This Is a V-Shaped Recovery: Jim O'Neill
CNBC EMEA Head of News
The world economy is clearly in a V-shaped recovery and those talking up a double dip recession are way off the mark, Jim O'Neill, the head of global economic research at Goldman Sachs, told CNBC.com.
Stocks offer "decent value", with the only threat to the recent rally being the risk of a significant rise in interest rates, O'Neill said. That's something he believes is not on the cards in the short term given policymakers fears over returning the world to recession.
"The same forward-looking indicators that pointed to the recession are now pointing to a economic recovery in both the developed and developing world," said the man famous for coining the term BRIC for emerging economies Brazil, Russia, India and China.
Speaking at an industry conference in London - where he made it clear he would take no questions on either the SEC investigation into his employer or his attempts to buy Manchester United - O'Neill said his only worry at the moment was the weakness of US consumer spending.
Strong capital expenditure in the US is helping to offset weaker consumer spending, but the main driver of global growth will be the developing world led by China, he said.
Missing the Point on China
Politicians in the US talking up a trade war with the Chinese are missing the point and simply grandstanding, according to O'Neill.
"Political leadership in the west is weak and missing the fact that the Chinese trade surplus is falling," he said.
The economic reality, according to O'Neill, is that Chinese domestic demand is soaring by 15 percent or higher and imports are surging.
"Look at Germany which will soon be exporting more goods to China than to France," he said.
European exporters are doing very well off the back of soaring demand from both China and India and the average business person in Germany is not worried by the Greek crisis, O'Neill pointed out.
Euro on the Slide, Pound Rising
Greece is grabbing the headlines across the world as it begins talks with the International Monetary Fund and the European Union over a rescue plan, but for Germany, which will provide the bulk of money for any bailout, it is actually a good news story.
German exporters have been doing well despite the strength of the euro in recent years, according to O'Neill. He sees fair value for euro/dollar at $1.22 and believes Germany now has the perfect mechanism for getting the single currency to that level: being negative about the Greek bailout.
With the pound under pressure ahead of the May 6 election, O'Neill believes sterling is the buy opportunity of the second half of the year.
- Watch the full interview with Jim O'Neill above.
While O'Neill believes the country's budget deficit needs to be brought under control, in the short term he believes there is no need to rush through spending cuts until it is clear the economic recovery is sustainable.
If this was not the case, O'Neill believes the market would be demanding spending cuts by selling gilts and the pound aggressively.