NOT for the first time, the recent behaviour of financial markets has
been at odds with economic fundamentals. The living has been easy on
American and European stock exchanges this summer, despite plenty of
gloomy data. Investors may have been placing too much faith in the
capacity of central banks to counteract economic weakness.
The global economy expanded by just 2.8% in the year to the second quarter, according to The Economist’s measure of world GDP (see chart). That is the slowest rate since the end of 2009, when recovery from savage recession in the wake of the financial crisis was getting under way. The most perturbing aspect of the current slowdown is that the weakness is so widespread, affecting emerging economies as well as rich countries.
The most fragile economy in the rich world is that of the troubled euro area, where GDP shrank by 0.2% (an annualised decline of 0.7%) in the second quarter, leaving it 0.4% smaller than a year earlier. Beset by fears about a possible Greek exit and a bigger bail-out for Spain (which this week received a rescue request of its own, from Catalonia’s regional government), the euro zone is sliding ever deeper into the mire. A composite index of output in manufacturing and services from Markit, a research firm, based on purchasing-manager reports in July and August, is pointing to a further fall in GDP in the third quarter.
Read more: http://www.economist.com/node/21561933
The global economy expanded by just 2.8% in the year to the second quarter, according to The Economist’s measure of world GDP (see chart). That is the slowest rate since the end of 2009, when recovery from savage recession in the wake of the financial crisis was getting under way. The most perturbing aspect of the current slowdown is that the weakness is so widespread, affecting emerging economies as well as rich countries.
The most fragile economy in the rich world is that of the troubled euro area, where GDP shrank by 0.2% (an annualised decline of 0.7%) in the second quarter, leaving it 0.4% smaller than a year earlier. Beset by fears about a possible Greek exit and a bigger bail-out for Spain (which this week received a rescue request of its own, from Catalonia’s regional government), the euro zone is sliding ever deeper into the mire. A composite index of output in manufacturing and services from Markit, a research firm, based on purchasing-manager reports in July and August, is pointing to a further fall in GDP in the third quarter.
Read more: http://www.economist.com/node/21561933
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