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The Global Growth Engine’s Dirty Fuel

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Image source: Unsplash.com

What's going on?

The global economy is on track for its best year of growth since 2010, and it’s expected to grow even faster next year (tweet this), according to a report from the OECD, a major financial body. Buckle up!

What does this mean?

The US economy has pulled its socks up and the eurozone has accelerated considerably (Britain, suffering slowing growth in the wake of its Brexit vote, is a notable exception).


The somewhat worrying news, however, is that the OECD says much of the pickup is due to the historically extreme policies of central banks, like quantitative easing. These policies are now (slowly) being reversed – and the tailwind they’ve created will likely fade substantially in the coming years. That means something else will need to take its place if the world’s growth is going to keep improving beyond next year…

Why should I care?

The bigger picture: More investment by businesses would be very helpful.

The OECD would like to see businesses investing more in themselves, e.g. spending more money on equipment that would make them more productive. That would help the economy as a whole, because companies would be producing more goods and services with less effort. Governments could encourage this by making it more attractive for businesses to pursue such investment (through, say, targeted reductions in corporate tax to encourage spending on research & development).


For you personally: Make hay while the sun shines – but store some for winter.

Typically, economic growth works in cycles: it peaks and troughs. The OECD is essentially saying that it looks like we’re approaching this cycle’s peak. That doesn’t mean the world’s about to end – but it does mean that you should be taking steps while the going is good to stow away any spare cash you can, as there’s a decent chance our collective economic situation won’t be so rosy in a few years.

Originally posted as part of the Finimize daily email.

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