Trade Tensions And Sluggish Rise In Productivity Could Hamper Global Investment Growth: IMF

The International Monetary Fund (IMF) has warned that trade tensions and sluggish productivity growth can slow the decline in relative prices of machinery and equipment, thus hampering the global investment growth, reports ANI.

With the cheapening of capital goods relative to consumption, there was about a one-third increase in real investment rate in machinery and equipment over the past three decades among the average emerging markets and developing economies.

Due to the rising trade and sweeping technological improvements which led to the more efficient production of capital goods, prices of machinery and equipment is witnessing a declining trend. There is a 60 per cent fall in the prices of machinery and equipment relative to the price of consumption around the world, since 1990.

"But this important driver of the investment may be under threat. Trade tensions and sluggish productivity growth could slow the decline in the relative price of machinery and equipment, which would hold back investment growth worldwide," said economists at IMF’s Research Department Weicheng Lian, Natalija Novta and Petia Topalova in a joint analysis.

The relative price of computing equipment, since 1990, declined about 90 per cent - the most significant factor being trade integration. These were dramatic declines when compared with relative prices of other types of capital assets such as housing and commercial structures, which more closely tracked the price level of consumption.