First, the globe is embarking on a two-speed recovery. Even after a small upgrade to 2010 forecasts (but no change to 2011), there remains a wide gap between forecasts for developed and emerging economy growth (Exhibit 1). The outlook for the developed world remains, as Joachim Fels says, triple-B: bumpy, below-par and brittle. In contrast, emerging economy growth forecasts are strong (7% for 2010), and have been revised up (by 0.5% from the last forecast, issued in December).
This is no V-shaped recovery expected for developed economies. Exhibit 2 highlights what is unusual about the US recovery: Historically, sharp rebounds have followed deep downturns, while lackluster recoveries have followed shallow downturns. This time – after the deepest downturn in four decades – peak growth in the recovery is expected to be near the weakest of recent cycles.
Downunder Daily Macro Themes
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