Last Wednesday, November 3research and developmentThe Conference Board set their forecasts for global economic growth. World growth for 2022 is expected to grow by 3.9%; Growth in all mature economies is expected to rise by 3.9%; The US and China are expected to grow by 3.8% and 5.5%, respectively.
The Conference Board is a research group supported by a broad membership base. The Conference Board and the World Bank are the two most well-known organizations in the field of global forecasting.
To sum up the outlook, the Conference Board projected rapid growth for this year, slightly above what would be considered normal growth through 2026, and then see growth decline to conventional levels from 2027 through 2031.
Before releasing the forecasts, the Conference Board’s chief economists discussed their findings and reflections with a group of journalists. The discussion was more interesting than the report they released.
While many of the upside and downside risks associated with the outlook were discussed, global supply chain issues, business issues, and investments in business technology were prominently discussed.
Supply chain disruptions, which negatively affected growth, are seen primarily as a function of strong demand along with supply disruptions linked to the coronavirus. As people were stuck at home and stopped spending their discretionary income on restaurants, entertainment and other services, more money was spent on food and consumer goods. On the supply side, China, the manufacturing capital of the world, has closed regions and ports as COVID rates have risen in different parts of the country at different times. The board sees demand returning to more normal levels in 2022 and supply improvement as COVID declines.
However, it will be difficult to solve the problem of shortage of semiconductors. The demand for goods that use computer chips will remain high. Due to the lead time for the construction of the new fab, the show will not catch up with the democratic war next year
The move toward deglobalization — as companies move from efficient to resilient supply chains — will result in lower growth in the long run. The phenomenon of deglobalization began with the election of Trump as president and the trade war between the United States and China began. But the pandemic has fueled a trend toward more global supply chains. Countries put in place industrial policies to protect the supply chains of companies headquartered in their field. These policies are meant to ensure that key inputs – semiconductor wafers and rare earth metals, for example – are not held hostage by the countries that control these inputs. These policies are accelerating the trend of Western companies to resettle and diversify their supply base. But to the extent that these activities raise the prices of the final products, the demand will fall as consumers choose to substitute other products or forgo the purchase altogether. The Conference Board summed it up by saying that less trade means less growth.
However, this diversification will not happen overnight. China still has significant advantages in terms of infrastructure, skilled labor base, and know-how to industrialize.
Labor shortages, which clearly affect growth, were also discussed. Economists believe that to some extent, workers have become more selective. But this argument can be an oversimplification of a more complex reality. In the United States, three million more workers than expected to retire during the pandemic. This is partly because older workers are at greater risk of contracting the COVID virus. But many older workers have found that their retirement plans, and the value of their homes, have increased dramatically in value. This group of workers could have retired at a younger age than they expected.
However, for younger workers, the financial payments from the government gave a lot of reserve that could last for several months. While workers can be picky in the near term, most will have to return to work in 2022.
These workers will have more options. For example, fewer companies require college degrees. The proportion of young people with an education that extends beyond high school has declined. Vocational schools closed during the pandemic. As one economist pointed out, “You can learn history from a distance,” but distance learning is not the right way to teach someone how to be a mechanic. This also means that companies are seeing fewer candidates with the skills they are looking for, and company training programs will become more important.
To attract wanted workers, companies pay new workers higher wages and offer better bonus and benefit plans. With young people returning to work in 2022, the need to do so will diminish. However, wage inflation is still almost certain next year. This is because the higher wages paid to the new workers, who cannot work at the same level of efficiency as the existing workforce, creates resentment among the existing workers. Existing workers will get “big hikes in increments.”
Demographic issues, in the long run, will also contribute to the labor shortage. Citizens are aging in existing economies as well as China. To overcome this, companies are increasingly investing in digital technologies. These technologies will increase productivity and growth. Business morale is important. To the extent that business leaders believe digital investments are prudent, total factor productivity will increase. However, one economist warned that the decade before the pandemic saw the slowest productivity growth in several decades. However, in some industries, technology is clearly replacing humans and the pandemic has accelerated this.
While supply chain and business issues will result in lower growth, it is important to put this in the right perspective. Global economies will grow faster than usual. In the United States, for example, a growth of 1.8% is considered normal. Anything over 1.8% growth in the US is a good thing. Next year, the Conference Board expects growth of 3.8%. This is a growth rate twice as high as would normally be expected.