The second quarter GDP figures for the US were published last Friday. The financial markets do not usually get very agitated about these figures, because the official quarterly data lag the many sources of more timely information on the economy. But this is an unusually sensitive time for the US economy. Many observers are beginning to fear the onset of a double dip recession, and even a slide towards chronic deflation. Since this is by far the biggest risk facing the global economy at present, I feel I should start this new blog on global macro-economics with a comment on what I learned from these figures. Three points stand out, all of them worrying.

First, the annualised growth in GDP in Q2 was only 2.4 per cent, a disturbing figure because it indicates decelerating momentum, compared with growth rates of 5.0 per cent and 3.7 per cent in Q4 and Q1 respectively. A growth rate of 2.4 per cent is no better than trend, and is not sufficient to bring unemployment down. The US labour market is currently trapped in its worst recession since the 1930s, with many troublesome signs which remind me of the dysfunctional European labour market in the 1980s. It cannot afford a period of sub trend GDP growth.