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From economy to econoMEH: global growth is mixed

Jan 19, 2016
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What’s wrong with the global EconoMEH

From economy to econoMEH

Putting the ‘meh’ in economeh

‘Meh’ is not an official economic term, but it would be pretty useful right now if it were. The global economy today is growing between 2.0 and 3.1 percent depending on who you ask

Whoever you ask though, “it’s not doing particularly well,” said  Tam Bayoumi, senior fellow at the Peterson Institute for International Economics.  

Emerging markets continue to suffer from falling commodity prices – growth in emerging economies fell for the fifth straight year – China’s growth is slowing (though not collapsing by any stretch) as it shifts from manufacturing to services, Brazil is in recession, and many oil exporting countries including Russia are struggling.  On the other hand the U.S. is growing in at a solid 2.6% and is economically near full employment.

“Europe is actually beginning to improve a little bit,” said Ken Goldstein, an economist with the Conference Board.  The European Central Bank intervened forcefully in 2015 with quantitative easing and growth there is edging forward at between 1 and 2 percent.

“You know, we talk about ‘the economy’, these are actually big amorphous things and they don’t all move at the same time,” said Goldstein.

That, fundamentally, is a part of the global economy’s problem right now.  Not only is everything moving in different directions, there’s no one big mover for better or for worse. 

“Eurozone, Japan, China, a lot of the big countries that provide global growth, they all have some question marks,” said Win Thin, global head of emerging markets at Brown Brothers Harriman.

It’s not like there’s a  giant rotten plank in the global economic ship about to give way, but it’s not like there’s some pillar of strength we can moor to either.  Some aspects of global economic malaise are pervasive – wage growth, for example, is a problem in many places. 

In fact, economists and investors are hard pressed to explain exactly why things are so muddled.  And that makes people – and markets — nervous.

“You know, the world economy on the whole, it’s too much Piglet,” said Matt Slaughter, dean of Dartmouth’s Tuck school of business, referring to the skittish character in “Winnie the Pooh” stories. “We’d love to have a lot more Tigger in the world economy, we’d love to have innovation happening in lots of countries, a sense of clear job growth and new companies being created.” In other words: More Tigger, less Piglet, and no Eeyore.

Abdur Chowdury, professor of economics at Marquette University, said the global economy will muddle through.  “I don’t see any reason to panic,” Chowdury said.

Just tell that to Wall Street.  No, really, someone tell that to Wall Street.

 

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