Released: 26 December 2019
Economic Activity Decelerated Sharply in 2019
The outlook for 2020 unlikely to be bright
Estimates suggest that China, the USA and India have together contributed over 60% of GDP growth in recent years. This is not entirely surprising as these countries account for over 40% of global economic activity. But it does mean that these countries have unquestionably been the key growth drivers of economic change since 2015.
No other country comes close to matching the wealth creation seen in the USA or the huge and growing size of the markets in China and India.
As always with economic data questions can be asked about the reliability of GDP numbers. But U.S. data is as good as it gets and China data are rated as B grade on the World Economics GDP Data Quality Ratings
scale, suggesting that whilst far from perfect, they are of a reasonable accuracy for judging the relative size and speed of GDP growth in relation to others. Indian data are more questionable, but the Data Quality Ratings show
India has a significantly larger shadow economy and uses an out of date base year for collecting data, so the size of the Indian economy is more likely than not to be underestimated.
GDP data is not yet available for 2019, but World Economics has produced Sales Managers Index (SMI) survey data over the past eight years, which is generally a good guide to the speed and direction of economic activity.
Headline SMI data show a clear deceleration in growth over the past 5 years, with the rate of decline in global growth (as measured by the three countries contributing 60%+ to growth) accelerating sharply over 2019:
Global Headline Sales Managers Index (SMI excl. Prices)
The Headline Sales Managers' Index (SMI) - a composite indicator designed to provide the most up-to-date assessment of business activity.
Index values from the Sales Managers Survey show a similar pattern of falling growth in Business Confidence and Sales Growth, confirming the trend of decelerating growth.
These trends are a continuation of much longer term trends in global growth. Over the post war period growth has slowed decade
upon decade even before the Great Recession.
Theories abound as to why this should be so, but the fact remains that rapid annual economic growth seems to be a thing of the past.
Don't expect miracles next year...
About World Economics
World Economics is an organisation dedicated to producing analysis, insight and data relating to questions of importance in understanding the world economy. Its parent company Information Sciences Ltd has a long history of the development of key business information today used throughout the world, including the origination of the Purchasing Managers Indexes in Europe and Asia (now owned by IHS Markit
), and the development of WARC
(now owned by Ascential Plc) a global information provider for major corporations (now owned by Ascential).
Currently our primary research objective is to encourage and assist the development of better and faster measures of economic activity. In cases where we believe we can contribute directly, as opposed to through highlighting the work of others, we are producing our own measures of economic activity.
Our work is mainly of interest to investors, organisations and individuals in the financial sector and to significant corporations with global operations, as well as governments and academic economists.