So, what does business know that consumers do not? For one, while low inflation is good for the consumer, it is bad for business, as it reduces pricing power and investment incentives. The price-lowering effect of digital technology also increases pressure on margins for many companies. And low oil prices, which have been a boon to consumers and energy-intensive companies, are increasingly hurting businesses linked to oil production, including oil explorers, engineering, logistics and transportation.
Moreover business is beginning to feel, however slightly, cost pressures from rising wages. In the United States, where unemployment is dropping precipitously, employment costs rose 2 percent in 2015, well above the record lows of the post-recession years.
So what is next? While the risk of an imminent global economic recession remains low, this trifurcation of the global economy cannot continue for all that much longer. Consumer optimism is a fragile phenomenon and can easily turn sour. Investors' herd behavior can do a lot of damage to a global economy still in its aftermath And once weak business confidence brings the already weak investment growth to a halt, the outcome can be much worse than one might reasonably expect.
To resolve the trifurcation, it is important that investors and business leaders focus their attention on the medium-term forces that are causing slow growth. The impact of those slowing forces on business growth is much more gradual than that of a recession, and some of those forces are already in play.
The actions to undertake are to broaden the investment agenda to innovation and human capital, counter slow productivity growth and face the labor force challenges of slowing demographics that are depressing growth in labor supply. Understanding and, where possible, mitigating those forces is the important task ahead of us.