"Strong consumer and business confidence, strengthening stock markets, a turnaround in the global industrial cycle, and a recent rise in the rate of global trade all point to strengthening cycle dynamics," said Bart van Ark, Chief Economist of The Conference Board. At the same time, van Ark warned that the recovery, which is supported by a pro-cyclical improvement in productivity, could die out if businesses do not accelerate investment. "The current upside to growth opens the door for businesses to catch up on their digital transformation to strengthen their growth base and allow them to weather the longer-term, structural headwinds which remain," he added, referring to medium-term challenges with regard to slowing labor supply and the slow pace by which new technologies translate themselves into a higher growth potential for the global economy.

Cyclical Upswing Is Widespread

The latest estimates of monthly leading economic indicators and quarterly GDP growth indicate that rising confidence among business and consumers in recent quarters has finally translated into some positive impact on the real economy. The Conference Board Global Economic Outlook update for May reveals these upsides:

• Though the overall projection for global GDP growth for 2017 remains unchanged from our February estimate of 2.9 percent, the global strengthening over 2016 levels (when growth was only 2.5 percent) is now more clearly visible in the hard data.

• Mature economies see a small improvement from 2 percent in 2016 to 2.1 percent in 2017.

  • Europe's growth performance is among the most substantial upward revision, as it is projected to improve to 1.8 percent for 2017 over our February estimate of 1.6 percent.

  • However, the gain from Europe for mature economies is entirely offset by the downward adjustment for the United States from 2.5 percent to 2.2 percent. This year-over-year U.S. figure has changed because of a weak first quarter, estimated at only 1.2 percent, according to latest estimates.

  • While the cyclical dynamics help the Euro Area outlook, they have been weakening in the UK well before last year's Brexit vote. While UK GDP growth is currently projected at 1.5 percent growth for 2017, the increasing uncertainty on economic policy and the Brexit strategy points to increasing risks in that outlook.

• Emerging markets are showing notably better GDP performance at 3.6 percent in 2017 over the 2016 level of 3 percent, and slightly over our February estimate of 3.5 percent.

  • The Indian economy has rebounded remarkably in the aftermath of the demonetization in late 2016—at least for now. The introduction of a harmonized national Goods and Services Tax by July 1 may have a positive impact on growth as early as the second half of the year.

  • China beat expectations with a fairly strong first quarter, benefiting from the strengthening of the global industrial cycle. However, future growth remains at risk as fiscal and monetary policy becomes less supportive, which in turn may contribute to a slowing environment for business investment and real estate.

  • The Conference Board lowered its projections for the Middle East and Turkey as tailwinds from political uncertainties have increased the vulnerability of some of the region's major economies (including Saudi Arabia and Egypt).

  • Brazil seems to be sustaining its recovery from a deep depression with modest growth of 0.5 percent for 2017. The projection for Mexico remains at 1.8 percent, almost a full percentage point below last year's performance. Mexico's industrial production growth will likely remain subdued, and inflation will remain elevated throughout the year because of higher import prices and deregulation of fuel prices.

Productivity May Help Improve the Growth Trend

The good news is that the latest estimates from The Conference Board Total Economy Database point toward some improvement in productivity growth. Global labor productivity growth is projected to reach 1.9 percent for 2017, distributed fairly equally across mature economies (with increases from 0.5 percent in 2016 to 1.0 percent in 2017 on a per person employed basis and from 0.8 percent in 2016 to 1.0 percent in 2017 on a per working hour basis) and in emerging markets (from 2.0 percent in 2016 to 2.7 in 2017 on a per person employed basis). This implies that productivity growth in 2017 will account for almost two thirds of GDP growth in 2017; it contributed less than half in 2016.