This is the second in a series of weekend comments on what I have learned in the past 7 days about the global economy and financial markets.  This week, there has been a notable rise in inflation concerns as higher food and energy prices start to impact consumer prices. There have been signs that European governments are discussing a more comprehensive package to address the sovereign debt crisis. And China has continued down the path of gradual monetary tightening. Next week, Mr Hu visits Washington, Ecofin meets to discuss sovereign debt, and China publishes its macro data for December. Read more

The batch of new year forecasts for the world economy have been almost uniformly positive this year, at least from economists in the financial markets. Only a few months ago, forecasters were talking of increasing risks of a double dip recession, but the surge in risk assets since the Federal Reserve announced QE2 in the autumn has swept away most of this pessimism. JP Morgan this week said simply that “strong global growth is baked in the cake”. Although nothing in economic forecasting is that certain, there is plenty of evidence in favour of the recent outbreak of optimism.

First, the most reliable and timely indicators of global economic activity have recovered strongly in recent months. Although QE2 may have helped somewhat in this regard, it is much more likely that the pause in the global economy was anyway about to end when the Fed took its expansionary decisions in the early autumn. Read more

The major global manufacturing surveys for the month of October have now been published, and they are considerably more buoyant than they had been in previous months. Read more

For most of my life in macroeconomics, I have tended to be very dismissive of anecdotes from the world of business. They run the risk of exaggerating the importance of specific experiences in a small number of companies, and behavioural finance warns us that human beings tend to over-estimate the significance of events which happen directly to them, rather than to others. Read more

Martin Wolf argues in his column this morning that the world’s two superpowers are in conflict over the dollar/yuan exchange rate, and that “when such elephants fight, bystanders are likely to be trampled”. Yet in preparations for the G20 summit in Korea in November, there is no sign that any of the other participating countries – especially the Europeans – want to join the US in talking specifically about the question of yuan overvaluation. According to reports, the US is likely to be “a posse of one” on this question. Read more

There are two massive fixed exchange rate blocks operating in the world economy today, and both of them are facing severe strains and conflicts.  Read more

The August economic data for China were more eagerly awaited than usual, because there had been marked signs of a slow-down in the industrial sector during the spring and summer months. Read more

The financial markets have been acting very serenely in the face of continuing evidence that the US economy is slowing markedly during the third quarter. Read more