George Kerevan: Detail of US recovery leaves room for plenty to go wrong yet

Admittedly, it took 15 quarters to get there, three times longer than the previous ten recoveries since 1945. But the UK is slated not to return to its previous GDP peak until 2013.

The US economy grew at an annualised 2.5 per cent in the quarter to September, a doubling compared with the previous three months. This is a crucial benchmark, as the US economy has to grow at 2.5 per cent in order to generate a net increase in jobs. Such welcome news, plus the positive impact of Wednesday’s eurozone deal, helped US stocks to sustain their biggest monthly rally since 1974.

Much of this growth spurt was funded by company investment. Corporate spending on equipment, vehicles and software jumped by 17.4 per cent, underwritten by a healthy 16 per cent rise in profits in the third quarter. However, there was also an unexpected improvement in consumer spending. UK retail sales, on the other hand, dipped in October, according to the CBI.

Can America stop the world slipping into recession this winter?

Unfortunately, my feeling is that US consumers were enjoying a limited summer break after digesting higher energy prices earlier in the year. Look deeper into the data, and most of their third quarter spending hike was on non-discretionary items such as health care.

To pay for this, Americans cut their savings rate by a record amount. US disposable incomes are still falling while unemployment remains stuck at 9 per cent.

Meanwhile, the Republican Senate has thrown out Barack Obama’s $447 billion jobs creation bill.

On the positive side, US company inventories have been squeezed heavily, which suggests that business investment could remain strong over the coming months. The EU debt deal could also have the perverse effect of weakening the dollar, thus boosting US exports. Longer term, expect cheap US shale gas to keep down British energy bills.

The real difference between the US and Europe is that American industry has used the downturn to improve productivity and competitiveness.

Consumers remain peevish on both sides of the Atlantic, which suggests we are in for one or even two quarters of negative growth. But while the American economy is not robust enough to drive global growth, this week’s data suggests it is better prepared for the long haul.

There are proven ways to keep bosses’ pay in check

THE evocative term “fat cat” was coined by rightwing American journalist Frank Kent in the 1920s. Kent was describing US businessmen buying influence with political donations. It is now being applied to Britain’s top bosses, for awarding themselves a massive 49 per cent pay rise. They take home on average £2.7m, or 113 times the national average wage.

There is a case for the pay of chief executives of major firms being linked to international comparisons, but it is hard to explain that 49 per cent jump. This has provoked calls for employee representatives to sit on company remuneration committees. The proposal is supported by Vince Cable and FirstGroup already has such a rep.

But there are practical difficulties: how do you elect a representative in a FTSE 100 firm with 300,000 employees in 70 countries?

An alternative approach is found in Australia, where 25 per cent of shareholders voting against the directors’ pay package automatically forces the board to review its remuneration policy. A second negative vote of 25 per cent triggers a meeting to re-elect the entire board.

Earlier this month, a third of share-holders at the Los Angeles AGM of Rupert Murdoch’s News Corporation voted against the company’s 2010-11 remuneration report. If News Corp still had its HQ in Adelaide, Murdoch could have been in line for a pay cut.