Daniel W. Drezner

Your global economy counterprogramming note for the week

I think it’s safe to say that if you want to feel jittery about the global economy today, there is no shortage of news to make you run for your Maalox.  That said, here are three pieces of good news to suggest that the global economic recovery is a bit more resilient than the headlines might ...

I think it's safe to say that if you want to feel jittery about the global economy today, there is no shortage of news to make you run for your Maalox. 

That said, here are three pieces of good news to suggest that the global economic recovery is a bit more resilient than the headlines might suggest: 

1)  American consumer confidence is still rising

I think it’s safe to say that if you want to feel jittery about the global economy today, there is no shortage of news to make you run for your Maalox. 

That said, here are three pieces of good news to suggest that the global economic recovery is a bit more resilient than the headlines might suggest: 

1)  American consumer confidence is still rising

The Conference Board, based in New York, said Tuesday that its Consumer Confidence Index rose to 63.3 points, up from a revised 57.7 reading in April. Economists surveyed by Thomson Reuters had expected 59.

The increase was bolstered by consumers’ outlook over the next six months, one component of the index, which soared to 85.3 from 77.4, the highest seen since it reached 89.2 in August 2007, before the economy entered in a recession.

The other component of the index, which measures how shoppers feel now about the economy, rose to 30.2 from 28.2.

The index — which measures how consumers feel about business conditions, the job market and the next six months — has been recovering fitfully since hitting an all-time low of 25.3 in February 2009.

2)  According to the World Bank’s Temporary Trade Barriers Database, trade protectionism is decreasing

The first quarter of 2010 saw a substantial decrease in industry demands for temporary new import barriers under potentially WTO-legal "trade remedy" policies – antidumping, safeguards, and countervailing duty (anti-subsidy) policies. The first quarter 2010 resulted in a 20% decrease in newly initiated investigations in which domestic industries request the imposition of such new import restrictions compared to the number during the same time period in 2009. This follows the fourth quarter 2009 which also resulted in a 20% decrease relative to the same time period in 2008….

The first quarter 2010 also exhibited a substantial decline in the imposition of the new trade barriers that can come at the conclusion of the investigations that were initiated earlier. When compared to the same period in 2009, the first quarter of 2010 resulted in a 51.1% decrease in the number of new import-restricting measures imposed. It is also a substantial reduction from the number of new import restrictions imposed in the previous quarter – i.e., the fourth quarter of 2009.

3)  There’s no indication that panic over European sovereign debt is causing a credit crunch across financial markets.  Indeed, according to the Financial Times’ Chris Giles, most economists are pretty upbeat about the direction of the real economy: 

[T]hrough this tense period, most economists have remained confident in the world economic recovery. Greece, Spain, Portugal, Ireland and Italy are simply not big enough to derail the global economy.

Jim O’Neill of Goldman Sachs says the policy crisis in the eurozone is unlikely to be a source of global financial market contagion. “Nearly 70 per cent of the eurozone economy is made up of three countries – France, Germany and Italy – and unless the sovereign debt crisis derails their economies, it is tough to see how the eurozone could weaken sufficiently,” he says.

Julian Callow of Barclays Capital agrees: “The real economy still has substantial momentum and pent-up demand at the global level, provided that the current derisking in the financial markets does not become extended and feed back into a fall in business and consumer confidence.”

So far that has not happened to any great extent, a result that is more encouraging than in the aftermath of the bankruptcy of Lehman Brothers. And forecasts for the global economy, although uneven, are still rising….

[A] rapid yet fragile global recovery is a big improvement on the sense of doom that surrounded the outlook a year ago. The European sovereign debt crisis cannot be dismissed as an irrelevance to the recovery but it appears so far to be a nasty financial aftershock rather than a new economic earthquake.  

True, a Second Korean War or, say, a zombie outbreak could dash these nascent hopes for a strong recovery.  That said, I’ll take these positive trends over the factors that are supposed to cause me fret and worry. 

Daniel W. Drezner is a professor of international politics at Tufts University’s Fletcher School. He blogged regularly for Foreign Policy from 2009 to 2014. Twitter: @dandrezner

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