The grin on the face of world leaders grew a little wider this week as strong manufacturing data added weight to the global recovery. The US, UK, eurozone and China all notched up significant gains in influential factory purchasing managers’ indices. For Britain, hopes that manufacturers would ride the low sterling towards an export-led recovery lent particular reassurance. This strength, though, raises the risk that if companies fail to find end buyers for their rebuilt inventories, they will cut back fast, triggering a double-dip recession in the first quarter of 2010.

This bullwhip effect may soon be visible across many industries. Say a recovering jeweller forecasts demand for 10 watches and orders accordingly. The wholesaler then sees this growth in demand and, scared of stock running out, orders 15 watches from the watchmaker. The watchmaker, in turn, interprets this growth as a trend and buys enough materials to make 20. Eventually everyone is oversupplied, the reverse situation plays out and orders evaporate, taking jobs with it. All the while, consumer demand may have grown only slightly.