The OECD average unemployment rate fell to 5.6% during June 2017, its lowest level since March 2008 (see chart below). What is remarkable about this upswing in global economic activity is that it is occurring at a time of both benign inflation and, on some measures, close to record low unemployment. It would also seem that there is room for meaningful upside to the IMF’s 2018 figures as they are predicated on Chinese growth falling to 6.2%, a significant slowdown from the current rate of activity.
This would represent the fastest pace for global growth since 20 respectively. The IMF, in its most recent review of the global economic outlook, forecasts the global economy to expand by 3.5% in 2017 and 3.6% in 2018. So far, predictions that these actions would weigh heavily on economic activity have proven to be incorrect, or at least premature. A year ago, markets (and the Chinese government) were predicting a meaningful slowdown during 2017 as the government tackled excess credit creation and forced closures in industries with excess capacity. Chinese growth rates are considerably ahead of its government’s own 2017 growth forecast of ‘around 6.5%’. The Chinese economy grew by 6.9% in the second quarter of 2017, the same rate of growth as the first quarter and the equal fastest pace of expansion since September 2015. Not that Chinese growth rates have been accelerating, but rather Chinese growth has (once again) not slowed down as forecast.
#Goldilocks economy 2017 driver
For mature developed market economies, such growth rates are positively zippy.Īn equally important driver of above-trend global growth has been developments in China. In the US, economic growth annualised at a rate of 3.1% in the second quarter of this year, well ahead of market expectations, while Europe and Japan both recorded annualised growth rates of 2.5% during the same period.
Since mid-2016, a string of consistently good economic data from around the world has shown the global economy is in a period of synchronised upswing. It is unfortunate then, that one of the better good news stories of recent years has received less attention than it deserves. Most financial commentators are fixated on predicting how soon it will be until the next bear market hits shares.
Brexit and Trump take turns in frightening us for our livelihoods. North Korea and ISIS take turns in frightening us for our lives. Pick up a newspaper today and it is hard to find many reasons to be cheery.
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