Strong global rebound is on firm footing

AFTER a long period of sub-par growth, the global economy has turned a corner this year. Global GDP growth has been tracking at an average of 3.9 per cent SAAR (seasonally adjusted annual rate) for the past three quarters. Trade has expanded by 4.7 per cent year-over-year in August 2017, significantly higher than the average of 1.7 per cent over 2015-16.

Globally, purchasing manager indices are also at multi-year highs across both developed markets (DMs) and emerging markets (EMs). Indeed, the US ISM is around its strongest since April 2011.

While impressive by itself, the strength of the recovery has been overshadowed by the breadth of the recovery. Indeed, this has been the first year of synchronous recovery in both DM and EM growth since 2011. Technically, the last comparable period when growth was this strong was 2010. However, that recovery was driven by strong acceleration from a deep recession and was driven by expansionary and monetary policies. Fundamentally, the recovery this year is the strongest since 2006.