The global economy continues to recover slowly, as the U.S. recovery picked up steam and the Eurozone crisis stabilized. Despite these promising signs, the recovery has been slow and several risk factors remain for the global economy. Spain's problems have led to renewed concerns about the Eurozone's recovery, while Britain and Japan could face some headwinds.
- United States - The U.S. continues to expand at a modest pace, driven by an improving private domestic sector. In particular, the automotive sector, residential construction and capital spending have been on the rise. Warm weather has helped moderate energy spending this winter, but higher gasoline prices could put a drag on consumer spending over the coming months.
- Europe - Fears over a eurozone collapse have largely faded, but fundamental problems persist for many European economies. The single eurozone monetary policy may be proving too stimulating for Germany and too restrictive for peripheral countries. These problems are compounded by "austerity fatigue" in weaker countries and "support fatigue" in stronger countries that's further dividing the eurozone.
- Japan - Japan's economy continues to recover thanks in large part to increased demand for autos in the United States and moderating declines in Europe. Meanwhile, the possibility for additional monetary easing from the Bank of Japan (BOJ) could help nudge inflation closer to its target and further boost growth over the coming months. The government expects the economy to expand 1.9% for the fiscal year.
- Britain - Britain's economy remains on a slow growth trajectory, with expected 1.6% annual GDP growth expected through 2015. With the government's new commitments to austerity measures, the country's AAA credit rating remains largely intact, but any slowdown worldwide could add pressure to its economic recovery.
- Switzerland - Switzerland's economy has proven very resilient throughout the eurozone crisis, but its currency's peg to the euro is now being challenged. Ongoing problems in the eurozone have driven traders to test the Swiss National Bank's (SNB) resolve to limit the franc's strength against the euro. Any failure to limit that strength could result in further damage to exports and a weakening of its economy.
Investopedia's Forex Outlook For May 2012: U.S. Economy
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