WRAPUP-G7 growth paths seen diverging, small double-dip chance

* For poll data and links to other stories see (ECONPOLL1: )

* 2011 GDP forecasts mostly revised down

* Modest chances of double dip recession

* Central banks to hold rates low for some time yet

By Jonathan Cable

LONDON, June 16 (BestGrowthStock) – There is a continuing divergence
in the rate of recovery among the world’s richest nations,
Reuters polls show, as the European debt crisis continues to
hamper economies across the continent.

The growth path for 2010 in the United States — the world’s
largest economy — has been revised higher, running away from
the euro zone and Britain and also outstripping Japan, according
to surveys of over 250 economists taken June 10-16.

The euro zone’s economy is expected to grow a mere 1.1
percent this year and 1.4 percent next. Across the channel major
trading partner Britain is on a similar path, with forecasted
1.1 percent growth this year and a healthier 2.1 percent in
2011. [ECILT/EU] [ECILT/GB]

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For graphic comparing U.S., euro zone, UK and Japan growth
outlooks, click: http://r.reuters.com/kaw32m
For an Insider show on the poll with Investec Chief
Economist Philip Shaw, click on: http://link.reuters.com/gak22m

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“Signs of a strong rebound remain conspicuously absent,”
said Christoph Weil at Commerzbank.

“In the summer the euro zone economy will grow significantly
more slowly, as the debt crisis in the peripheral countries will
exert progressively greater drag.”

The bloc and Britain have both seen their currencies
hammered on fears about sovereign indebtedness, while concerns
over a budget deficit running close to 11 percent of gross
domestic product has added its weight to sterling.

Things look rosier for Japan, whose economy is seen growing
2.5 percent in the fiscal year to next March on solid exports,
but even this lags the United States, where gross domestic
product (GDP) is predicted to grow 3.2 percent on average in
2010. [ECILT/JP] [ECILT/US]

All but the U.S. saw their 2011 forecasts nudged down from
last month’s poll while 2010 predictions for the U.S., Japan and
the euro zone were revised up.

“As yet, our growth forecast has been pared down only
slightly due to mild contagion from the European debt crisis —
any further downward revision will hinge upon the length and
depth of the concerns over sovereign debt,” said Ellen Zentner,
senior economist at Bank of Tokyo-Mitsubishi.

The economies emerged from their deepest recession since the
Second World War last year and economists gave a one-in-four
chance of a double-dip in the euro zone and Britain, but only a
15 percent chance the U.S. would slump back and a 20 percent
chance for Japan.

Governments and central banks have pumped hundreds of
billions of dollars into programmes designed to kick-start their
battered economies but the huge costs of these recovery packages
must be repaid.

As Group of 20 world leaders prepare for next week’s summit
in Toronto, disagreements are becoming more frequent and
decades-old policy biases are resurfacing. [ID:nN1582646]

After two years of matching economic policy moves the U.S.
and Europe are parting ways, with debt-wary Germany pressing for
a swift clamp-down on public spending while the U.S. preaches
patience.

Mindful of the Great Depression, U.S. policymakers insist
economic recovery is a prerequisite for repairing public
finances. European leaders fearful of runaway inflation argue
fiscal restraint is required for restoring the confidence that
is necessary for growth.

INFLATION IRKS

Economists now expect Japan to pull out of deflation next
fiscal year, ending in March 2012, and in Britain — where
prices have been rising much faster compared to its major
trading partners — inflation is seen dropping below the central
bank’s two percent target to 1.9 percent in 2011.

Inflation is seen at 1.4 percent in the U.S. and 1.5 percent
in the 16-nation euro zone, giving the central bank’s scope to
hold interest rates low and boost the struggling economies.

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For graphic comparing the inflation outlook in U.S., euro
zone, UK and Japan, click: http://r.reuters.com/gew32m

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Central banks are seen holding rates at record lows for some
time yet, the Bank of England and European Central Bank are not
seen budging until next year while the U.S. Federal Reserve is
not seen hiking rates to 0.5 percent until early next year,
later than seen in last month’s poll.
The Bank of Japan, which has rates at just 0.1 percent, is
not seen making a move until 2012 at the earliest as it battles
deflation.
(For poll data click on (ECONPOLL1: ))

(For a pdf click on [ECILT/PDF])

(For other stories from the poll click on [ID:nLDE65F0EE])

Stock Trading

(Polling by Bangalore Polling Unit; Additional reporting by
Andy Bruce in London, Chris Reese in New York and Rie Ishiguro
in Tokyo; Editing by Toby Chopra)

WRAPUP-G7 growth paths seen diverging, small double-dip chance