2019 Global Outlook: Another year near zero
It has been a decade since global interest rates reached the zero lower bound, where monetary policymakers lose their ability to stimulate the economy using conventional policy tools. Among the largest global central banks, only the United States Federal Reserve has set its benchmark above 2 percent. Will this anomaly end in 2019?
2019 Global Outlook: The economy we left behind
2018 was not a bad year for the world economy, and 2019 should be only a little worse. Consistent with our forecasts, last year brought no disasters: no recession in the West, no major slump in China, no public finance crisis in Europe or global trade wars. Instead, there was satisfactory growth and a long overdue cleanup on financial markets. 2019 will be more sluggish as China keeps slowing and the U.S. administration spurs commercial tensions. Yet the biggest brake will be applied by the world economy’s silent actor – lagging productivity growth.
German growth sputters: Should Europe brace for trouble?
In 2018, Germany’s growth dipped. Europe’s economic powerhouse is likely to continue sputtering in 2019 and beyond. Too many European companies have become exceedingly dependent on the health of the German economy and relatively few seem capable of restructuring their production and marketing techniques to succeed on a global scale. The German slowdown will soon be followed by other disappointing figures on the continental scale.
Vocational lessons from Germany and France
Germany is praised as a model of vocational training, with youth unemployment of just over 6 percent. France, where 22 percent of young people don’t have jobs, has long known that its own vocational education system needs fixing. A comparison of how these two great European economies prepare pupils to become future employees may provide a useful guide for other countries.
No easy way back for U.S. manufacturing
President Donald Trump declared on October 1 that the new trade deal with Canada and Mexico signifies the return of the United States as a “manufacturing powerhouse.” U.S. manufacturing has indeed changed dramatically since 1992, when the three countries signed their original trade pact. But the complex and varied factors that have reshaped factory production in the U.S. cannot be summarily reversed.
German exports slow down: Should Europe celebrate?
Those European leaders who like to complain about the ongoing trade surpluses of the German economy should not celebrate the recent slowdown in Germany’s exports and GDP growth. Higher labor costs and tensions in international trade may cause trouble for German exporters, but they are already investing in new production facilities in low-cost countries. If German exports slow down, their market share might be taken by German producers outside of Germany, while the productivity gap between Germany and the rest of Europe will widen.
Low productivity puts Western economies at a crossroads
Productivity is the key to economic success and the main determinant of future growth. In Europe and North America, however, this economic driver has been weakening for decades, despite scientific and technological progress. Unless Western countries want to take a back seat to rising Asian economies, they must look hard at their educational, social welfare and regulatory systems.
Opinion: Ready for the next recession?
Economists enjoy delivering bad news. The current favorite being shared by academics and financial experts is that the world is headed for a recession, in 2020 or 2021 at the latest. But we regard this as unlikely, unless there is a major political accident – such as a trade war or turmoil in China. While a slowdown is always possible, especially in Western Europe, that does not make a recession.