World still downbeat on economic prospects

By Bruce Stokes, Special to CNN

Editor’s note: Bruce Stokes is director of global economic attitudes at the Pew Research Center. The views expressed are his own.

In the Marx Brothers’ movie Duck Soup, Chico Marx asked: “Who you gonna believe, me or your own eyes?” As 2014 dawns, this seems to be the question guardedly optimistic economic forecasters are asking recession weary pessimistic publics around the world. And many people appear to trust their experience over the views of the experts, raising new doubts about consumer behavior – the willingness to spend and to invest – in 2014.

The U.S. economy grew at its fastest pace in nearly two years in the third quarter of 2013, expanding by 4.1 percent on an annual basis. And the Wall Street Journal reports that the International Monetary Fund, in its mid-January forecast, is poised to boost its current forecast of 2.5 percent for U.S. growth in 2014.

But the American public is not necessarily convinced their economy is on the cusp of a recovery. The unemployment rate is now down to 7 percent. But, thanks to the Great Recession, joblessness has been above that figure longer than at any time since the Great Depression. And the share of the unemployed who have been out of work for six months or longer remains well above the average over the last six decades.

It may be little wonder then that a mid-December Gallup survey found that 56 percent thought the economy was doing worse; just 39 percent said the economy was getting better. This optimistic minority was actually up from the quarter who were upbeat in mid-October, but such sentiment is hardly a ringing endorsement of economic revival.

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In Europe, meanwhile, Eurostat – the statistical arm of the European Union – forecasts 1.4 percent growth for the 28-member European Union in 2014, an anemic but definite improvement over expected 0 percent growth when all the results are in for 2013. But the unemployment rate across the EU stands at 10.9 percent, including 26.7 percent in Spain and 27.3 percent in Greece.

Such Depression-era joblessness rates translate into just one-in-five Europeans expecting their economy to improve over the next 12 months and about one third anticipating that it will get worse, according to the latest Eurobarometer survey. Again, this represents a slight improvement in optimism over the 18 percent who foresaw a better future in September. But it is hardly upbeat news that only about one-in-five Europeans expects the economy to grow faster.

This disconnect between economic forecasts and public mood is even greater in some recession-slammed European countries. In eight of such nations the economic mood has grown more somber.

In Greece, Eurostat expects very modest 0.6 percent growth in 2014. But this is a dramatic turnaround from the 4 percent economic decline in 2013. Nevertheless, just 13 percent of the Greek public is optimistic about 2014.

Similarly, just 11 percent of the Portuguese public expects an economic upturn in 2014, despite an EU prediction that the economy will rebound by 2.6 percentage points of GDP, from a 1.8 percent decline in 2013. And in Latvia, even though the European Union forecasts 4.1 percent growth in 2014, roughly the performance in 2013, just under a quarter of the public expects things to be better over the next year, a four percentage point drop in optimism.

Notably, there is no disconnect between the expectations of economists and the public about Japan’s economic prospects. The Organization for Economic Cooperation and Development, the Paris-based think tank for advanced economies, foresees Japan slowing to 1.5 percent growth in 2014, down from 1.8 percent in 2013. And the Japanese people share this pessimism. Just 39 percent expect better economic conditions in 2014, while half see them getting worse, according to a recent survey reported in the Nikkei Asian Review.

This widely shared disconnect between the world’s modest recovery from the Great Recession and the public mood is testimony to the depth of the downturn and the persistence of unemployment. And it suggests that if the pessimism reflected in these polls is to dissipate, it will take time – and a stronger recovery.