Put the Brexit debate on hold and pull back and see the bigger picture. If the latest data is only a little bit accurate, the Eurozone economy is in the midst of a full-blown recovery.
It matters not whether you are pro or anti-Brexit. You are both getting it wrong. Before the EU referendum, the Remain camp warned of immediate economic catastrophe if the UK voted to leave. Such predictions were foolish – there are always massive time lags between political shocks and the economic consequences. The economic effect of Brexit may or may not be dire, but to say that this would manifest itself immediately was a serious error of judgement.
The Brexit camp told us that the euro area was yesterday’s economy, a bunch of has been economies that were going down, and that we would be better off leaving before the SS Titanic Eurozone collapses.
A quite different picture is emerging. And by the way, those who point to the surprising strength of the UK economy in the wake of the Brexit vote need to pay more attention to this new emerging picture.
The developed world – that’s Europe, north America and Japan, and some Asian economies, seem to be just about in their strongest position for years. This has almost certainly got nothing to do with political decisions, and got more to the with the turning of the economic cycle.
Take for example, the latest ifo index tracking the business climate in Germany, and which was released today – the index surged, jumping to 112.3, the highest reading since July 2011.
But then the latest flash purchasing managers’ indexes, released last week, also looked good – especially the indexes tracking the euro area, which rose to a six-year high.
Indexes tracking the US and Japan fell a tad, but only from unusually high levels the month before.
We will get a complete story next week when the the full flash purchasing indexes covering economies around the world are released.
But right now, the data is telling us that the global economy is in recovery mode, and the star of this recovery appears to be Germany.
The forces that drive the economy are complex, the business cycle moves slowly.
Politicians will try and take credit for recovery, the biggest danger lies in believing them.
Don’t conclude that because the economy is doing okay, it somehow proves that Brexit or the policies of President Trump are working – there is probably no link whatsoever.