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Will productivity turn global growth around?
Wednesday 17 July 2024
Research / Market
Will productivity turn global growth around?
July 2024 | Global growth has been on a secular decline since around 2000, with a more pronounced decline following the Global Financial Crisis. To explain this, economists typically cite the sizeable and broad-based slowdown in Total Factor Productivity Growth, which measures how efficiently labor and capital inputs are used to produce output. Looking back over longer periods, there were strong advances in productivity after WW2 in the advanced economies in the 1970s to the 90s, but since around 2000, there has been a broad-based slowdown. If these trends continue, global growth over the next decade will likely be sub-3%, compared to just under 4% in the two decades before the pandemic, even before considering recent adverse developments such as global economic fragmentation, increasing security concerns and the transition to net zero. In this paper, we analyze the contributing factors and economic risks.
01 | The long-term outlook for global growth is not promising, largely determined by declining working-age populations and weak investment.
02 | The secular decline in productivity growth, especially in advanced economies is unlikely to improve in the near term.
03 | Artificial intelligence is promising, but its macroeconomic impact will take longer to move the productivity needle.
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Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of June 10, 2024. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
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Will Artificial Intelligence increase economic growth?
Recent advances in the development of artificial intelligence (AI) could lead to potentially disruptive changes across a wide range of industries. Will AI significantly increase aggregate economic growth through its impact on labor markets and increases in productivity? And will it enhance the productivity of labor or displaced workers? We believe that it is inevitable that AI will be widely adopted in the long term, and that it will have a positive impact on productivity and economic growth. But while it could be a huge gain for countries where the labor force is projected to decline, investors should be mindful that AI will be disruptive in the short term and will likely adversely affect profitability and returns in a number of sectors.
07/22/2024
Investment Talks
Biden's exit from the presidential race opens a phase of uncertainty
Market reaction to Biden's announcement has been muted at the time of writing, with a fall in the US dollar in early trading on Monday (July 22nd), a marginal movement in 10-year US Treasuries, and an upward trend in equity futures. In terms of the implications on markets, the election outcome is still highly uncertain. It is too early to define a potential "Harris trade," but even to have a specific trading strategy for a potential Trump 2.0 administration, as there is ideological uncertainty regarding its goals and policies. There are also significant ideological clashes that the Trump administration would need to address, such as the approach towards China, inflation, tariffs, fiscal expansion and the desire for a weaker dollar.
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