The bright spots and damp squibs of 2012

GLOBAL

There are two reasons why the world economy slowed down this year. The first is the slowdown in the eurozone: global trade with the eurozone has fallen off very sharply as the region has cut back on activity.

The second reason is that capital spending has been very weak. This came as a bit more of a surprise because companies have a lot of cash on balance sheets and are very profitable – so normally we would expect them to be spending more. They are being held back by uncertainty about the eurozone and the recent US election and the looming fiscal cliff. Europe The eurozone was a major drag on the global economy through 2012. We had an escalation of the eurozone debt crisis which caused bond yields to rise substantially throughout the peripheral economies. This meant that companies really s...