Reproduced with the kind authorization of CNBC

Brian Sullivan, presenter: William, first off, you just heard Matt Taylor’s report, what do you make of China? Do you really believe that that nation is in the grips of a solid recovery?

William De Vijlder, Group Chief Economist, BNP Paribas: It is a square root recovery. If you look at the charts of their retail sales and even industrial production, it was a sharp down, sharp up and now the growth is tailing off. I think the important element is retail sales. Typically, recoveries are driven by the household sector, so if retail sales are soft, it is an element of concern not only for China, but more globally. It’s an issue, I would say.

BS: Yes, it is and no more concern, of course, than here, the biggest consumer economy in the world, is the United States. All this debate over these letter, V-shaped, U-shaped, W-shaped recovery, William, from your perch globally, how do you see the US economy over the next three, six, 12 months?

WDV: The key point is what is happening on the consumer side, it depends on what is happening on the labour market, so the big concern I would have is that the job creation will be slow, subdued, and at the same time unemployment would continue to creep up and that people would no longer benefit from the specific programmes that have been put in place to give them income support. If there is no continuation of these programmes, it means that you can have a cliff edge phenomenon with respect to consumer spending. By the way, that concern also exists with certain programmes in Europe as well. Recoveries in the US, but also globally, as I mentioned when I was speaking about China, are really driven by the consumer sector and that means that everything hinges on the labour market. To illustrate the point, today we had data from the UK, we’ve never had as few a number of job postings whereas the unemployment rate is going up big time, so you see the issue that we have at hand with the outlook for the global economy in the next several months.

BS: You know, what’s interesting here, William, is that the stock market which, by the way, is not the economy, we acknowledge that, but the stock market has soared at or near record highs in many indexes, but 10-year bond yields are low, 0.62%. What is that gap between the equity markets and the credit markets telling you?

WDV: For me, that gap is a big source of concern. Now, this is not a forecast, it’s kind of an anomaly compared to the recent history. If you go back in the past several years, what we observed is that when the equity market was rallying that, typically, bond yields were also rising and that is not the case now. One interpretation is that this is all thanks to the Fed, the Fed is keeping a lid on bond yields and that is the kind of the positive interpretation. The other interpretation will be that you have part of the investment community, which is not really sharing the bullishness of equity investors and is really holding on to Treasuries because they are, of course, as we know a very good hedge in times of turmoil.

BS: William de Vijlder of BNP Paribas, a look at the global economy there. William, appreciate you coming on, thank you very much.