Global Economy Prospects Improving

The global economy prospects are slowly improving, according to the IMF, which released new forecasts this week.

World GDP is set to rise by 3.5% this year, and by 4.1% in 2013. Emerging markets will sparkle, and America will grow by an improved 2.1%.

The IMF sees several risks ahead: the euro crisis and fiscal austerity in the rich world, upheaval in the Middle East and the possibility of a hard landing in countries, such as China, which have seen exceptional credit growth.

The IMF also warned that growth could be hurt by the deleveraging that is under way at European banks. Balance-sheets could be reduced by up to $2.6 trillion over two years, as the banks boost capital and get rid of unprofitable businesses. Credit will be harder to come by.

Inflation surpassed earnings

Consumer prices increased 0.3 percent last month, the department said on Friday. Gasoline prices rose 1.7 percent, a slowing from February when costs at the pump rose more than three times as quickly.

The inflation outstripped wage gains remains. Workers’ earnings fell 0.4 percent in March after adjusting for the increase in prices.

Core inflation, which strips out food and energy prices, climbed 0.2 percent, pushed higher by rising rents, medical care costs and used car prices.

In the 12 months to March, core consumer prices increased 2.3 percent after rising 2.2 percent in February. The persistence of core inflation could affect the Federal Reserve’s maneuvering room for stimulus.

Overall consumer prices rose 2.7 percent compared with a year ago, down from a reading of 2.9 percent in February.