![](/sites/uk/files/styles/standard_banner_xs/public/header/axa-im-insight-landing-city-g1412803631_0.jpg?h=16436056&itok=8hW28lrN)
Zoom on the Boom
- 12 February 2024 (10 min read)
Key points:
- We explore the possibility that the US strong productivity gains stem from a surge in Intellectual Property investment since the middle of the last decade, which the Euro area has completely missed.
- The data needs to be taken with prudence, but it is possible that monetary policy transmission has been slower in the US than in the Euro area.
We explore the ongoing divergence between the US and the Euro area in terms of growth performance. We focus here on two non-mutually exclusive explanations: first, that there are fundamental factors behind the acceleration in productivity in the US which are absent in the Euro area. Second, that although the monetary policy stance has been similar, the transmission to the real economy has been slower in the US.
Distinguishing “structural” from “cyclical” productivity gains is difficult in real time Yet, we are tempted to link the current persistent improvement in US productivity to a steep acceleration in Intellectual Property Investment (essentially software and R&D) since the middle of the last decade. There is a rich academic literature on the positive effect at firm level of the adoption of IT techniques such as cloud computing. While the focus of the current tech debate is on the promise of AI, it may well be that an acceleration in the diffusion of pre-AI digital technologies – perhaps aided by the pandemic shock – has been triggering a “revolution by stealth”. Interestingly, the Euro area has completely missed the surge in IP investment. While the EU is currently under pressure to emulate the US IRA and Chips Act and engage in old-fashioned interventionist industrial policy, speeding up the disbursement of the Next Generation package, especially the digitalisation leg, could prove more rewarding to boost productivity.
Besides, while data is not necessarily convergent across sources for the US, the financial national accounts suggest that the transmission of monetary policy to US businesses has been very limited so far, and slower than in the last episode of sustained monetary policy tightening 20 years ago. No such phenomenon can be observed in the Euro area countries for which up to date comparable data is available, such as France. Europe could thus be faced with a double whammy: the absence of a positive supply-side shock, and a swift transmission of the ECB’s stance.
Related articles
View all articles
![](/sites/uk/files/styles/364x205/public/header/axa-im-insight-article-city-g508589970.jpg?itok=Q8BqAXt8)
China: Fuelling recovery with an extra policy kick
- by
- 09 June 2020 (10 min read)
![](/sites/uk/files/styles/364x205/public/header/axa-im-insight-article-city-g1173597900_1.jpg?itok=mO_g0SDp)
Beyond the mechanical rebound
- by Gilles Moëc
- 08 June 2020 (7 min read)
![](/sites/uk/files/styles/364x205/public/header/axa-im-insight-article-city-g498284390_0.jpg?itok=m1CMPlFg)
COVID-19 update: US policy response
- by David Page
- 03 June 2020 (15 min read)
![](/sites/uk/files/styles/364x205/public/header/axa-im-insight-article-people-g472081305.jpg?itok=22ydz0EU)
Define ”Big”
- by Gilles Moëc
- 01 June 2020 (7 min read)
Hamilton has not sung yet
- by Gilles Moëc
- 25 May 2020 (7 min read)
May investment strategy - Economies begin to emerge
- by Gilles Moëc, Chris Iggo
- 20 May 2020 (10 min read)
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.