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Economic activity in advanced economies is encouraging

Staff Writer |
The recent increase in economic activity in the G7 advanced economies is attracting the attention of policymakers – particularly those gathering in Washington DC for this month’s World Bank-IMF Spring meeting.

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:

- First, the continued highly accommodative monetary stance across the G7 and, in particular, in the Eurozone, despite the gradual rise in US rates from historic lows recently.

- Second, governments are starting to spend more, with some putting infrastructure plans in place.

- Third, an uptick in demand from the large (E7) emerging markets, partly driven by a fiscal stimulus in China, as well as a turnaround in economic activity in Brazil.

This is corroborated by recent trade data, which shows that emerging markets’ imports continue to grow compared to a year earlier.

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