JPMorgan Forecasts a Global Economic Recovery Sharper and Earlier Than Previously Expected; JPMorgan Publishes Quarterly Report: World Financial Markets.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 17, 2002

JPMorgan economists published their quarterly World Financial Markets today forecasting a global economic recovery that will be sharper and earlier than previously expected.

"A powerful global growth rebound is at hand," says John Lipsky, chief economist at JPMorgan. "Just as the effects of September 11 led to a more striking and globally uniform downturn than originally anticipated, the global upturn will be both potent and broad."

While financial market prices for some weeks have reflected growing investor optimism about a 2002 U.S. recovery, JPMorgan economists say that the real surprise will be a faster than expected rebound in overall global growth.

Mr. Lipsky and team attribute their positive view to several factors. Most importantly, the tragic events of September 11 produced similar results in all industrial economies. "A sharp cut back in manufacturing output, contrasted by more resilient strength in household spending than anticipated, led directly to an inventory reduction of historic proportions," says Lipsky.

JPMorgan economists predict that a gradual rebuilding of depleted inventories in the coming months will boost industrial output worldwide at a 2% annual growth pace, following a 4% annual rate drop in last year's final quarter. In addition, JPMorgan anticipates that resulting improvement in household incomes will result in solid, if moderate, gains in household spending. By the second half of 2002, JPMorgan also says that the global drop in capital spending will begin to reverse. They say that just as the 2001 global growth recession collapsed world trade volumes, the 2002 recovery will result in a more vigorous trade rebound than is expected at present.

In fact, JPMorgan economists anticipate that global GDP growth will turn modestly positive in the current quarter, ending three quarters of declining global output. Furthermore, in the World Financial Markets, JPMorgan forecasts global GDP growth to reach an annual rate of 2.6% by the second quarter and increasing to 3.5% in the second half of 2002.

JPMorgan economists say that this positive outcome is being signaled already by a variety of indicators. Notably, JPMorgan's global "all activity" purchasing managers' index has turned higher in the past two months, while capital goods orders and consumer confidence measures have improved in both the United States and Europe. According to the JPMorgan forecast, the U.S. recovery will be the most forceful, with GDP growth accelerating to a 4% annual pace in the year's final three quarters. JPMorgan predicts that economies in Emerging Asia and the United States' NAFTA neighbors will benefit most directly from the U.S. recovery. In addition, they argue that the drop in the Euro area's GDP will end during the current quarter, but the rebound there will be more muted than in the United States. Finally, JPMorgan economists say that a Japanese rebound will become clear in the second half of 2002 - somewhat sooner than expected previously - as the weaker yen and stronger growth abroad will aid Japanese exports.

Copies of the World Financial Markets are accessible on www.morganmarkets.com or you can request a copy by calling JPMorgan's research department [phone].

J.P. Morgan Chase & Co. is a leading global financial services firm with assets of $694 billion and operations in more than 50 countries. With relationships with over 99% of the Fortune 1000 companies, the firm is a leader in investment banking, asset management, private banking, private equity, custody and transaction services, and retail and middle market financial services. A component of the Dow Jones Industrial Average, JPMorgan Chase is headquartered in New York and serves more than 30 million consumer customers and the world's most prominent corporate, institutional and government clients. Information about JPMorgan Chase is available on the Internet at www.jpmorganchase.com.