The Global Recovery Is Sending Flares. Is Anyone Watching?

As policy makers vie to claim the mantle of hawk-in-chief, spare a thought for what we like to think of as the recovery. It’s hard to think of an economy that’s traveling comfortably, let alone doing well. All the attention devoted to inflation slaying is muting some disturbing signs on the growth side of the equation.

Many central bankers say the best way to safeguard the economy is to contain price rises. They are really referring to prospects over the medium-to-long term. Their insistence on ratcheting up interest rates in big steps and lecturing about the bad old days of the 1970s — when borrowing costs were relaxed too soon and high inflation became entrenched — means that faltering growth now is a secondary concern, at best.

Authorities aren’t quite saying an imminent downdraft is a fair price to pay. Perhaps they don’t have to. Some important ingredients are present, nonetheless. The past week has been a tough one for optimists: China’s export growth slowed dramatically in August and imports barely stayed the right side of zero. While Beijing’s strict Covid strategy bears some blame for this poor outcome, it’s worth remembering that trade had been a bright spot for China’s otherwise troubled economy even as some major urban centers were locked down. All that monetary tightening outside China — Beijing is scrambling to put a floor under growth — might be starting to bite. That’s the point.