Global Economics

Global Economics Update

Has the pandemic permanently reduced the workforce?

The pandemic is still depressing the size of the labour force in many developed countries. This probably reflects a mixture of temporary and permanent factors, so some of it may yet be reversed. But even if the bulk of the reduction in the labour force persists, this does not alter the big picture that the overall lasting damage to economies’ supply capacity has been limited considering the scale of the downturn.

19 October 2021

Global Economics Update

Indeed Job Postings point to shortages intensifying

We think that Indeed job data are useful and timely indicators of labour demand, and we will continue to monitor them in the months ahead. The latest data support the view that labour shortages are rising, and are most acute in the US, Australia, and Canada.

18 October 2021

Global Economics Chart Book

Shortages limiting growth and boosting inflation

With shortages of goods and labour still dominating the news, and following our Focus research into global shortages, we have added a new page to the Global Economics Chart Book to monitor their evolution. While the global economy has continued to grow at a fairly healthy pace, businesses are reporting that shortages are limiting growth, particularly in advanced economies. Suppliers’ delivery times have continued to lengthen, backlogs of work are mounting and congestion at ports has increased. Most of the shortages should begin to ease in the year ahead, but shortages of labour could be relatively persistent. Staffing issues seem most pronounced in the US and UK, implying that the risk of sustained above-target inflation is also greatest in those economies.

14 October 2021

Our view

There has been mounting evidence that the pace of the global recovery has slowed. In part, this moderation in growth has been benign, reflecting a natural normalisation of activity as the effects of past stimulus fade and output approaches or exceeds pre-virus levels. However, in many economies, it also reflects increased consumer caution about high virus cases, or various shortages limiting how fast economies can grow. Goods shortages are still worsening and are likely to persist well into next year, given pandemic-related shutdowns in Asia, strong demand for traded goods, logistical logjams, and low inventories. As a result, global industry will continue to struggle to grow in the coming quarters, and inflation is likely to stay a little higher for longer than we had previously forecast. The risks of a more persistent pick-up in inflation are greatest where labour shortages are most acute and are therefore most likely to bring about a sustained acceleration in wage growth. On this basis, the upside risks to inflation among DMs are greatest in the UK, Canada, and especially the US.

Latest Outlook

Global Economic Outlook

Pandemic rebound peaks but recovery story still intact

The initial post-pandemic resurgence is nearing its zenith, but strong policy support and limited private sector debt should allow most economies to grow at a healthy pace over the next two years. The US and China were among the fastest to recover to their pre-virus paths or even beyond, so it is no surprise that they are slowing first, whereas growth in the euro-zone and Japan has yet to peak. The spreading Delta variant is a risk, but mainly to Emerging Markets where vaccination is less advanced. As goods shortages ease, activity normalises, and commodity prices fall, most economies should see inflation drop back towards central bank targets and policy tightening will generally be more limited or come later than markets expect. Even in the US, where inflation is a bigger threat, we do not expect interest rate hikes until the first half of 2023.

28 July 2021