Springtime for the world economy

Posted by: Paul Donovan

15 Mar 2019
  • Economic data quality is not as good as it should be. The way the world works is changing fast. The way data is calculated is not keeping up. There are lots of changes to numbers. Sometimes the data is just wrong (e.g. Germany). Investors should forget precision, and look at the big picture.
  • The big picture of the world economy today shows several signs of stabilization. Labor markets remain very strong. Developed economy unemployment is at a forty-year low. The broadest US unemployment measure is at an eighteen-year low. Wage growth is strong in the US and Europe. This is suggests stable or strong consumers. But consumers were not really the problem.
  • Some of the 2018 slowdown was due to weak investment. Firms worried about trade taxes and delayed investment. Investment drives up to a third of exports. Slower investment made exports weak too. Now, fears over NAFTA are fading. A Chinese trade deal seems more likely. There are signs investment is stabilizing. European manufacturing shows some stability. US manufacturing remains positive.
  • The world economy is not going to grow faster in 2019 than in 2018. But the big picture suggests stable growth, around the trend rate.