Wednesday, July 4, 2012

The World's Grim Economic Growth Prospects

The analysts at the Brookings Institute have developed an index that they use to track the global economic recovery cleverly called the TIGER or Tracking Indexes for the Global Economic Recovery.  Dr. Eswar Prasad, Senior Fellow at the Brookings Institute and a Senior Professor of Trade Policy at Cornell University recently released his updated and rather sobering outlook for the world's economy.

As most of us are aware, the global economy is firing at about half-speed on a good day.  The economies of both the emerging and advanced nations of the world certainly look like they are running out of steam as evidenced by a string of bad news.  Unemployment in the Eurozone is at a new high and is stalled at a level above 8 percent in the United States.  Many of Europe's economies are also straddling the fence between modest contraction and modest expansion even though the world is supposedly in the third year of the post-Great Recession expansion.

A map showing the global economic and development data for both the advanced and emerging market economies as measured using TIGER is available here.  For the purposes of this posting, I'll select a few key countries and show how global growth is stalling out as measured by the overall growth index graphs from 2003 to the present and how this has left us standing on the edge of the next recession.  Please note that the overall growth index is composed of several economic measures as follows:

1.) Real activity indicators which includes industrial production, imports, exports, employment and GDP growth.

2.) Financial indicators which includes equity market indices, stock market capitalization and credit growth.

3.) Confidence indicators which includes business and consumer confidence.

Included for each country are graphs showing the performance of each of the indicators and economic measures as noted above which you can view by clicking on the country name.

Let's start with the world's advanced economies.  

First up, here is the overall growth index for the United States:

Here is the overall growth index for Canada:

Here is the overall growth index for the United Kingdom:

Here is the overall growth index for Germany:

Here is the overall growth index for France:

Here is the overall growth index for Australia:

Now, let's look at the overall growth indices for the world's key emerging economies.

Here is the overall growth index for Brazil:

Here is the overall growth index for Russia:

Here is the overall growth index for India:

Here is the overall growth index for China:

Do you notice a pattern?

Not a single one of the world's major economies is showing an upward trend in their overall growth index and all have shown a steady downhill overall growth index trend since their indices peaked in early to mid-2010.  The overall growth index is either negative or very close to zero in all cases, a rather foreboding scenario.  Basically, all of the quantitative easing, Twisting, liquidity injections, debt bailouts and years of near-zero interest rates have done absolutely nothing to prod the world's very reluctant economy back to life and yet the world's central bankers persist.

As Albert Einstein famously said "Insanity is doing the same thing over and over again and expecting different results."  Apparently, this is the mantra of today's generation of central bankers and politicians.  Either that, or they have failed to pay heed to their own failures from the lofty heights of their ivory towers.  After all, they get paid regardless of their success or failures.  

As Dr. Prasad stated:

"The global economic recovery is being held hostage by political brinksmanship that has created policy paralysis, undermined confidence and stymied the effectiveness of macroeconomic policy tools."


  1. Cool. Found this site via a comment on today's FT report on the latest IMF growth (degrowth?) forecast.