by Richard Horton

There has been much talk in the business pages of a two speed economic recovery. A recovery that sees the economies of the developing world grow quickly while the developed world sluggishly heaves itself out of the remnants of the financial crisis. The long and painful rebalancing of a number of Europe’s economies, the UK’s included, is forecast. And yet life, or should that be economics, is not that straightforward. Within the developed world and especially within Europe, we are witnessing our very own two speed economic recovery.

Economists at ING Group describe how “a deep economic chasm” has formed between core euro-zone countries and the rest. The UK may well sit outside the euro-zone but that does not mean that it sits outside of Europe’s two speed economic recovery. At first glance, the GDP figures for the fourth quarter of 2010 may point to the UK being firmly rooted on the sluggish side of the European chasm. But what is more telling than GDP figures or manufacturing production numbers is consumer and business confidence.

Two weeks ago, the BBC reported the findings of a social research survey published by GfK NOP. The results showed how consumer confidence between December and January had plummeted by its largest monthly fall since 1994. UK consumers were not just more worried about their current financial situation compared to a year ago but they were also more concerned about the future of the economy compared to a year ago. In contrast, and on the other side of the European chasm, the same survey indicated that German consumer and business confidence had reached a four year high in January. (more…)