The term "double dip" is overused, but it's important now to look at where the cycle is going.
February seemed to start off well, with decent earnings reports and some stronger data from the US, but at the end of last week sovereign debt default fears took hold and risk aversion was the only game in town.
Investors ran from cyclical stocks and strong currencies as the markets priced in a greater chance that Greece and Portugal would not be able to pay their debts. In January we were worried that growth was getting out of hand in China and a monetary clampdown was on its way. But now the fear has changed.
The new fear rides rough-shod over markets, pulling down everything in its path. As one analyst put it: how can you worry about individual stocks when the market is worried about whole countries?
We have received mixed clues from businesses. British Airways talks of seeing an improvement in the fourth quarter and Ryanair looks set to return to profit this year.
But BP and Shell both lost money in downstream operations and Electrolux forecasts only modest growth in demand this year. Unilever delivered better-than-expected numbers with volumes climbing as the year progressed. But the CEO told me it was more about the internal measures that the Anglo-Dutch food giant was taking to address past wrongs on price, rather than any big pick up in demand.
Central bankers at both ends of the spectrum have been caught on the hop by this mood shift and what it could do to global growth.
Last Tuesday, markets sensed a cooling as the Reserve Bank of Australia kept interest rates on hold, rather than raising rates as the markets had expected. The RBA is wrestling with a relatively strong China-driven domestic economy and a global picture that looks more sluggish. In its statement the RBA said further rate hikes might be necessary but it was taking a breather.
A pause for thought, and more data, seems to be de rigeur for central bankers as the Bank of England also took a break last week. The Bank, though, left the door open for more quantitative easing, should it become necessary.
Let’s hope central bankers get this right. A pause is all very well, but if the monetary crutch that has supported recovery is kicked out too soon, that double dip scenario could become a reality.