World Economy Strengthens Despite Uncertainty Hitting New Highs: Schroders QuickView

By Keith Wade, chief economist and strategist

“Despite the increase in economic uncertainty, the world economy is strengthening with business surveys signaling an acceleration in growth. Concerns about Brexit and President Trump’s populist policies have been swept aside, prompting talk of a crisis in economic forecasting.

The dismal science seems to be living up to its name with economists out of step with the surge in business confidence. Growth forecasts are likely to be upgraded, but we still have doubts about the sustainability of the upswing now that oil prices and inflation are rising again. President Trump’s rapid shift toward protectionism only threatens to exacerbate inflationary pressure whilst halting the nascent recovery in global trade.”

Wade continued: “There can be no doubt that policy uncertainty is high with the global Economic Policy Uncertainty index (EPU) currently running at elevated levels, around 2.5 times higher than the average since 1997. This measure is based on search results for newspaper articles discussing policy-related economic uncertainty, the dispersion of forecasters’ expectations for key macro measures, and additionally for the US, the number of temporary tax measures set to expire in the coming years. The global index uses data for 17 countries that account for two-thirds of global GDP.”

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