The Recovery Is Stalling. We Need Pro-Market Reforms Now.
The Economic Sentiment Index of the European Commission for August shows that the recovery of the European economy is slowing down. Not only has the pace of recovery slowed significantly, but the data for Spain reflected evidence of being the only economy in the euro area where the index fell compared to July. If we look at the Organisation of Economic Co-operation and Development (OECD) leading indicator index, the evolution is also worrying. 60 Bloomberg also tracks the daily activity in most economies, and the evidence points to a deceleration in August in most developed and emerging economies. Only the United States seems moderately better in comparison, although the slowdown in the recovery process is also evident.
Many may say that it is normal to see a deceleration in the recovery after such a fast bounce in June and July, but when most economies’ outputs remain 10 to 20 percent below February levels after the reopening, we must be concerned. We also must warn about a rapid recovery in GDP (gross domestic product) that comes mostly from massive increases in debt and government spending. The reality is that for most businesses and households the economy remains far away from 2019 levels.
Why Such a Rapid Change in Trend?
The first and wrong analysis is usually to blame the slowdown on a bad tourist season affecting the travel and leisure sector. Of course, it is an important factor, but many other parts of the economy are showing an abrupt change in trend. Furthermore, the worsening of the indicators is clearly reflected in industry and consumer confidence, with manufacturing purchasing managers’ indexes (PMIs) slowing down in the eurozone and even entering contraction in Spain.
The forced closure of the economy by government decision and the lack of confidence in the future have a profound midterm impact on the economy.
Government shutdowns have created a solvency problem with severe long-term ramifications in large parts of the business fabr
Article from Mises Wire