10 Jun 2013
Flash: European economies slated for growth rally in 2014 – Goldman Sachs
FXstreet.com (New York) - According to the Economics Research Team at Goldman Sachs, “We expect economies in Europe and globally to see a sequential improvement in growth through this year and into 2014.”
The latest survey data from Europe has been supportive of a bottoming out of demand; the Euro area and UK PMI surveys have strengthened (albeit they are still at weak levels, especially in peripheral Europe) and other data such as construction and cement output, the IFO and German orders data have improved. US data has also generally strengthened (the ISM being an exception) and our global lead indicator (GLI) has moved back into the expansion phase.
As growth expectations improve, we would expect companies with a lot of potential gearing into that move to perform well. Indeed, more cyclical sectors, such as autos, have recently enjoyed a sharp bounce versus more defensive or stable growth sectors. “We have shown too that valuations of companies with high earnings growth, often driven by expected improvements in the cycle, as opposed to high sales growth, have generally been low relative to history.” the team notes.
The latest survey data from Europe has been supportive of a bottoming out of demand; the Euro area and UK PMI surveys have strengthened (albeit they are still at weak levels, especially in peripheral Europe) and other data such as construction and cement output, the IFO and German orders data have improved. US data has also generally strengthened (the ISM being an exception) and our global lead indicator (GLI) has moved back into the expansion phase.
As growth expectations improve, we would expect companies with a lot of potential gearing into that move to perform well. Indeed, more cyclical sectors, such as autos, have recently enjoyed a sharp bounce versus more defensive or stable growth sectors. “We have shown too that valuations of companies with high earnings growth, often driven by expected improvements in the cycle, as opposed to high sales growth, have generally been low relative to history.” the team notes.