While the US economic outlook has been a source of dissention since early last year, few disagreed last summer that both Europe and China would be in recessions by now. Europe was expected to go dark and freeze during the winter months because of a shortage of natural gas resulting from Russia’s attack on Ukraine. China’s recession was expected to result from the government’s zero-Covid lockdowns. Instead, Europe succeeded in finding other sources of natural gas and Beijing simply ended its Covid restrictions.

Here are some recent relevant developments in Europe and China:

(1) Europe. The Economic Sentiment Indicator for the Eurozone fell below 100 last year during July and fell to a low of 93.7 during October (chart). That suggested that real GDP could be headed for a hard landing. However, the index has recovered since then back to 99.9 in January, consist with a soft landing.

(2) China. The Chinese government not only reversed course on its zero-Covid policy but also refocused on stimulating the economy. That’s evident in January’s bank loans, which increased by a record $725.3 billion during the month (chart). That isn’t an annualized number: It’s what was lent in one month!