Green shoots of recovery? More like lawn mulch

Soros Fund Management, the investment arm of the billionaire George Soros, reported last week it was re-weighting in favour of US retailers such as Macy’s and Home Depot, while Warren Buffett’s Berkshire Hathaway announced it was raising its stakes in two banks, Wells Fargo and US Bancorp. Those announcements followed by only a few days remarks by Jean-Claude Trichet, the famously restrained president of the European Central Bank, that the recession had “reached an inflection point”. He was joined in this hopeful prognosis by Tim Geithner, the US Treasury secretary, who ventured that the US financial system was finally beginning to heal itself.

It is unlikely that Mr Soros and Mr Buffett are keying their investment decisions to the commentary of technocrats such as Mr Trichet and Mr Geithner, who have a clear interest in talking up the markets. While the latter insist on seeing “green shoots” perforating the gloom, the former understand the wisdom of averaging down in a market such as this, rather than waiting for the elusive bottom. That was particularly true last week, when an onslaught of bad news trampled those proverbial seedlings into mulch.

Suddenly, every economic indicator is at its worst level since Detroit was selling cars. The euro zone’s GDP declined 2.5 per cent in the first quarter, extending its most severe contraction since the Second World War. For the year to March, European industrial production shrank by 20 per cent, the fastest rate of decline on record. The European Bank of Reconstruction and Development now estimates a 5.2 per cent contraction in European output, compared with a growth forecast of 0.1 per cent in January. In the US, consumer prices last month tumbled at their fastest rate since 1955, while retail sales posted their fourth consecutive monthly decline. Unemployment is at its highest level in 25 years and will get worse before it gets better.