Extended economic recovery leaves cycle in later stages

Here's what we're thinking

Written by Lynn Healy-Goulet
May 8, 2018

Recent economic data for the first quarter of 2018 suggest the global economy cooled off from its red-hot pace of the second half of last year. However, economic activity remains well above its trend (or potential) growth rate, resulting in diminished excess capacity across most economies. This is reflected in declining unemployment rates and rising capacity utilization rates. As a result, inflation readings have ticked higher as tighter labour and goods markets result in stronger wage gains and quicker price increases. In response, central bankers, including those in Canada and the United States, have become more confident in tightening monetary policy. Strong growth, diminished excess capacity, and rising inflation and interest rates are all consistent with an economy in the later stages of its business cycle.