- Economies of Europe, China, Japan all doing well
- U.S. economic expansion still on track in ninth year
- Business investment critical to improve productivity
This year is shaping up as the most synchronized for global growth in a decade, a development that could ease the burden on the U.S. as the world’s economic engine. World trade is at a seven-year high, and for the first time since 2010, no G20 economy is expected to post a decline in output.
Across the Atlantic, Eurozone economies are experiencing better, albeit moderate, growth and inflation – a sign that easy monetary policies are yielding positive results. Economic sentiment in the EU is the highest since 2011, and unemployment the lowest since 2009. Japan is experiencing its longest stretch of growth in more than a decade, and China is apparently still growing as it transitions to a lower-growth but more balanced economy.
At home, the U.S. economic expansion has entered its ninth year and may well continue for some time. Recent data indicates a solid rebound in second-quarter GDP, and expectations are for growth to be modestly above trend over the next year.
With all the world’s economies growing in lockstep, the difficult question is whether a more fundamental shift is occurring. An important component to sustaining global growth would be to see a sustained expansion in business investment to improve productivity and make economies more efficient.
Investment is a key indicator of economic strength because it shows how extensively firms are committing resources to increasing future output. The good news is that various factors affecting the investment outlook have turned supportive, including corporate profitability. Investment growth in advanced economies is forecasted to overtake consumption growth over the next year.
Significant challenges may arise when central banks reverse years of ultra-accommodative monetary policies, and the possibility remains of policy mistakes and unintended consequences that could damage the global economy and financial markets. Still, many economic indicators appear to be pointing in the right direction.
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