Edward Hadas & Constantine Courcoulas / Nov 17, 2009, 00:37 IST
Economic Spot-check: The shoots are really green. It has taken a while, and it’s still fragile, but the global economy is now growing rather than shrinking. Last week the eurozone joined the US and Japan in the “positive GDP” club. But as yet there are few signs of a post-recession growth spurt. The Breakingviews Economic Spot-check index, which runs from one to five, stayed at 2.7, well above Slow Decline but still little below Stability. In a V-shaped recovery, the BES would be at something like 4.5.
Labour markets are the main reason the green shoots’ roots still look shallow. Companies are hitting profit targets largely by cutting costs. That means more job losses and fewer overtime hours. Employment uncertainty is keeping spending down.
Some financial currents remain strongly positive. Official support is keeping profits up and asset prices rising. But loan losses are still too high for comfort and loan refinancing remains a challenge. Unless the conservative approach to both borrowing and lending is replaced by something more exuberant, this recovery is likely to stay slow and muted.
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