An optimistic tone dominated the month of October supported by economic, monetary and political factors. Leading business indicators confirm the gradual recovery of advanced economies while the emerging are reducing their cruising speed, although the much-feared hard landing is looking increasingly unlikely. This improved economic tone can partly be explained by the continuation of expansionary monetary policies: the Fed has delayed the start of it withdrawing stimuli, the Bank of Japan is maintaining its asset purchase plan and the ECB is stressing that its expansionary monetary policy will carry on. Significant advances have also been seen in the political and institutional sphere, particularly the progress made in the fiscal area in the USA and the ECB's public announcement of its roadmap to assess Europe's banks. However, as warned by the IMF in its World Economic Outlook, the greatest risk to global recovery is the failure to implement the structural reforms that can ensure sustainable growth.

The emerging countries are stabilising but must correct their macroeconomic imbalances. The capital outflows from emerging countries that started this summer have now stopped to a large extent. The financial conditions of these countries, especially the most vulnerable ones, have normalised, undoubtedly thanks to the Fed postponing its tapering. However, sooner or later the Fed will normalise its monetary policy so tensions may reappear, particularly if these economies do not take credible measures to correct their macroeconomic imbalances. On the other hand, China's capacity to grow continues to surprise: in Q3 it posted 7.8% growth year-on-year, outdoing all forecasts. In any case, the Asian giant also needs to implement structural reforms and, perhaps even more importantly, to rebalance its economy towards growth based more on consumption than on investment.

The shutdown has had a limited impact in the USA but the Fed has decided to delay tapering. In October, the USA captured a large part of the world's economic attention. On the one hand, negotiations regarding the federal budget and debt ceiling finally bore fruit, ensuring the government would function until January and suspending the debt ceiling until February while, on the other hand, the Fed delayed its withdrawal of monetary stimuli. It is estimated that the partial government shutdown for seventeen days had a limited impact on economic growth, so that our GDP growth forecasts for 2013 and 2014 remain unchanged. However, the latest economic figures, weaker than expected, will probably force the Fed to postpone a reduction in its rate of asset purchases until 2014 Q1. It did not take long to see the effects on the markets, especially in equity with stock markets at record highs.

The euro area continues to recover, supported by advances towards banking union. During October, leading business indicators behaved as expected, remaining in expansionary terrain and suggesting a slow recovery at different speeds between the core and the periphery. On the other hand, inflation surprised with a drop in its rate (0.7% in October). Given that this fall in inflation is due to temporary factors and the current situation, such as the low utilization of production capacity and high unemployment in some countries, we expect it to increase slightly as economic activity gains ground. The euro area's recovery is being helped by the first steps towards the implementation of the Single Supervisory Mechanism (SSM) for European banks. The ECB publicly announced its roadmap to assess the banking balance sheets of the main financial institutions, a process that starts in November 2013 and ends in October 2014, just before the SSM starts up.

Spain exits the recession. Slight growth in GDP in 2013 Q3 (0.1% quarter-on-quarter) confirms the end of the recession after nine quarters of contraction. Exports are still the main support for the recovery process. The good figures posted by employment, boosted by the tourism sector and the rest of services, indicate a scenario of gradual stabilisation in the labour market. Moreover, the drop in the risk premium and significant capital inflows in the form of foreign direct investment and portfolio investment encourage quiet optimism, although the figures from Q4 will be crucial in confirming whether the recovery is actually underway.