The American economy has never gone this long between recessions. Why?
to summon significant optimism when looking at the world economy. As the trade war between America and China grinds on unresolved, indices of business confidence in America and elsewhere have been falling fast . Surveys suggest that, as trade growth slows, global manufacturing is shrinking for the first time in more than three years. Services have begun to follow manufacturing’s downward trend as domestic demand falters, even in economies with strong labour markets, such as Germany.
Thus this expansion’s remarkable longevity does not mean it will die of old age. It just means that none of the things which usually bring expansions to an end—busts in industry and investment, mistakes by central banks and financial crises—has yet shown up with scythe in hand. Why not? And is their arrival merely delayed, or becoming genuinely unlikely?
This blurring of manufacturing and services has been accompanied by changes in the nature of investment. America’s private non-residential investment is, at about 14% ofin line with its long-term average. But less money is being put into structures and equipment, more into intellectual property.
America’s monetary loosening allows central banks in emerging markets, many of which are also reeling from the trade slowdown, to follow suit. With America cutting rates they need not worry about lower rates pushing down the value of their currencies and threatening their capacity to service dollar-denominated debts. The Philippines, Malaysia and India have already cut rates in 2019.
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