FOR the past year or two, the big economies have experienced a “multi-speed” recovery, as the IMF calls it. The recovery has resembled third-world traffic, where juggernauts and rickshaws, cars and cycles ply the same lanes at different speeds, often gettingin each other’s way.
But for the past month or two, this traffic has slowed in unison. The deceleration is evident in the prices of commodities, which have fallen by 8.6% since mid-February, according to The Economist’s commodity-price index. It is also reflected in American manufacturing. New orders for durable goods, such as engines and cars, fell by 3.6% in April (albeit after a strong rise the month before). Factory output is still growing modestly, according to the Philadelphia Fed’s latest survey, but has lost more momentum since March than in any two months since November 2008.
America’s recovery relied for longer than most on fiscal injections. But by early August the federal government will bang up against a debt limit imposed by Congress. Any deal to raise the limit would almost certainly require spending reductions, and failure to strike a deal at all would require drastic cuts as the government stops selling debt. Even if the government is allowed to keep selling debt, the Federal Reserve will soon stop buying it, as it reaches the end of its latest round of “quantitative easing”, a programme to buy longer-dated paper with freshly printed money.
The euro zone’s prospects of growing its way out of trouble are receding, according to surveys of purchasing managers by HSBC and Markit, an information provider. Their “flash” (ie, preliminary) index for the euro-area economy fell sharply from 57.8 in April to 55.4 in May, a drop not seen since late 2008. In services the pessimism expressed about the coming year was reminiscent of mid-2009, before the recovery had picked up any speed at all.