Heating up, slowly

19 jan 2018

The robust global economy, led by the U.S., is approaching full capacity. We dig into the effects of U.S. fiscal stimulus and explain why the global expansion can last at least a few more years – and
perhaps longer.


  • From a growth perspective, U.S. fiscal stimulus is a sea change after the policy stance served as a major drag for much of the expansion. We estimate the U.S. cycle can power on for another two to three years –about a year shorter that would have been the case without stimulus.
  • Some spare capacity persists, particularly in Europe, and is more global in nature. More U.S. growth spilling abroad could underpin the global expansion, implying less domestic overheating.If overheating pressures are contained, the global expansion could press on for longer, in our view.
  • Corporate animal spirits are revving up and leading to greater investment. An investment recovery gives the expansion more breadth and a longer lifespan by lifting potential growth.
  • U.S. protectionism could threaten one of the most important foundations to the post-war economic order. We may be witnessing the start of global integration going in reverse.
Chart: Fiscal fuel for expansion
Vice Chairman of BlackRock
Jean Boivin
Managing Director
Jean Boivin, PhD, Managing Director is Head of Economic and Markets Research at the Blackrock Investment Institute, a global platform which leverages ...