Global economy set for faster, firmer growth

A stock quotation board in Tokyo. A 4 per cent annualised surge in Japanese GDP in the second quarter put the nation at the top of the growth table among the Group of Seven industrial economies.
A stock quotation board in Tokyo. A 4 per cent annualised surge in Japanese GDP in the second quarter put the nation at the top of the growth table among the Group of Seven industrial economies.PHOTO: AGENCE FRANCE-PRESSE

WASHINGTON • The world economy looks well on its way to a year of faster, firmer growth after rising at its most rapid pace in 2 1/2 years in the second quarter.

The expansion is broad-based as long-time laggards Japan and the euro area perk up. Even more encouraging: The gains look sustainable as they are not generating much in the way of inflation or other excesses that often presage a downturn, economists said.

"The global economy is in better shape than it has been in several years," said Deutsche Bank chief international economist Torsten Slok. "We just don't see what would be a trigger for a recession."

He called it a "Goldilocks" scenario for stock market investors, with recovery solid enough to generate higher corporate profits but not so fast as to lead to a rapid pickup in inflation and interest rates.

The MSCI ACWI Index of stocks from emerging and advanced economies has risen in the past five quarters, its longest stretch of gains since the 2008 financial crisis.

Global gross domestic product is projected to increase by 3.4 per cent this year and 3.5 per cent next year, based on a median forecast of economists surveyed by Bloomberg. While that would be down from an estimated 4 per cent-plus pace in the second quarter, it still represents a clear acceleration from last year's 3.1 per cent advance.

"Recent data points to the broadest synchronised upswing the world economy has experienced in the last decade," International Monetary Fund chief economist Maurice Obstfeld wrote in a recent blog post. "World trade growth has also picked up, with volumes projected to grow faster than global output in the next two years."

The pickup has been paced by budding rebounds in Europe and Japan, two economies that until now had been seen as drags on the global economy.

After years of lacklustre growth, the euro-area economy is starting to build momentum. The expansion accelerated to 0.6 per cent in the second quarter, and it is more evenly spread across the 19-nation region than in the past.

A 4 per cent annualised surge in Japanese GDP in the second quarter put the nation in an unexpected spot: at the top of the growth table among the Group of Seven industrial economies.

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A version of this article appeared in the print edition of The Straits Times on August 18, 2017, with the headline 'Global economy set for faster, firmer growth'. Print Edition | Subscribe