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Dear Clients,

While the world remains focused on developments in the eurozone in the run-up to the next Greek election in mid-June, I remain relatively bullish on the outlook for two other members of the G8—the US and Japan—in the months ahead. Although the US faces the risk of large tax increases at the end of this year and Japan could experience power shortages this summer, both countries should grow reasonably strongly in the next couple of months.

You will find attached our latest monthly report, “The World Desynchronizes.” Key conclusions include:
• US growth leadership is now shifting towards consumption and housing and away from investment and exports
• Declining PMI readings and rising unemployment rates are renewing debate over how the European Monetary Union can best revive growth
• Greece leaving the euro could lead to a stronger fiscal union if the contagion effects on the rest of the periphery are manageable
• The Japanese growth rate could exceed 2% this year because of earthquake reconstruction and an export recovery
• The People’s Bank of China (PBOC) is attempting to ease monetary policy while still clamping down on property lending

Additionally, I recently wrote "America Forges Ahead in the New Global Economy," which is an article for the G8 Research Group's newest publication. It can be accessed at the following link: http://www.davidhaleweb.com/g8-magazine-america-forges-ahead-in-the-new-global-economy/

As always, we welcome any comments.

Best regards,
David Hale
Chairman

David Hale Global Economics, Inc.

847-386-6009 (tel)
847-386-6011 (fax)
davidhale@davidhaleweb.com

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