24/08/2012 Comments Off on Shuffling sideways
I’ve been working through the economic news from around the world this morning. Bloomberg says that Europe is still contracting, although perhaps a bit less than before. Indicators for both services and manufacturing are in the negative zone, just moving around a bit. The same article tells us that China is slowing down and the United States is moving sideways. The Washington Post reports much the same information, adding that the eurozone numbers mean Europe is ‘firmly in recession’, and that China’s economic policy will be on autopilot until the Party Congress in October. I’d add that US policy is also likely to be on autopilot until November: Congress will try to stymie the President and the Federal Reserve will want to avoid appearing political.
The policy news out of the eurozone was better, as TVHE explained a couple of days ago, and then the news this morning is contradictory and strange. Matt Nolan focuses on the ‘we won’t tell anyone’ aspect of the story. I keyed into comments in this Reuters article, in which a European bank economist explained the folly. I guess I assumed that, if someone can clearly explain the problem in a news article, the ECB can understand that it might not be good policy.
With all this, I was trying to think of what the country-by-country analysis meant for the world economy. I went back to the World Bank statistics just to refresh my memory of the relative sizes of these countries’ economies. As a service to readers, I’ve put them in pie charts:
These are just reminders that the big countries are big — a few countries comprise most of the world’s GDP. They all seem to be shuffling sideways at the moment. Given that the US and China are at points in their political cycles when economic policy is flat, that shuffling looks set to continue through the end of the year. The contradictory yet strangely hopeful signals out of Europe suggest a muddling through there. The Eurozone chart also suggests that Greece isn’t as important as it is made out to be, but Italy and Spain could be worries.
For New Zealand, well, the latest NZIER column (pdf) probably has it about right (and not just because they sign my paychecks): ‘stagnant’, ‘sideways’, ‘anaemic’, ‘flat’, ‘weak’, etc.