Happy days

On 4th August, Ambrose Evans-Pritchard wrote a piece suggesting that happy days awaited the global economy. Europe printed disappointing second quarter GDP growth. Italy youth unemployment at 44% is approaching Greek levels. US just printedcontraction in manufacturing in the NY region. OF course, US National Association of Home Builders’ Index rose to its highest level in 2005. But, Srinivas Thiruvadanthai tells me that US home prices were at their highest, if one excluded the bubble years of 2005 to 2007. Sure enough, housing affordability has dropped sharply. There has been a surge in commercial real estate prices, igniting bubble worries and Bloomberg carried an article on auto subprime loans. Déjà vu. High yield bond spreads are rising. A good FT article summarises the dire economic situation in China, although most of us were foxed by the line that net exports subtracted from China’s growth in the last ten years. God knows where that came from!

Not a good sign of a thriving economy. In July, when the International Monetary Fund updated its World Economic Outlook of July, the number of items of risk that threaten the global economy was fairly long. Optimists might be disappointed in 2016.

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