- "We are again being asked whether, and for how long, Europe can continue to grow if the US is slowing. It’s a familiar question, albeit very different from the one that we were being asked until relatively recently, in which Europe was supposed to be the cause of whatever slowdown was going on rather than the victim of someone else’s. Never mind – it’s instructive that both concerns involve doubts about the recovery."
- "The starting point for the current concern is that the second quarter was the strongest in the recovery so far in the euro area and the UK with growth running at an annualised rate of 4% or more. Remarkably, it ran at more than twice that rate in Germany. Meanwhile, it was the weakest in the recovery so far in the US with, on our estimates, growth running at about half the rate seen in the euro area and the UK and about a quarter of the rate seen in Germany."
- "So, where do we go from here? Our analysis suggests that US slowdowns needn’t be associated with any change in European growth, but US recessions typically are. Trade exposures matter, but are not overwhelming. The higher correlations and larger multipliers are associated with financial shocks and common shocks. That is what causes US recessions and also what leads them to be associated with something similar elsewhere."
- "From our perspective, the key issue is to assess what sort of slowdown it is that the US seems to be experiencing. For now, it looks like the sort of slowdown that needn’t be associated with a large change in European growth. The multiplier could be closer to zero than one. It doesn’t help that other economies such as China also appear to be slowing and neither does it help that stock markets have been volatile. Those are the downside risks."
- "The upside risks have more to do with domestic demand. There is no breakdown of the second quarter numbers yet, but domestic demand is likely to have made a large contribution. For now, monetary policy remains exceptionally accommodating and sentiment and cash flow remain strong in some of the larger European economies. We continue to expect them to grow steadily over the coming year."
- "The starting point for the current concern is that the second quarter was the strongest in the recovery so far in the euro area and the UK with growth running at an annualised rate of 4% or more. Remarkably, it ran at more than twice that rate in Germany. Meanwhile, it was the weakest in the recovery so far in the US with, on our estimates, growth running at about half the rate seen in the euro area and the UK and about a quarter of the rate seen in Germany."
- "So, where do we go from here? Our analysis suggests that US slowdowns needn’t be associated with any change in European growth, but US recessions typically are. Trade exposures matter, but are not overwhelming. The higher correlations and larger multipliers are associated with financial shocks and common shocks. That is what causes US recessions and also what leads them to be associated with something similar elsewhere."
- "From our perspective, the key issue is to assess what sort of slowdown it is that the US seems to be experiencing. For now, it looks like the sort of slowdown that needn’t be associated with a large change in European growth. The multiplier could be closer to zero than one. It doesn’t help that other economies such as China also appear to be slowing and neither does it help that stock markets have been volatile. Those are the downside risks."
- "The upside risks have more to do with domestic demand. There is no breakdown of the second quarter numbers yet, but domestic demand is likely to have made a large contribution. For now, monetary policy remains exceptionally accommodating and sentiment and cash flow remain strong in some of the larger European economies. We continue to expect them to grow steadily over the coming year."
CreditSuisse European Economics 20100818
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