But is the optimism justified? And more importantly, can the growth be sustained? In their latest Global Economy Watch, PwC’s economists turn their attention to the advanced economies – and call on business to help boost productivity rates.
The economists say that ‘hard’ data indicates a slight acceleration in G7 economic growth to 1.7% year-on-year in the last quarter of 2016. The average growth rate post crisis is 1.8%. Furthermore, what is driving the optimism is the broad-based nature of the recovery across the G7, as indicated by less variation in growth rates across countries than at any time in the past 20 years.
Three reasons for this turnaround have been identified by the PwC economists:
So, will this continue in the future? Most ‘soft’ survey-based data suggests the momentum has carried on through the first quarter of this year. This will not be confirmed until the ‘hard’ data on GDP is released later this month, starting with the US and UK on April 28th.
“But policymakers’ discussions should focus on the key factor which determines long-run standards of living: productivity. Barret Kupelian, Senior Economist, PwC says: “Our analysis shows that post-crisis productivity growth in the G7 has been around two thirds slower than its long-run average rate.”
Typically, governments take on the task to push through economy-wide reforms. For example, they can help drive large public investment projects or invest more in schooling.
“But we think that businesses have an equally important role to play, particularly from a bottom-up perspective,” adds Barret Kupelian. “Best practice management techniques, for example, could have an impact on national productivity rates if implemented across a large number of businesses.