By Julie E 
Photo Credit ( Freepik )
The birth rates of numerous countries are not keeping pace with the maturing of the global population.
Deutsche Bank reports that the distribution of the population is unprecedented, with a greater number of individuals over the age of 65 than under the age of five.
Economists assert that the data point is a component of a more extensive trend that has far-reaching implications for global growth, inflation, and productivity.
Fund managers are modifying their allocations in response to the “secular stagnation” conditions that are frequently linked to persistently low inflation and low growth.
The global population is not increasing in age. In reality, it is becoming significantly older. Economists argue that this has far-reaching implications for global growth.
According to a Deutsche Bank analysis of United Nations data, Haver Analytics data, and the firm’s global research, the number of individuals over the age of 65 on Earth has surpassed that of those under the age of five for the first time.
The extreme data point emphasizes a more general economic trend that certain economists are cautioning their clients about: the aging population, which is a consequence of declining fertility rates, is anticipated to result in stagnant inflation, reduced productivity, and reduced labor force participation. Macroeconomic factors such as homeownership may also be affected by more indirect consequences of declining fertility rates.
The chart below, which is courtesy of Torsten Sløk, Deutsche Bank’s chief international economist, illustrates the global population of individuals aged five and older. Although the population of children under the age of five has remained relatively stable over the past two decades, the number of individuals aged 65 and older has continued to increase.
“The key issue for investors in equities, rates, and credit is if the global economy is able to generate enough productivity growth to offset these demographic trends,” Sløk wrote to clients Tuesday. “And for [foreign exchange], the question is which parts of the world will be hit harder than others by a demographic slowdown in growth.”
It is recognized as a state in which economic development stagnates due to a decrease in investment and an increase in savings. Summers, the former Treasury secretary during the Clinton administration and director of the National Economic Council during the Obama administration, has contended that the condition may be the “defining macro-economic challenge of our era.”
Ed Yardeni, president of Yardeni Research, stated that fertility rates worldwide have generally declined below “replacement” levels, which are the minimum levels that can sustain population development. The “baby bust” is also impacting global development.
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The United States has a fertility rate that is slightly below replacement, according to Yardeni, who has extensively written about the economic consequences of an aging population, particularly in China.
In an interview with Markets Insider on Tuesday, Yardeni stated, “Our fertility is approximately equivalent to replacement.” “So we’re not as advanced in the birth dearth and on this kind of road to self-extinction as Japan is, and China, and some other countries.”
The broader “stagnation” theme that is associated with an aging population is being observed by Wall Street. The theme was the primary focus of the Global Fund Manager survey conducted by Bank of America Merrill Lynch for the second consecutive month. This survey is designed to gauge the perspectives of high-net-worth managers regarding global markets and economies.
Last week, fund managers disclosed that their “longs” in February consisted of conventionally low-growth investments, including cash, emerging markets, and REITs, while they were shorting cyclical sectors.
The firm has provided a chart that illustrates the characteristics of the “return” of secular stagnation. According to the survey, 55% of investors anticipate that both growth and inflation will be below trend in the coming year.
Certainly, there are those who argue that there is no definitive negative correlation between an aging population and declining growth.
Daron Acemoglu, an economist at the Massachusetts Institute of Technology, and Pascual Restrepo, an assistant professor at Boston University, discovered in a 2017 paper that, in contrast to the themes and concepts that Summers and others have popularized, there is “no negative relationship between population aging and slower growth of GDP per capita.”
They discovered a counterintuitive outcome: countries that are experiencing accelerated aging have experienced a greater increase in population in recent decades. This is likely due to the increased adoption of automation and labor-replacing technologies.
The research paper concluded: “There is a clear need for future work that systematically investigates the relationship between demographic change and GDP growth as well as the channels via which this relationship works.”