Productivity prospects.
Early signs of productivity picking up in the United States are encouraging hopes that this year could see a global revival in productivity that would dim the prospect of an extended period of anaemic growth. However, if the recovery of the past two years across developing and advanced economies stalls, the productivity revival would be snuffed out, raising the risk of stagflation.
Stagflation, the combination of slower growth and faster inflation, could return if productivity trends remain chronically weak.
A ‘back to the early 1980s’ scenario would intensify concerns about job prospects and upheaval in the industrial and geographic landscape.
US bond investors fear higher-than-expected inflation and faster monetary tightening; overvalued equities also raise concern.
