David Fuller's view -
There’s bullish talk about a coming pick-up in global economic growth, but for the moment, the signals are negative. Trends in the global economy look increasingly ominous.
Global trade is sluggish. In the first four months of the year, it rose only 2 per cent in volume terms, fell 12 per cent in dollar terms, year-on-year. Exports of Asian countries that are particularly sensitive indicators are looking awful.
Investment in expanding productive capacity is weak. The gap between new orders and stocks held by manufacturers is the poorest in three years.
Inflation is trending downwards in the US, Europe, China and Japan, with the rise in consumer prices in purchasing-power terms down over the past two years from 3 per cent to 1.2 per cent.
The OECD – the think-tank of mature economies – has cut its forecast for growth this year from 3.7 per cent to 3.1. The US is only expected to grow 1.1 per cent according to the Atlanta Fed’s latest GDP Now model. Europe and Japan are forecast to deliver minimal growth, while the most dynamic constituent of the world economy, China, is losing momentum.
Of course, there are some positive factors to counter the gloom. The fall in oil prices, by improving users‟ spending power, is adding 0.25 percentage points to economic growth. Central banks show no sign of retreating from their extreme money and credit creation policies to stimulate growth. In the US unemployment continues to fall, wage gains have started to gain traction, the housing market is looking better.
This is an interesting section and Martin Spring gives plenty of reasons why he still thinks global GDP growth will remain weak for many more years. He could be right and obviously no one knows for sure. I have repeatedly said in recent months that if may take two or three more years before we see a clear improvement in global growth. Fortunately, the more enlightened governments and central bankers understand the challenge. They are also addressing it, from the USA to India and obviously many more countries.
They are also doing so in an environment of globalisation and accelerating technological innovation. These changes are not without significant challenges, but the long-term benefits are likely to be far greater. We already see this in so many areas, from the development of increasingly influential corporate Autonomies, to lower Energy costs, and previously unimaginable developments in biotechnology. This is not just a limited or theoretical net gain for mankind. Look at the increasing growth in the world’s middle classes over the last decade and counting.
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