Shoots and weeds in the economic garden

June 9, 2009

Nouriel Roubini is a bearish guy at the best of times, but he is currently worried that signs of those “green shoots” of economic recovery are covering up something altogether more stubborn in the garden.

Recent data suggest that the rate of contraction in the world economy may be slowing. But hopes that “green shoots” of recovery may be springing up have been dashed by plenty of yellow weeds.

His point, in a new post on his much-followed blog, is that the consensus view that the global economy has or will soon bottom out has already been proven too optimistic.

Employment, retail sales, industrial production, and housing in the United States remain very weak; Europe’s first quarter GDP growth data is dismal; Japan’s economy is still comatose; and even China – which is recovering – has very weak exports.

Like most economic prognostications at the moment, it will take some time to see if the Stern School of Business economist is right. In the meantime, the shoots and weeds are prevalent.

Today, we had a smallerFrench trade deficit, two indexes of Japanese indicators rising , an improved Australian business mood and slowing UK house price falls.

But there was also a resumed slide in German exports, a bleak forecast for Swiss growth, and slowing UK shop spending.

As the nursery rhyme goes: Mary, Mary, how does your garden grow?

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We’ve got to be very careful that the weeds don’t become dominant and take over the garden, its just like in a real garden where the weeds are the fastest growers and become a pest quickly.

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