US growth firming, mixed data elsewhere

The world's developed economies reported mixed data last week, with the United States producing most of the positive reports.

In the US, a report last week showed that retail sales rose by a solid 1.1 percent in February. While this was partly due to higher gasoline prices, retail sales excluding gas also showed a rise of 0.6 percent.

In addition, another report from the US showed that industrial production rose 0.7 percent in February.

In contrast, a report last week showed that industrial production in the euro area fell 0.4 percent in January.

In Japan, core machinery orders was reported last week to have plunged 13.1 percent in January. Another report showed that the tertiary industry index fell 1.1 percent in January.

Still, there were also signs that the major developed economies are improving.

A report at the beginning of last week from the Organisation for Economic Co-operation and Development showed that the composite leading indicator for the OECD as a whole rose to 100.4 in January from 100.3 in December. Growth in the US and Japan was described as “firming” while the euro area was reported to be showing a “pick-up in growth”.

OECD composite leading indicators
	Ratio to trend, amplitude adjusted					Change from previous month
	2012				2013	2012				2013
	Sep	Oct	Nov	Dec	Jan	Sep	Oct	Nov	Dec	Jan
OECD area	100.0	100.1	100.2	100.3	100.4	0.02	0.06	0.08	0.10	0.10
United States	100.6	100.7	100.8	100.9	100.9	0.09	0.11	0.10	0.09	0.08
Euro area	99.4	99.4	99.4	99.6	99.7	-0.05	0.01	0.08	0.13	0.16
Japan	100.0	100.1	100.2	100.4	100.6	-0.01	0.06	0.11	0.17	0.20

The main risk to the global economy remains -- as it has been for the past few years -- Europe's financial problems.

The country that is now the focus of attention is Cyprus after its government proposed at the end of last week -- at the behest of other European governments -- to fund a bailout of its banks with a levy on depositors. This precedent raised fears that bank deposits are no longer safe and may trigger fresh financial turmoil by encouraging withdrawals from banks not only in Cyprus but other European banks as well.

A renewed financial crisis would very likely dent the prospect of a recovery in Europe while putting the rest of the global economy at risk as well.