Global economy week ahead: Eyes thanks

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SummaryThis Thanksgiving, with impact of 2008 financial crisis refusing to fade, will not feel like a time to celebrate.

German elections next September. Hence the need to keep drip-feeding aid to Athens - something the Fund is reluctant to do on the basis of debt sustainability projections it considers unrealistic.

The European Central Bank has reduced the risk of a disorderly break-up of the euro by promising in principle to buy the bonds of big indebted countries such as Spain and Italy.

But the wrangling over Greece is a constant reminder of the single currency's shaky foundations, and that weighs heavily on Europe's economy.

The financial stability that has been created by the measures that the ECB has taken over the summer is not translating into a better economic outlook, said Bert Colijn, an economist in Brussels with the Conference Board, a research outfit.

Giving some thanks

The euro zone went into the fourth quarter with industrial output slumping, and a November survey of the area's purchasing managers due on Thursday is likely to offer scant relief.

Economists polled by Reuters expect the index derived from the survey to tick up to just 45.8 from 45.7 in October - still well below the boom-bust threshold of 50.

A parallel poll of procurement executives from German industry is forecast to show no change, while on Friday Munich's IFO institute is expected to report a deterioration in the business climate in Europe's biggest economy.

Colijn said concern over the prospects for China, a big customer, was affecting Germany. You see in declining orders and business confidence that the global weakening in manufacturing is a concern to Germany as well, he said.

But there should also be reasons this week to give some sort of thanks. Several banks expect China's HSBC/Markit purchasing managers' index (PMI) to regain the neutral mark of 50 after a reading of 49.5 in October.

And even the dark cyclical cloud enveloping the euro zone's PMIs has a silver structural lining, according to a Goldman Sachs study. Although pointing to a second straight quarter of recession, the recent surveys are consistent with the economic rebalancing that the single currency area needs, the bank said.

Germany is gradually stimulating domestic services, while Spain's export sector is faring better at the expense of construction and public services.

In sum, Goldman suggests, Spain is an economy where the all too obvious pain of the current recession may be obscuring an ongoing, necessary and broadly effective restructuring.

As for the United States, October data on housing starts and building permits due on Tuesday might show

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