The global economy’s warning signs are broken

From markets to spending to debt, usually reliable indicators that forecast where the economy is headed are proving deeply fallible, writes Patricia Cohen from London

- Patricia Cohen

The usually reliable indicators that signal a recession is starting have gone haywire.NYT

The general bewilderment that bedevils the economic mandarins these days was captured by a recent World Bank note: “Global Growth Defies Expectations.”

Forecasts that turn out to be wrong — or defy expectations — are as routine as a heartbeat.

But now something is up. Familiar guideposts to how businesses, consumers, investors and workers have historically responded to economic slings and arrows have turned out to be less reliable.

This has made interpreting the cascade of data trickier than ever. It's as if cars, instead of slowing down at a flashing yellow light as expected, started speeding up.

Consider people’s spending habits. Normally when consumers are gloomy about the economy, they tend to spend less, wary of what lies ahead.

And in the United States, consumers’ outlook has been depressed. In every category, from rising prices to the job market, a survey showed that consumer sentiment has dropped to a 12-year low. Yet Americans have not stopped shopping. Consumer spending has risen steadily.

The stock market, too, has generally been on a tear despite pell-mell disturbances, including a worldwide trade war, whiplash-inducing policy changes, threats to central bank independence, military conflicts and rising geopolitical tensions, titanic debt, and a possible financial bubble related to artificial intelligence.

“Tt’s just been remarkable that we haven't seen more big swings going on,’ Kenneth Rogoff, author of Our Dollar, Your Problem, said of the market's calm.

Many businesses have also shrugged off uncertainty.