World confidence slips as central banks look to withdraw stimulus

SINGAPORE: Confidence in the world economy dipped in November as central banks' actions to withdraw some stimulus measures sparked concern about the strength of the recovery, a survey of users on six continents showed. The Global Confidence Index fell to 60.3 from 61.7 in October, the highest level in the series that began two years ago. The index exceeded 50 for a fourth month, which means there were more optimists than pessimists.

The survey follows steps by central banks including the Federal Reserve to start unwinding emergency measures, seeking to avoid market distortions that may spur bubbles in assets from stocks and commodities to real estate.

The shift comes at a time when unemployment is still rising in the US and Europe, threatening a nascent recovery as consumers limit spending.

"Confidence hinges almost entirely on the level of stability produced by extraordinary monetary support," said Lena Komileva, an economist at Tullett Prebon Plc in London who participated in the survey. "As the effect of fiscal stimulus peaks, the future path of growth figures will become more volatile and that will affect confidence."
Rising unemployment may hit.



The US economy will be slow to recover from the deepest recession since the 1930s as rising unemployment curbs consumer spending, Federal Reserve officials said. San Francisco Fed Bank president Janet Yellen raised the prospect of a "jobless recovery" in a speech in Phoenix, while Dennis Lockhart, who heads the Atlanta Fed, predicted a "relatively subdued pace of growth" this quarter and beyond.

The comments are among the first on the economic outlook since the Fed signaled last week that a return to growth alone won't be enough to change its policy of keeping interest rates near zero for "an extended period." Instead, the central bank said any change would depend on increases in employment and inflation. The jobless rate will exceed 10% through the first half of 2010, according to a survey.

The rate jumped to 10.2% in October, the highest level since 1983, according to Labour Department report. The economy has lost 7.3 million jobs since the recession began in December 2007.