The World Economy Is In Trouble
The Economist
BusinessInsider.com
Oct. 11, 2014
For the American and British economies it has been a long road out of the woods, but the journey is nearing its end. America’s unemployment rate fell below 6% in September. Britain’s economy, where output was up 3.2% in the year to June, is growing faster than any other big rich country’s. Central bankers are counting the days until they can raise interest rates.
Virtually everywhere else, however, the news is grim and getting grimmer. The euro zone, the world’s second-biggest economic area, seems to be falling from a feeble recovery back into outright recession as Germany hits the skids. Shockingly weak industrial production and export figures mean Germany’s GDP is likely to shrink for the second consecutive quarter–a popular definition of recession.
Japan, the world’s third-biggest economy, may also be on the edge of a downturn, because April’s rise in the consumption tax is hurting spending more than expected. Russia’s and Brazil’s economies are stagnant, at best. Even in China, still growing at a suspiciously smooth 7.5% a year, there are worries about a property bust, a credit bubble and a fall in productivity.
Such a lopsided world economy is unlikely to be stable. Either the weakness outside the Anglo-Saxon world proves temporary, or it will spook financial markets and darken the outlook everywhere. The conventional view is that global growth will strengthen in 2015 as America’s surge buoys other places, and as the recent weakness elsewhere proves temporary. The IMF reckons global growth will rise to 3.8% next year.
This newspaper, however, is more worried on two counts. First, today’s weakness, especially in the euro area, could last longer than investors expect; and second, the lopsided growth could itself fuel destabilizing shifts, particularly in the dollar.
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