In This Issue: The Global Economic Outlook In 2006: Another Year Of Leaping Hurdles?: If you had asked a year ago whether the world economy could prosper with oil prices at sustained levels of $70 a barrel or more, while central bankers in the developed nations kept pushing interest rates higher, the answer from investors and economists worldwide might well have been a quick and easy, "No." Yet that obvious outcome has not been the case. Despite those seeming deterrents to prosperity, the world seems poised to maintain a healthy rate of economic growth. United States: Moderation In All Things: The U.S. economy is showing clear signs of slowing down-but to a pace that still is likely to be acceptable to the Federal Reserve. We expect growth to slow to 2.5% in 2007 from the 3.5% pace of 2005 and 2006, with the unemployment rate edging up from its current 4.8% level to 5%. Europe: A Strong Year So Far, But A Slowdown On The Way: After several years of sluggish growth, the Eurozone economy is on track to register its best performance so far this decade in 2006. Two key factors explain this shift: the return of the consumer and a surge in business investment. Japan's Second-Quarter GDP Growth Slower Than Expected: Japan's 0.8% annualized real GDP growth in the second quarter of 2006 was substantially slower than the 2.7% growth in the previous quarter and the 1.7% predictions of most forecasters. Despite Modest Decline In GDP Growth, Canada's Strong Economy Should Continue: Growth in the Canadian economy is continuing at a robust pace in 2006 because of strength in consumption and investment spending. Export growth, however, has begun to show signs of weakness, and this likely will extend into 2007. China: The Economic Growth Surge Continues: China's GDP growth in 2006 should be about 10.5%. This reflects expectations that growth in the second half of the year would come in at less than the 10.9% and 11.3% rates in the first and second quarters, respectively. Guest Opinion: India's Growth Remains Buoyant: Growing at an average rate of about 8% in the past three years, India has the second-fastest growing economy in the world. This sustained growth performance is driven by a combination of domestic consumption and investment, supplemented by gains from rapid integration with the global economy through exports, and capital inflows. Resource Boom Bolsters Growth In Australia: The Australian economy continues to surprise on the upside, driven by solid domestic spending and business investment. The economy is likely to grow by 3.25% in 2006 after rising by 2.5% last year. Current Account And Trade Surpluses Underpin Strong Latin American Economies: Across Latin America, the economic outlook for the remainder of 2006 and into 2007 remains favorable overall. This is despite an intermittent backup in emerging market bond yields related to concerns about the pace of Fed tightening and the change in global liquidity conditions. Guest Opinion: Strong Export-Driven ASEAN 4 Growth Amid Vulnerability: The ASEAN 4 (Association of South East Asian Nations) economies grew by 5.2% (IMF REO Asia Pacific) in 2005, amid rising inflation and interest rates. | 
