London, 19 July 2010

Key changes since July 9th 2010: The global data flow in July and early August point to a marked softening of the global economic recovery, with developments in the US giving particular cause for concern. The Economist Intelligence Unit's central scenario sees the weaken­ing of activity as a natural adjustment from a period of unsustainably rapid stimulus-driven recovery since mid-2009. We do, however, attach a 30% probability to the weakening developing into double-dip global recession.

- In view of the continued weakness of private-sector jobs creation and the housing market in the US, we have downgraded our US real growth forecast in 2010 and 2011 to 2.8% and 1.5%, respectively (from 3.3% and 2% previously).

- A weaker growth outlook has also led us to revise our US monetary policy assumptions. We now expect the Federal Reserve to hold the federal funds rate at a record low of 0.1% until the first quarter of 2012, compared with the fourth quarter of 2011 previously. The fed funds rate will stand at 1.75% by end-2012. We have also pushed out rate rises in the UK and Japan to early 2012 from late 2011 previously.

- Our growth forecast for China is unchanged at 9.9% in 2010 and 8.3% in 2011. This assumes, however, that the Chinese government is successful in its efforts to deflate the current credit and property bubbles and thus achieve a soft landing for the economy.

- A punchy export performance helped to power growth in Germany of 2.2% quarter on quarter in April-June. We have accordingly revised up our euro zone forecast to 1.3% in 2010, from 0.7% in our last report. Softer world trade growth will pull the single-currency region's growth down to just below 1% in 2011.

- Sharply lower wheat output in the Black Sea producers and Canada has led to an upward revision to our forecasts for grains prices in 2010-11. The food, feedstuffs and beverages (FFB) index is now expected to rise by nearly 0.5% in 2010 (a contraction of 3.4% previously).

The Economist Intelligence Unit's forecasts are featured in the Global Forecasting Service, a new website that provides businesses with reliable projections for the global economy over a five-year period. The service also includes forecasts for commodity prices, exchange rates and world trade, and analysis of the main risk scenarios facing the global economy.

Speaking at the launch of the new service, Robin Bew, Editorial Director at the Economist Intelligence Unit said: "The new Global Forecasting Service is the first in an exciting new generation of online services that will help organisations get a clearer picture of the world around them. We are particularly pleased that this new site allows us to offer subscribers our forecasts in a variety of formats, from traditional text-based reporting to interactive charts, video and webinars."

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