Economic growth should remain strong in 2018, but should not accelerate any more

11th January 2018
-News, IAM

Hugues Chevalier, Economist

The latest leading indicators confirm that world economic growth has reached its highest level since 2011. In Europe, manufacturing industry activity has even reached its highest point since the start of the PMI Index measures, in 1992. Activity momentum is due both on domestic demand and on exports. This dynamic growth should continue for the next quarters, however, we do not expect it to accelerate this year. Thanks to weak inflation, monetary policies remain accommodating and support activity. But, in some countries, such as Germany, the labour market is overheating, which should result in rising wages and, by the end of the year, in rising inflation. Rising prices will reduce households’ purchasing power and central banks might then tighten their policies. In summary, world economic growth is expected to remain dynamic this year at 3.4% (volume and at purchasing parity power), like in 2017. But we do expect growth to start slowing in 2019, especially in the OCDE countries.