For the global economy, it was the best of times, and then it was the worst of times. Buoyed by very strong growth in emerging markets, the global economy boomed in the mid-2000s. On average, annualised world GDP growth exceeded 5% for the four years leading up to 2007 – a pace of growth that hadn’t been sustained since the early 1970s. But it wasn’t to last. In this post, I illustrate how the failure of Lehman Brothers in September 2008 coincided with the deepest, most synchronised global downturn since World War II. And I describe how after having seen the fallout of the Lehman collapse, macroeconomic forecasters were nevertheless surprised by the magnitude of the ensuing global recession.
Continue reading “‘The world turned upside down’: How the global economy was hit by the crisis”
Estimates of GDP growth are published with a considerable lag – even in some major economies we still only have partial data on what GDP growth was in Q1 2018. So ‘nowcasting’ GDP using more timely indicators of economic activity is an important way of assessing the strength of the world economy in real time. Good indicators are timely, correlated with measures of world activity and should outperform simple benchmarks. Unlike other global indicators such as business surveys or trade data, metals prices are available minute by minute. They also tend to move closely with world GDP. This post assesses how well they perform at nowcasting world GDP.
Continue reading “Pumping Iron: How can metals prices help predict global growth?”