63834
The first quarter economic growth data of Europe has been strong, easing concerns regarding the ‘hard’ versus ‘soft’ data gap, and the  still elevated April PMIs imply momentum stays strong.
The first quarter economic growth data of Europe has been strong, easing concerns regarding the ‘hard’ versus ‘soft’ data gap, and the  still elevated April PMIs imply momentum stays strong.

Moody’s Warns of Sluggish Global Productivity Growth

Long-term factors of slow technology diffusion and stagnation of new, lean firms entering the global marketplace have also contributed to the economic slowdown

Moody’s Warns of Sluggish Global Productivity Growth

Global rating agency Moody's Investors Service sees a persistent decline in labor productivity growth, stemming from an aging population and slow investments, as posing a key threat to global economic recovery.
The agency's report, titled "Collapse of Global Productivity Growth Remains Sizable Risk to Credit Conditions," published on Thursday said global labor productivity growth fell to an average 1.7% in the post global financial crisis years of 2011-2015, compared to an average 2.6% between 1995-2007, Moody's.com reported.
In 2016 alone, labor productivity growth slowed to just 1.2%. Moody's said if productivity growth remains unchanged, global economic growth next year might be as low as 2.5%, significantly lower than previous estimates of 3.5%.
"Despite the cyclical uptick, we expect global growth to remain significantly below pre-crisis levels in the near term, driven by slower growth in both employment and labor productivity," Elena Duggar, Moody’s associate managing director, said on Friday.
According to Duggar, a combination of factors has caused the productivity growth slowdown, including an aging population, declining growth in human capital and education and mismatched skills related to new workplace technologies.
Weak investment in the post-crisis period can be attributed to credit constraints, an overall sense of business pessimism and an elevated policy uncertainty, which also contribute to slowing labor productivity, Moody's said.
Long-term factors of slow technology diffusion and a stagnation of new, lean firms entering the global marketplace have also contributed to an economic slowdown.
However, the rating agency said economic growth in Indonesia could reach as high as 5.1% this year and 5.2% in 2018 if productivity levels continue on current trends.
Duggar said the global financial crisis "exacerbated" the slowdown in productivity growth but the ultimate causes of the economic downturn are still subject to much debate.
Ultimately, though, a slowing of productivity rates is a long-term phenomenon, one that predates the 2008 financial crisis, according to Duggar.
Synchronized Recovery
The global economic recovery continues to be synchronized. The US economic growth came in weak in the first quarter of this year, whereas the recent April manufacturing PMIs of China indicate reduced momentum and that the recent weakness in commodity prices raises questions regarding global demand.
However, the reasons for weak growth in US, which was mainly because of consumption, are mostly temporary, and the growth is expected to pick up in the second quarter, noted Barclays in a research report.
This week’s strong labor market data indicates that private consumption in the US should continue to be healthy. Meanwhile, the signals of Chinese economy’s slowdown come on the back of stronger than expected growth in the first quarter and indicate moderation rather than any serious disruption. Similarly, the recent oil price declines are likely to be just temporary, mainly driven by inventory adjustments and supply factors rather than reflecting weak demand, added Barclays.
Significantly, the first quarter economic growth data of Europe has been strong, easing concerns regarding the ‘hard’ versus ‘soft’ data gap; and the still elevated April PMIs imply momentum stays strong. Similarly, the Japanese economy continues to expand above potential driven by strong net exports.
The general rebound in export activity also augurs well for the wider emerging market universe. The EM manufacturing PMIs, excluding China, hint at a further upward trend. Therefore, while regions are seeing different momentum and political risks loom, the overall modest rebound of the global economy, including nominal GDP growth, appears intact, stated Barclays.
A recent IMF study said: “Unless there is an unforeseen technological breakthrough, productivity growth is unlikely to return to the higher rates of the 1990’s for advanced economies or the early 2000’s for emerging economies.” Protectionism in the form of “increasing tariffs and developing restrictions on immigration will only exacerbate the slowdown,” said the report.

 

Short URL : https://goo.gl/AWOfCn
  1. https://goo.gl/IgmSzN
  • https://goo.gl/tykkl6
  • https://goo.gl/xPJP9j
  • https://goo.gl/nTNf65
  • https://goo.gl/Ql4vuM

You can also read ...

Venezuela Wants to Improve Economy
Venezuelan Labor Minister Eduardo Pinate says the Bolivarian...
Closing Africa’s Wealth Gap
From “Africa Reeling” to “Africa Rising”, there’s a new...
GDP expanded 6.8% year-on-year in the Q1.
With growth resilient and progress made in the pursuit of high...
New Whistleblower Rises Against India’s ICICI Bank
India’s private lender ICICI Bank has been identified as a...
Asian countries form a crucial part of the supply chain for many of the Chinese electronics the US has slapped with tariffs.
The mounting trade tensions between the US and much of the...
The accumulated improvement in the structural balance since 2015 amounted to 0.7% of GDP.
The European Council closed the excessive deficit procedure...
Bitcoin Falls to Four-Month Low
Bitcoin dropped to a more than four-month low on Friday,...
Italy’s New Gov’t Facing Daunting Challenges
Italy’s Five Star Movement and the Lega party managed to form...

Add new comment

Read our comment policy before posting your viewpoints

Trending

Googleplus