22 September 2019
As the Greek debt crisis appears to be on its way to being resolved, the rest of the global economy is showing promising signs of growth. Photo: Reuters
As the Greek debt crisis appears to be on its way to being resolved, the rest of the global economy is showing promising signs of growth. Photo: Reuters

Our world after Greece

As Greece moves out of the headlines, what does the rest of the world look like? 

Crude oil prices, still well off last year’s highs, should be a boon to global growth.

I expect this cycle to progress as revenues and profits at large multinationals gain traction.

For months now, the Greek debt repayment saga has been front-page news.

At long last, an agreement has been reached between the country and its creditors.

Efforts to meet the conditions of this bailout deal will play out over the next few days and weeks, with economic and political consequences in Greece and across Europe.

If the past is any guide, this issue will probably resurface again, reminding investors everywhere of the long-running battle between creditors and overindebted governments.

But until then, we can get back to the business of understanding the economic cycle.

While investors were distracted with Greece’s troubles, the global economy has been moving forward.

Here is a brief refresher on the basics — my top 10 list of positive signs for the US economy:

1. Interest rates around the world remain at historical lows.

2. Industrial production in the United States has picked up.

3. Better employment numbers are evident across the US in almost all job categories.

4. Consumer confidence has risen, though US retail sales have continued to disappoint as households have yet to spend the gasoline dividend arising from lower oil prices.

5. US car sales have accelerated and may soon return to annual volumes not seen since 2007.

6. Spurred by low inventories of existing homes, the building of new houses in the US has gained momentum — allowing the labor-intensive construction sector to recover the jobs lost in the last recession.

7. Bank lending to commercial enterprises, usually a leading indicator of more growth, has been rising.

8. The US dollar has stopped rising, and many exporting companies have started to reclaim sales growth from non-US firms.

9. Nonresidential business spending is no longer stalled.

10. Inflation has remained lower than expected, helping the US Federal Reserve to delay the beginning of the rate-tightening cycle.

Since the drawn-out negotiations over Greece dominated the headlines, the following trends have been clear outside the US:

• Japan’s manufacturing economy has improved and labor force participation has been rising — both good signs for US-based multinational corporations that sell products in Japan.

• We have seen further evidence that Europe is recovering from its economic slowdown: German consumers have been spending, exports have risen and the peripheral countries have shown some progress.

• The news from the emerging markets has been mixed, with growth in China’s economy weakening but other parts of Asia faring better and with stronger signals coming out of Mexico and Eastern Europe.

I conclude that the Greek debt crisis has been an opportunity to add to risk assets.

The fall in crude oil from highs near US$100 per barrel a year ago should be a boon to growth in global gross domestic product — and I think that is exactly what we are likely to see.

MFS Investment Management, a global asset management firm based in Boston, focuses on institution investors in the Asia Pacific region.

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The author is Chief Investment Strategist at Massachusetts Financial Services