Export sales have declined and domestic demand now accounts for a larger share of their GDP growth. Appearances can be deceiving, however. While some legitimate progress has been made in the rebalancing of global growth, most of the “correction” that has occurred has been driven by demand compression in the deficit countries.
The same is true for the rising share of domestic demand in many surplus countries. It is not a case of domestic demand growing significantly faster but, rather, declining export sales in the face of falling incomes and aggressive belt-tightening in deficit countries (Chart 9).