Economic recovery in the U.S. and elsewhere has slowed rapidly and private and some public forecasts are being downgraded accordingly. The Federal Reserve is sounding much more cautious, although they are not yet prepared to talk of further monetary easing. The most optimistic observers are now having to face reality. The massive stimulus packages did the job of stopping a self-feeding downward spiral but they have given us an artificial recovery.
Growth is now gravitating back towards 1% in the U.S. and Europe, close to what final demand has been. In the U.S. the inventory cycle has stopped adding growth, state and local governments are slashing expenditures and jobs, the nascent housing recovery has gone into reverse, and deleveraging continues. Realistically, it is difficult to picture where any new growth surge may come from.
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