The US-China trade war and Brexit don’t help, but behind sluggish global growth lies political gridlock
- Income inequality, an ageing workforce and a focus on creating short-term value for shareholders are some of the reasons for the global growth slowdown
- Behind all of these is a deadlocked political process in advanced economies that prevents investment in much-needed infrastructure that could spur growth
The US economy ended 2018 with a whimper and a 1.1 per cent annual rate of gross domestic product growth, and then started the first quarter of 2019 with a bang – 3.1 per cent growth. The economy has since settled back to 2 per cent or less, where it seems likely to linger unless major shocks occur.
Consumers keep spending, but business investment is sluggish. Monetary authorities have eased about as much as they can. Short and long interest rates in the United States are now zero in real terms – adjusted to remove the effects of inflation and reflect real borrowing costs and yield – and negative in nominal terms in much of Europe and Japan.
In any case, China’s imports in 2017 were lower in US dollars than in 2013. Precautionary buying ahead of tariffs led to a large jump in imports for 2018, but there has been a decline in import value since.
