Decoupling: One expensive euro

Posted: April 2, 2013 in economy
Tags: , ,

MOST of the time, American economic trends closely track those in Europe and vice-versa. When growth in one slows so does growth in the other. When one’s economy tanks so does the other’s, as in late 2008. And when recovery begins in one, so too does a rebound begin in the other, as in mid-2009. Sort of. In fact, America managed slightly better growth in the early years of the Great Recession than did the euro area. The overall divergence in recovery paths widened slowly through 2010, but as of 2011 the gap has grown much larger. For a simple reason: America’s economy has trundled on growing at a fairly steady pace over the past two years while the euro-zone economy has been stuck in recession.The contrast only seems to be growing starker. Forecasters now reckon that the American economy may have grown at close to a 4% annual pace in the first quarter of 2013. Meanwhile, the euro area’s recession once again appears to be deepening; the latest PMI data are particularly bleak. In March, manufacturing activity declined across the euro area, from Germany to Greece. Through February, unemployment continued to worsen, albeit at a slowing pace. The March figures now coming in suggest the early-2013 slowdown in job loss has probably come to an end.At the moment there is little reason to expect America to fall below recent trend growth in 2013 and little hope that the euro-area will …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/04/decoupling?fsrc=rss

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