April 24, 2012

New Index Tracks Sputtering Economic Recovery

Brookings Institution and Financial Times provide snapshot, interactive map of global growth

Two Brookings Institution scholars in collaboration with the Financial Times have developed a new index that aims to offer a more nimble and transparent view of the global economy.

Eswar Prasad and Karim Foda, the two Brookings fellows behind the new TIGER index, endeavored to create a tool that can get a read on the economy without the opacity of forecasts published by the International Monetary Fund (IMF) or the Organization for Economic Cooperation and Development (OECD). TIGER stands for Tracking Indexes for Global Economic Recovery.

The recently released forecasts from those organizations do not differ in their conclusions from TIGER that the world economy exhibits both some positive signs and much fragility. But TIGER endeavors to offer a clearer view through “consistent and comparable data” on real economic activity, financial market indicators and confidence.

In contrast to the density of the 250-page IMF forecast, for example, TIGER offers a single interactive page that a reader can mouse over to track growth in the 20 advanced and emerging countries the index tracks. A separate link takes you to detailed charts of the global economy, while clicking on an individual country on the interactive map will show the same data for that country alone. A nifty feature allows readers to look at a specific economic indicator—say, business and consumer confidence—across the countries tracked by TIGER. The webpage also includes a link to a concise, single-page commentary.

In this written commentary, the two Brookings economists are not any more cheerful than other economic forecasts have been in the recent quarter. Their report’s first words are, “The world economy is showing scattered signs of vigor but remains on life support, mostly provided by accommodative central banks.”

Of advanced countries they write: “With fiscal policy already in a tight spot and monetary policy out on a limb in these economies, the room to boost domestic demand is limited.” About Europe specifically, Prasad and Foda say that austerity measures undertaken at the same time as structural reforms are leading to declining growth and political instability.

The “scattered signs of vigor” are to be found mostly in the U.S., where “the unemployment rate continues to drop and employment growth has begun to pick up,” together with first quarter stock market gains and credit growth.China also gets a positive plug for seeming to be “engineering a soft landing for its economy.”

But the tenor of the report, along with specific references to Japan, Europe, India, Brazil and Russia, remains predominantly gloomy.  The authors conclude that “the global economic recovery is still sputtering due to a lack of robust demand, policy tools that are stretched to their limits and unable to muster much traction, and enormous risks posed by weak financial systems and political uncertainty.”

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