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Agribusiness Intelligence sees evidence of several major macroeconomic transitions of monumental importance occurring in 2017. These transitions have been in the process for years and, while not going unnoticed, they are emerging as more visible influences. While we list them here and we address them in the pages to follow, there is not a ranking, in terms of importance – they all are important. What does clearly distinguish each “transition” is timing, as some will have a more immediate impact while others evolve.
At the top of the list for immediate impact is the great plunge in energy prices over the last 24 months and the follow-on implications for inflation, related interest rates and currencies as well as GDP prospects predicated on where energy prices go from here.
A less immediate transition involves an ever-growing global population, which coincides with several of the newly emerged economies around the world that are evolving into consumer-based economies which are much more like their industrial counterparts (China being the best example). Another transition concerns educating the population of the industrial nations to meet the needs of a new cyber-driven world and one plagued by less-than-adequate cyber-security in a world vulnerably dependent on cyber-driven businesses and institutions.
On the other side of the coin, an additional labor issue, especially in the US, concerns the need for and inability to hire and sustain physical labor, especially in rural areas but, more generally, across the economy. Immigration legislation will be an important feature that improves or exacerbates this problem. Finally, in a world that is politically volatile and subjected to global terrorism, there is an enhanced penchant, in some circles, for greater isolationism, which can have dramatic impacts on trade and economic performance (Brexit is a good example).
While one can, of course, identify other transitions or sources of volatility such as wars, pandemics, institutional failures and such, these episodic events represent risks to the 2017 outlook more than foundations for the outlook. The discussion that follows provides a picture of the global economy’s prospects for 2017 while weaving in thoughts about these key transitions.
The 2016 outlook: How did we do and what did we learn?
In last year’s annual, we focused on the US as the centerpiece economy for the world with a three-percent Gross Domestic Product (GDP) growth prospect for 2016 and with the US serving as a platform for a global expansion of 2.8 percent. In short, that did not happen.
US annual GDP growth for 2016 is below two percent as the economy is plagued by an energy sector with woes (layoffs and Capex reductions) that outweighed any benefits that consumers or businesses had from cheap crude oil and related products. The emerged economies of the world (China, India and Asia, in general) actually had modestly out-performed expectations while GDP growth in Europe, Canada and Japan were all about as expected. So the onus for our miss was wholly a US problem.
Well, here we go again in forecasting prospects for 2017 with the US economy as the centerpiece.
Read the full macro-economic background outlook, along with ten additional chapters covering the entire agribusiness value chain, in the latest free-to-download Agribusiness Annual report.
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