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.