Global Economics

Global Economics Chart Book

Global Economics Chart Book

More signs that the recovery is hitting the buffers

Recent indicators confirm that the global recovery has continued, but also that it has entered a slower and more difficult phase. US GDP growth slowed sharply in Q3, and our China Activity Proxy suggests that there was a large contraction there. (See Chart 1.) Growth was stronger in the euro-zone, but high-frequency data suggest that the latest rise in virus case numbers is hurting discretionary spending. The biggest brake on output is still coming from supply shortages, which have intensified. Global industrial production had already struggled to grow at all this year, and now looks to have fallen outright. With headwinds from shortages unlikely to fade soon, consensus forecasts for GDP growth in 2022 now generally look too optimistic. At the same time, worsening shortages are increasing the risks that inflation will drop back more slowly and from a higher level in 2022, making the next few months uncomfortable for major central banks.

11 November 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

Global Economics Chart Book

Global recovery slowing down a gear

There have been growing signs of a slowdown in the pace of the global recovery in recent months. World industrial production fell in July and retail sales declined in almost all major economies, while the business surveys suggest that activity softened again in August. To some extent, 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, high frequency data on activities such as restaurant dining show that consumer caution has returned in some places as virus cases have risen again. What’s more, the surveys offer evidence that widespread shortages of goods and labour are limiting growth. With the notable exception of the euro-zone, we think that the rapid phase of the recovery is already in the rear-view mirror for the world’s major economies.

20 September 2021
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Global Economics Chart Book

Peak global growth narrative lacks nuance

Slowdowns in China and the US should not be taken as evidence that the global recovery is stalling. Admittedly, it is not just some high-profile data from the US and China that have weakened recently. Recoveries in retail sales, industrial output, and trade more broadly have generally flattened off, while the PMIs have dipped too. But some commentators have cast these developments in too negative a light. Growth in the US is normalising after unprecedented stimulus and China’s economy is coming back down to earth from above-trend levels. Meanwhile, many survey indicators have merely edged down from record levels. And while the softer production and sales of goods can partly be pinned on shortages of materials and parts, they also reflect a benign reversion of consumer spending away from goods towards services as economies re-open. Most of the world is behind the US and China in re-opening and so is yet to reap the full benefits of lifting restrictions. While weaker growth in China will exert an arithmetic drag on global growth in Q3 and Q4, we expect a pick-up in growth in the rest of the world in the second half of the year.

Global Economics Chart Book

Broad recovery continues, but Delta poses some risks

Global economic activity looks to have perked up recently, despite a slowdown in China and a slightly weaker re-opening bounce in the US than most had anticipated. The hard economic data have revealed further improvements in global industrial output and private consumption, and the business surveys remain strong even if many suggest that demand growth has peaked. Moreover, our Mobility Trackers have surged during the past two months. However, coronavirus infections seem to be at the start of another wave driven by the virulent Delta variant, which has become the dominant strain in numerous countries. (See Chart 1.) For economies where vaccination coverage is high, the early signs are that major vaccines are effective in preventing severe disease and death from the variant. But this leaves large parts of the emerging world facing the risk of renewed stringent lockdowns. And India’s experience of battling the variant suggests that this could be a substantial setback on the road to economic recovery.

Global Economics Chart Book

Recoveries regaining pace after slow start to the year

Global GDP growth slowed sharply in Q1 as most parts of the world grappled with renewed waves of coronavirus. The US and Korea were among the few exceptions where recoveries accelerated. But with global infection numbers now falling, activity seems to be gaining momentum again. The Global Composite PMI rose to its highest level since April 2006 in May. What’s more, our high frequency COVID Mobility Trackers suggest that activity has risen sharply, particularly in Europe, as restrictions have eased. Other than in particular sectors such as motor vehicle production, there is little evidence so far that recent supply shortages are holding back output. But there are growing signs of inflationary pressure around the world, most notably in the US. Fears of higher inflation should prompt numerous central banks in emerging economies – especially in Central & Eastern Europe – to shift towards tighter monetary policy in the coming quarters. But central banks in major DMs will look through higher inflation this year and next.

11 June 2021

Global Economics Chart Book

Near-term inflation pressures mount

Near-term inflationary pressures appear to be building. Some of this reflects factors that are likely to be only temporary, such as the “reopening inflation” associated with the easing of virus-related restrictions. We also think the broad-based rally in commodity prices will go into reverse later this year. But there is a risk that shortages of commodities could constrain the production of goods and services, leading to a more broad-based rise in inflation. So far, there is most evidence of a rise in underlying price pressures in the US, which is consistent with our forecast of a prolonged upward shift in core inflation there.

Global Economics Chart Book

Virus & vaccine setbacks push back timing of recovery

The world economy lost considerable momentum in the first quarter as resurgences of the virus and tighter lockdown measures weighed on activity. The lesson from Q4 last year was that households and businesses have adapted to lockdown measures to a significant extant and most industrial sectors have remained open for business, so individual economies should avoid large falls in output. But while the latest data show that the recovery in the US is being supercharged by a combination of fiscal stimulus and relaxation of restrictions, for much of the rest of the world, vaccine setbacks and worsening virus outbreaks will delay economic recoveries. The surge in virus cases in India has grabbed attention in recent weeks, but infections are on the rise in most parts of the world, especially in emerging economies.

16 April 2021
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