Analysis: Nothing black or white in trendless 2012

Wed Jan 11, 2012 1:54am EST
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By Mike Dolan

LONDON (Reuters) - If the first week in January 2012 tells us anything about the investment year ahead, it's to be skeptical about black and white thinking.

For all the negativity surrounding the financial system and future growth, the newsflow just won't corroborate the gloom - not entirely at least. The reality, it seems, is that despite fears of renewed world recession and even depression, the economy is less moribund than much of the commentary would have it.

In the space of a week, the United States reported a drop in unemployment last month to its lowest in nearly three years and the biggest jump in consumer credit in a decade.

And this quickening of the pulse was not isolated to the biggest economy in the world. Manufacturing and services firms boosted activity globally in December at their fastest pace since March, according to JP Morgan's compilation of monthly purchasing manager surveys. The improvement was notable across Europe as well as in the United States.

Of course, all these surprises remain bright sparks in an otherwise fairly gloomy picture -- a picture that's not likely to be hugely improved as long as the euro sovereign debt and banking crisis remains unresolved, household and government deleveraging continues apace and fast-growing emerging economies slacken their pace.

But it does show that the financial sector woes, government balance sheet problems and euro risks have not completely snuffed out cyclical economic activity. For the committed bears, that's frustrating. For evergreen optimists, it's some solace.

The blend of the two means that, for the foreseeable future at least, neither will be completely satisfied.

"While global growth will surely not win any medals this year, the recent trend of positive data surprises recorded in the U.S., euro zone and at G7 aggregate level all suggest that the worst of the declines in economic activity is over, at least for now," economists at Barclays told their clients this week.   Continued...