In my previous post (here), I mentioned internal demand momentum in the Euro Area and in the United States. The chart below shows internal demand profile for both country or zone. (I include all government expenditures in the chart).
The difference is huge: 9 points between the two levels. This leads to a very different support in GDP growth momentum. Moreover, internal demand is stronger now in the USA than before the crisis (+4.7%) but still weaker in the Euro Area (-4.3%).
The gap between the two will not narrow rapidly and the two dynamics are not consistent yet. In the Euro Area, the trend, since Q1 2013) is just +0.6% at annual rate. For the USA, the trend, since Q1 2010, is 2%. The effort that will have to be done in the Euro Area to converge to the US level is not thinkable now.
If you want to understand the difference in Janet Yellen and Mario Draghi’s position on monetary policy you just have to look at this chart. The answer is drawn in it for an extended period.
