“Regional economies are, in fact, more at risk from deflationary pressures,” says Saunders. “The euphoria of the 2H-2009 bull run glossed over the fact that this global recession was spawned in the financial sector. Banking-related recessions take longer than other types of economic recessions to recover. ‘Toxic’ mortgages are still on the books of many banks.”
Consumer confidence in Western economies is likely to take time to recover. A key indicator to follow is unemployment. Corporate earnings have increasingly been in the black since 2H-2009. This is to be celebrated, but a large portion of that profit can be attributed to “adroit” management of capital and operational expenditure. More telling indicators are revenues, and for many industry sectors these are still very depressed. Therefore B2B and B2C purchasing remains constrained.
Unemployment figures for the US, UK and Germany are 10.2%, 8% and 8.1% respectively.