Economic recovery lacks traction

The answer is probably yes to both questions. US growth in 2013 was sustained by high levels of inventory rather than consumer demand and if they increase then we should expect a return to recession.

In Europe the realisation has set in that fiscal austerity measures have brought lots of pain and enormous youth unemployment but very little growth. There are attempts at easing the austerity but nothing serious as yet. Take France – the current sick man of Europe – as an example: it is slipping into a 3^rd recessionary dip. Only the UK has managed to have a broader recovery than its European counterparts. Germany is dependent on exports but that is a policy that is in reality dependent on the end markets rather than on the astuteness of Mrs Merckel.

Asia is less robust than expected but as it remains export driven, slack demand in Europe and the US are causing volatility in recovery. The latest report from China indicates that manufacturing may contract for the first time in six months, adding to the economic woes of its Asian trading partners. The preliminary reading of HSBC’s Purchasing Managers’ Index of 49.6 for January is not good: anything below 50 indicates recession.

According to the latest update of the Global Economic Prospects by the World Bank, the global economy is expected to grow in 2014, picking up in emerging markets while richer mature markets improve five years after the 2008 financial crisis. Global GDP growth is projected to grow from 2.4% in 2013 to 3.2% this year, stabilising at 3.4% in 2015 and 3.5% in 2016.

In all of this semi gloom, no one has suggested a way into a more sustainable recovery that will address the high levels of unemployment. What a sorry state of affairs.