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Animation: The World’s 10 Largest Economies by GDP (1960-Today)

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Animation: The World’s 10 Largest Economies by GDP (1960-Today)

Just weeks ago, we showed you a colorful visualization that breaks down the $80 trillion global economy.

While such a view provides useful context on the relative size of national economies, it’s also a static snapshot that doesn’t show any movement over time. In other words, we can see the size of any given economy today, but not how it got there.

Today’s animation comes to us from WawamuStats and it charts how GDP has changed over the last 57 years for the world’s 10 largest economies.

It provides us with a lens through time, that helps show the rapid ascent of certain countries and the stagnation of others – and while there are many noteworthy changes that occur in the animation, the two most noticeable ones have been described as “economic miracles”.

Japan’s Economic Miracle

You may have heard of the “Japanese economic miracle”, a term that is used to describe the record-setting GDP growth in Japan between the end of World War II and the end of the Cold War.

Well, the above animation shows this event better than pretty much anything else.

In 1960, Japan had an economy that was only 10% of the size of the United States. But in just a decade, Japan would see sustained real GDP growth – often in the double digits each year – that allowed the country to rocket past both the United Kingdom and France to become the world’s second-largest economy.

It would hold this title consecutively between 1972 and 2010, until it was supplanted by another Asian economic miracle.

Economic Miracle, Part Deux

The other rapid ascent in this animation that can be obviously seen is that of China.

Despite falling off the top 10 list completely by 1980, new economic reforms in the 1980s and 1990s helped pave the way to the massive economy in China we know today, including the lifting of hundreds of millions of people out of extreme poverty.

By 1993, China was once again one of the world’s largest economies, just squeezing onto the above list.

By 2010 – just 17 years later – the country had surpassed titans like the United Kingdom, Germany, France, and even Japan to secure the second spot on the list, which it continues to hold today in nominal terms.

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Investor Education

Fact Check: The Truth Behind Five ESG Myths

ESG investing continues to break fund inflow records. In this infographic, we unpack five common ESG myths.

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ESG Myths

Fact Check: The Truth Behind 5 ESG Myths

In 2021, investors continue to embrace environmental, social, and governance (ESG) investments at record levels.

In the first quarter of 2021, global ESG fund inflows outpaced the last four consecutive quarters, reaching $2 trillion. But while ESG gains rapid momentum, the CFA Institute shows that 33% of professional investors surveyed feel they have insufficient knowledge for considering ESG issues.

To help investors understand this growing trend, this infographic from MSCI helps provide a fact check on five common ESG myths.

1. “ESG Comes at the Expense of Investment Performance”

Fact Check: Not necessarily

Worldwide, ESG-focused companies have not only seen higher returns, but stronger earnings growth and dividends.

Returns by ESG RatingsEarnings Growth*Active Return**Dividends and Buybacks
Top tier2.89%1.31%0.28%
Middle tier1.35%0.12%-0.02%
Bottom tier-9.22%-1.25%-0.05%

Source: MSCI ESG Research LLC (Dec, 2020)
*Contribution of earnings growth and dividends/buybacks to active return
**Active return is the additional gain or loss compared to it respective benchmark

In fact, a separate study from the CFA Institute shows that 35% of investment professionals invest in ESG to improve their financial returns.

2. “Investors Talk About ESG But Don’t Invest In It”

Fact Check: False

Global ESG assets under management (AUM) in ETFs have grown from $6 billion in 2015 to $150 billion in 2020. In just five years, ESG AUM have accelerated 25 times.

Today, money managers are focusing on the following top five issues:

Top ESG IssuesAssets AffectedGrowth in Assets Affected (2018-2020)
Climate change / carbon emissions $4.18T39%
Anti-corruption$2.44T10%
Board issues$2.39T66%
Sustainable natural resources / agriculture$2.38T81%
Executive pay$2.22T122%

Source: US SIF Foundation (Nov, 2020)

Meanwhile, over 1,500 shareholder resolutions focused on ESG-related matters were filed between 2018-2020. Not only are investors turning to ESG assets, but they are placing higher demands on corporate responsibility.

3. “ESG Investment Strategies Eliminate Entire Sectors”

Fact Check: Not necessarily

First, not all ESG investment approaches are exclusionary.

For instance, in North America roughly 51% of ESG ETFs used an ESG integration approach as of Dec. 31, 2020. In an ESG integration approach, ESG risks and opportunities are analyzed with the goal to support long-term returns.

By comparison, values and screens approaches, which accounted for over 22% of ESG ETFs in North America may screen out specific business activities, such as alcohol or tobacco, or sectors such as oil & gas.

Percentage of ESG TypeIntegrationValues & ScreensThematicImpact
North America50.9%22.5%20.7%5.9%
Asia57.8%34.6%3.8%3.8%
Europe30.8%60.6%8.6%0.0%
Australia28.6%71.4%0.0%0.0%

Source: Refinitiv/Lipper and MSCI ESG Research LLC as of Dec 31, 2020 (MSCI Feb, 2021)

Second, companies are assessed on a sector-specific basis where ESG leaders and laggards are identified within each sector in comparison to peers. In other words, ESG doesn’t mean eliminating exposure to entire sectors. Instead, investors can choose from a range of companies based on their ESG ratings quality.

4. “ESG Investing Is Only For Millennials”

Fact Check: False

Although ESG is popular among millennials, ESG investing is being driven by the entire investor population. In 2019, one study finds that 85% of the general population expressed interest in ESG investing.

Interest in Sustainable InvestingGeneral PopulationMillennials
201985%95%
201571%84%

Source: US SIF Foundation (Nov, 2020)

Sustainable investing goes far beyond millennials—ESG disclosures are quickly becoming requirements for key industry participants, such as institutional investors and listed companies.

5. “ESG Investing is Here to Stay”

Fact Check: True

Climbing 28% in 2020 alone, over 3,000 signatories have committed to the UN Principles of Responsible Investment. As of the first quarter of 2021, 313 global organizations and 33 asset owners have been newly added.

Growth of UN PRINumber of Signatories*AUM Represented
20203,038$103.4T
20192,370$86.3T

Source: UN PRI
*As of Mar, 2020

Central to ESG’s growth is the availability of ESG investments. ESG investing has become more widely accessible—which wasn’t always the case. Over the last decade, the global number of ESG ETFs has grown from 46 to 497.

Why the Facts Matter

As ESG investments continue to play an even greater role in investor portfolios, it’s important to focus on data rather than prevailing ESG myths that are not backed by fact.

Given the recent momentum in investment returns and ESG adoption, data-driven evidence empowers investors to build more sustainable portfolios that better align with their investment objectives.

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Markets

Visualizing the Recent Explosion in Lumber Prices

Lumber prices in the U.S. continue to break records as pressure from both the supply and demand sides of the market collide.

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Visualizing the Recent Explosion in Lumber Prices

Lumber is an important commodity used in construction, and refers to wood that has been processed into beams or planks.

Fluctuations in its price, which is typically quoted in USD/1,000 board feet (bd ft), can significantly affect the housing industry and in turn, influence the broader U.S. economy.

To understand the impact that lumber prices can have, we’ve visualized the number of homes that can be built with $50,000 worth of lumber, one year apart.

A Story of Supply and Demand

Before discussing the infographic above, it’s important to understand the market’s current environment.

In just one year, the price of lumber has increased 377%—reaching a record high of $1,635 per 1,000 bd ft. For context, lumber has historically fluctuated between $200 to $400.

To understand what’s driving lumber prices to new heights, let’s look at two economic elements: supply and demand.

Shortened Supply

U.S. lumber supplies came under pressure in April 2017, when the Trump administration raised tariffs on Canadian lumber. Since then, lumber imports have fallen and prices have experienced significant volatility.

After a brief stint above $600 in April 2018, lumber quickly tumbled down to sub $250 levels, causing a number of sawmills to shut down. The resulting decreases in production capacity (supply) were estimated to be around 3 billion board feet.

Once COVID-19 emerged, labor shortages cut production even further, making the lumber market incredibly sensitive to demand shocks. The U.S. government has since reduced its tariffs on Canadian lumber, but these measures appear to be an example of too little, too late.

Pent-up Demand

Against expectations, COVID-19 has led to a significant boom in housing markets, greatly increasing the need for lumber.

Lockdowns in early 2020 delayed many home purchases until later in the year, while increased savings rates during the pandemic meant Americans had more cash on hand. The demand for homes was further amplified by record-low mortgage rates across the country.

Existing homeowners needed lumber too, as many Americans suddenly found themselves requiring upgrades and renovations to accommodate their new stay-at-home lifestyles.

How Many Homes Can You Build With $50K of Lumber?

To see how burgeoning lumber prices are impacting the U.S. housing market, we’ve calculated the number of single family homes that could be built with $50,000 worth of lumber. First, we established the following parameters:

  • Lumber requirements: 6.3 board feet (bd ft) per square foot (sq ft)
  • Median single family house size: 2,301 sq ft
  • Total lumber required per single family house: 14,496 bd ft

Based on these parameters, here’s how many single family homes can be built with $50,000 worth of lumber:

Date*Lumber PriceTotal Lumber PurchasedTotal Homes Built
2021-05-05$1,635 per 1,000 bd ft30,581 bd ft2.11
2020-05-04$343 per 1,000 bd ft145,773 bd ft10.05
2015-05-01$234 per 1,000 bd ft213,675 bd ft14.74
2010-05-01$270 per 1,000 bd ft185,185 bd ft12.77

*Exact matching dates were not available for past years.
Source: Insider

As lumber prices continue to set record highs, the National Association of Home Builders (NAHB) has reported that the cost to build a single family home has increased by $36,000. Most of this cost can be passed down to the consumer, but extremely tight supplies mean homebuilders are unable to start more projects.

The Clock is Ticking

Despite their best efforts to increase output, it’s likely that sawmills across the U.S. will continue playing catch-up in 2021.

“There was a great fear among sawmills to prepare for a downturn. When home buying surged, they could not open up capacity quickly enough.”
– Lawrence Yun, National Association of Realtors

Analysts are now warning that lumber prices could reach a flashpoint, where affordability becomes so limited that demand suddenly falls off. This has led the NAHB to ask the Biden administration for a temporary pause on Canadian lumber tariffs, which currently sit at 9%.

U.S. tariffs on Canadian lumber were first introduced in 1982, and represent one of the longest lasting trade wars between the two nations. The U.S. is currently appealing a World Trade Organization (WTO) ruling that states its 2017 tariff hike was a breach of global trading rules.

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