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Tuesday, 28 March 2017

Growth indicators flashing green, but achieving pre-crisis rates unlikely

“It is perhaps odd that despite gloomy news stories about the risks to growth the world economy is recovering,” Deloitte Chief Economist Ian Stewart wrote in his Monday Briefing. “This is a rare thing, a synchronised global recovery with activity strengthening in developed and emerging markets for the first time since 2010.” Stewart says leading growth indicators are flashing green globally: “Singaporean export growth, a barometer of global demand, has hit a two-year high. Chinese electricity consumption has rebounded. Arguably Europe’s most important economic indicator, Germany’s Ifo business confidence index, is near a three-year high. In the UK, optimism among manufacturing companies has reached its highest level since 1995. Surging North American rail freight volumes point to growing demand. Across the world the regular economic data are coming in on the strong side of expectations.” However, Stewart tempers this optimism by suggesting that the pace of recovery is unlikely to match pre-crisis growth rates due to decline in advances in productivity. He traces this decline to a reduction in investment in education, training, and capital spending.

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