Recent data releases confirm that global economic growth is not only improving, but is also highly synchronized across regions. Global real GDP is estimated to have increased 3.6% in 2017, and is projected to expand by 3.7% in 2018 and 3.6% in 2019.
Along with the slightly improved global outlook manufacturing activity has been expanding, world trade has strengthened, and commodity markets have also improved. Indeed, economic growth seems not only stable or solid in the “big three” advanced economies (the United States, the Eurozone and Japan), but momentum has also spread to the larger emerging market economies.
Moreover, large commodity dependent economies like Russia and Brazil, which have been struggling and experienced economic contractions in 2016, also reversed direction and posted some modest growth in 2017.
Buoyed by very strong job creation numbers and a 4.1% unemployment rate, the u.s. economy is expected to post 2.7% real GDP growth this year and 2.2% growth in 2019.
The new tax bill will contribute to economic growth this year and in 2019, but the low multipliers associated with tax cuts for corporations and wealthy households suggest the incremental economic gains will be minimal. Despite a relatively fully employed economy, U.S. inflation is likely to remain below target in 2017, although that will not limit the Fed's decision to raise interest rates this year
After recording about 3.1% growth in 2017, Canada's economy should grow about 2.5% in 2018 and 1.5% in 2019.
Relatively strong federal and provincial government spending and a weak Canadian dollar has been boosting the economy. Indeed, Canadian fiscal policy boosted the economy in 2017 and there will continue to be positive spillovers into 2018 because of the federal government's infrastructure program and provincial government election spending.
In other words, despite understandable political concerns, the continued expansion of the global economy looks promising and sustainable. Nonetheless, the usual caveats need to be offered – i.e. assuming that the advanced economies successfully manage the risks posed by record debt levels, trade protectionism, and geopolitical uncertainties.
