Really green

The green shoots spotter: It is starting to look like the markets were prescient. From March on, most financial indicators were flashing green – rising stocks, narrowing credit spreads, increasing commodity prices. But actual economic green shoots have been harder to find. Finally, the ground is looking more verdant. For the first time in its 15-week history, the Breakingviews.com’s Green Shoots Spotter of economic newsflow is closer to “Stable” than “Getting Less Bad”. On its scale of 1 (Still in real trouble) to 5 (Rapid recovery), it jumped from 2.2 last week to a series-high of 2.7.

The biggest good news last week was the decline in the US unemployment rate. Pessimists – there are still some out there – could pick holes in the data, but investors were probably right to see a real sign of stability. That went along with strong exports and orders from Germany. The markets are still far ahead of the data, but the whispers of a sharp V-shaped recovery are getting louder.

Still, pessimists need not abandon the gloom totally. They can argue that a recovery funded by massive government and monetary stimulus could prove tepid and short-lived. They too have some evidence: US retail sales declined in July, following a June decline in personal income (also announced last week). And one of the most sensitive indicators of world trade, the Baltic Dry Index, had its worst week since last October.