The Stall-Speed Syndrome

NEW HAVEN – Relapse is the rule in the post-crisis global economy. In the United States, Japan, and Europe, GDP growth faltered again in the first half of 2014. These setbacks are hardly a coincidence. Persistent sluggish growth throughout the developed world has left major economies unusually vulnerable to the inevitable bumps in the road.

Sure, there are excuses – there always are. A contraction in the US economy in the first quarter of the year was dismissed as weather-related. Japan’s plunge in the second quarter was blamed on a sales-tax hike. Europe’s stagnant growth in the second quarter has been explained away as an aberration reflecting the confluence of weather effects and sanctions imposed on Russia.

As tempting as it may be to attribute these developments to idiosyncratic factors, the latest slowdown in developed countries is not so easily dismissed. Lacking cyclical vigor in the aftermath of severe recessions, today’s economies are finding it especially difficult to shrug off the impact of shocks and break out of anemic growth trajectories.

Consider the US. Though annual GDP growth is estimated to have rebounded to 4% in the second quarter of 2014, following the 2.1% first-quarter contraction, that still leaves average growth in the first half of the year at a measly 1%.