Since the financial crisis, the global economy has travelled at two speeds. Developing countries have steamed ahead, powered by China’s voracious appetite for raw materials. Meanwhile, the west has limped along, as households and states cut back spending to address towering debts.
In the past 12 months, however, this picture has shifted. Just as confidence has returned to parts of the rich world, plummeting commodity prices have exposed the frailties of emerging markets. In October, the International Monetary Fund slashed its forecasts for the likes of Indonesia and Brazil. The fund now believes that the bulk of positive news for 2014 will come from high-income countries.
The US economy, in particular, offers grounds for optimism. The housing market has strengthened, after the massive injection of liquidity by the US Federal Reserve helped to lower mortgage rates. The labour market is becoming more buoyant and cheerier consumers have resumed spending. For now, investment is still lagging behind. But were corporations to use the large cash piles upon which they are sitting to finance new projects, the US economy could easily edge closer to its pre-crisis trend. Britain is also motoring, thanks to a sudden jump in consumption. However, banks are still lending too little to business, in spite of ultra-low interest rates.