The Independent Uganda: You get the Truth we Pay the Price
Some might object that Chinese data cannot be trusted. But I do not see why the data on one side of the ratio would be any more or less reliable than data on the other side. Why would Chinese officials fiddle with consumption data while allowing the industrial-output figures to register a decline. In any case, we have to work with what we have.
A fifth indicator is South Korean trade data, which is consistently reported on the first day of each month after trades occur – faster than any other country. South Korea has an open economy and trading partners around the world, including the U.S, China, Japan, and the European Union, so one can extrapolate from its trade data to draw conclusions about the state of global trade.
After trending down in recent years, South Korean trade since November has shown signs of recovering, notably in terms of export growth; and in January, it bounced back significantly. To be sure, this finding is at odds with all of the eulogies for globalisation that one hears these days, and Donald Trump’s decidedly protectionist administration in the U.S could now send global trade into a long retreat. But South Korea’s recent data suggest that globalisation still has some life left in it, and that 2017 is off to a decent start.
In fact, barring the worst-case scenario under Trump, it is possible that the slowdown in global trade in recent years will turn out to be a temporary phenomenon. It may have been a singular occurrence that reflected a variety of factors, including the euro crisis; continued economic weakness in many European countries; the sharp decline in commodity prices; dramatic slowdowns in Brazil, Russia, and other emerging economies; and tighter regulations for international banks, which might have hindered trade finance.
The last key indicator is the monthly Ifo Business Climate Index in Germany, which contains useful cyclical data for Europe overall, owing to Germany’s centrality in the continent’s economy. The Ifo survey has reported positive results in recent months, although the data were more promising in December than in January.
Taken together, these six indicators suggest to me that the global economy might now be growing at a rate of more than 4%. This is the fastest growth in a number of years – although the last decade’s average growth rate of 3.3% was barely lower than the rate in the previous decade – and close to the pace of the previous two decades before that. At the same time, the six indicators cannot tell us anything about what will happen after the next few months. It is an open question whether global economic growth will remain strong, strengthen further, or start to weaken.
It has been interesting to watch growth accelerate in the face of shocks such as the UK’s Brexit referendum and Trump’s election. And yet it is unclear why this is happening. Some might say the trend is a result of policy decisions in the US and UK, but far more would probably say that it is happening despite those decisions. Unfortunately, there are no indicators that provide an answer to this question – only time will tell.
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Jim O’Neill, a former chairman of Goldman Sachs Asset Management and former Commercial Secretary to the UK Treasury, is Honorary Professor of Economics at Manchester University and former Chairman of the British government’s Review on Antimicrobial Resistance.
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Copyright: Project Syndicate, 2017.
www.project-syndicate.org
