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The Shifting Tides of World Growth

As U.S. growth remains relatively anemic, the rest of the world is looking slightly better

Robert Johnson, CFA 08 August, 2017 | 14:16
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MF agreed with our assessment in its latest Global Economy Outlook (July), reducing the U.S. GDP growth forecast from 2.3% to 2.1%, while raising Europe's growth rate for 2017 from 1.7% to 1.9%. Even China's growth forecast was raised modestly from 6.6% to 6.7%. Overall, the world GDP growth rate was left unchanged at 3.5%, which is higher than the 3.2% reading recorded in 2016.

The relatively anemic U.S. growth is not because anything is falling apart, but because demographic and labor shortages continue to press on growth rates. Perhaps this is most apparent in the housing sector. Plagued with labor shortages (along with lack of well-located land), it could be doing noticeably better with more skilled construction workers.

In its quarterly economic forecast the IMF left its GDP growth forecasts for 2017 and 2018 at 3.5% and 3.6%, respectively, compared with 3.2% in 2016. The better forecast is the result of a combination of better reported economic performance in the first half, improved trade data, and higher commodity prices (which will boost some emerging-markets economies, such as Russia and Brazil).

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About Author

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis with Morningstar.

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