2010.08.1809:55:00UTC+00Ifo: World Economic Climate Clouded In Q3

The world economic climate looks slightly clouded in the third quarter of 2010, latest survey results from the Ifo Institute for Economic Research showed Wednesday.

The think tank said its world economic climate indicator fell to 103.2 in the third quarter from 104.1 in the second quarter. It suggests that the recovery of world economic activity will continue at a slower pace in the second half of the year, the Munich-based Ifo said.

The world economic climate indicator fell in North America and in Asia, but rose in Western Europe. In North America, the assessments of the current economic situation were more favorable than in the previous survey and expectations for the coming six months were less optimistic. In Asia, the favorable economic situation has improved further, but the optimism for the next half year has declined somewhat.

In Western Europe, the assessments of the current economic situation have improved more clearly than the worldwide average. Since the six-month economic outlook has not clouded so strongly, the climate indicator as a whole rose marginally, the think tank said.

Although the surveyed experts have given better assessments of the current economic situation than in the first half of 2010, the economic expectations for the coming six months have been revised downwards. The corresponding indicator declined to 112.3 from 126.3.

Further, the think tank said inflation expectations remained stable compared to the previous survey, but economic experts foresee a somewhat higher rate of inflation on a worldwide average.

In accord with the somewhat cloudier economic outlook, fewer survey participants than in spring expect increasing short-term and long-term interest rates in the course of the coming six months.

In contrast to the previous surveys, the euro was assessed as slightly undervalued against the U.S. dollar. Overall, in the coming six months, after adjustments have occurred, the experts foresee largely stable exchange rates for the four major world currencies, the euro, the U.S. dollar, the Japanese yen and the British pound, Ifo said.

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