Shock, horror: Europe grows more than the US!
Do you recall those dire US economic growth numbers from earlier this month? They really were quite poor:
Of course blame the weather, inventory adjustments and the like. Over the summer we will find out the reality of quarter two but it has led to one rather surprising development: for the first time in a while Europe has grown (at least using these provisional statistics) more than the US.
Of course there is a ‘but’. Yes, the region-wide growth rate of 0.4% (quarter-on-quarter) is greater than the US-wide 0.2% statistic quoted above BUT it does cover a variety of sins. The devil is always in the detail…
So putting aside that the currently high profile Greek economy is back in recession, Germany’s dull growth hints at the deeper truth. Europe’s economically dire epoch since the 2007-9 global financial crisis should have led to some easy comparisons but with its largest and most powerful economy (Germany) growing just at a 1% year-on-year rate in quarter one much work remains to stimulate an economic zone which many forget is just as big as the US.
The imposition of quantitative easing by the European Central Bank during the first quarter will provide some help at the margin but as the money supply growth graphic below from today’s Financial Times shows. It is amazing what you can do with an open printing press and easy comparisons. Far better for true guidance to look to the lending graphic on the right. Once that lending number gets back up to an annualised rate of 5%+ then start to take notice. My advice is not to hold your breath.
Still the most balanced economy in Europe remains the UK…although as I noted last week challenges are rising there too for the newly elected Conservative government, most notably with the twin deficits…
I note too that that Bank of England have been talking after their self-imposed purdah during the election period. And the comment that I immediately note?:
‘Bank of England cuts growth forecast for 2015 from 2.9% to 2.4%’
If by the end of 2015 the US cannot out-grow the European crowd then we really should worry. And many global financial markets undoubtedly will not be kicking around all-time highs.
Image sourced from here.
Further thoughts from Chris Bailey / Financial Orbit can be found on twitter @financial_orbit or at the website www.financialorbit.com. You can contact Chris directly via email at chris.bailey@financialorbit.com
