Global market view: Margin mayhem

With the world’s population set to rise gradually, we must rely on improvements to productivity to sustain growth. But are they enough?

Summary: The global economy has grown sixfold in the past 50 years but, according to the latest projections, is only expected to grow threefold in the next 50.  The big change in the future will be the slow growth in population. Fertility rates are declining, and the average age of the population in Europe, China and Japan is rising. Improvements to productivity could compensate for the slower rise in population, but it would have to be 80 per cent faster than the already rapid growth of the last half century.

Key take-out:  For investors, this means that profit margins are likely to be under pressure if the boost from productivity improvements diminishes. It also means that revenue increases may be modest as the population grows more slowly.

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