The Global Economy Is Not Recovering—Just Look at the Data, by John Mauldin

The data are contradicting the popular synchronized global recovery narrative. From John Mauldin at mauldineconomics.com:

Central banks think the US and global economies are about to break from the post-recession doldrums. They believe their aggressive monetary policies—along with tax cuts and other factors—are finally bearing fruit.

As a result, the Fed is now tightening policy to prevent this inevitable growth sparking too much inflation. My friend Lakshman Achuthan of the Economic Cycles Research Institute (ECRI) is not convinced.

He recently sent some slides I want to share with you.

Economic Growth Is Slowing Down

The first one shows that the present, low-grade expansion phase is the slowest in a series. By the way, the ECRI is as close as we have to an “official” economic cycle watch service in the country.


Source: Economic Cycles Research Institute

This is growth during times when the economy is not in recession, which should be considerably higher than the full-cycle averages. It has been falling steadily since the 1970s and is now below 2%.

If the best we can do is 2% (not counting recessions), it’s hardly time to proclaim victory.

The next chart looks at the ECRI US Coincident Index, which is their alternative growth measure. The shaded areas are cyclical downturns, the three most recent of which did not reach recession status.


Source: Economic Cycles Research Institute

The important point here is we see little or no improvement in the growth rate. Since 2010, it has moved sideways in a tight range. In the last two years, it moved up to about the middle of the range, which is positive but doesn’t mean the US economy is off to the races.

GDP Growth Stalled in the Largest Economies

Finally, and most ominously, Lakshman shows this chart of quarterly GDP growth in the three largest developed market economies.


Source: Economic Cycles Research Institute

We see in all three places that quarterly growth peaked in mid-2017 and then fell in the last quarter. Yet the experts tell us a synchronized global recovery is forming. Really?

What I see here is a synchronized downturn. Granted, it’s just a couple of quarters but early data makes Q1 2018 look lower still.

If a recession is coming, GDP growth will decline from its present level to 0% or below. That process will likely unfold over a few quarters—and may already be beginning.

To continue reading: The Global Economy Is Not Recovering—Just Look at the Data

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One response to “The Global Economy Is Not Recovering—Just Look at the Data, by John Mauldin

  1. If anyone thinks the best we can do is 2% then follow this man’s advice. I’ve been investing for 40 years and I can see a massive leap forward the same way we did in the 1980s after the disaster that was Carter. And Obama was worse than Carter in every possible sense.

    Like

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