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.
Continue reading

More from Global Economics

Global Economics Update

First thoughts on B.1.1.529

It goes without saying that it’s still too early to say exactly how big a threat the new B.1.1.529 strain poses to the global economy. We’ll have more to say as the picture becomes clearer, but in the first instance there are three points worth making.

26 November 2021

Global Trade Monitor

Supply constraints cause world trade to trend lower

World trade has continued to edge down from its high peak in March, as supply shortages have meant that Asian exporters remain unable to keep up with strong demand from consumers in advanced economies. Even when demand does eventually abate, large backlogs of unmet orders mean that Asian exports will remain elevated, which should keep shipping and air freight costs sky-high for some time.

25 November 2021

Global Economics Update

Global exposure to Turkey’s currency crisis

With the Turkish lira down by 9% so far today and 20% over the past week, the currency is now firmly in crisis territory. Higher inflation and tighter domestic financial conditions are likely to sap Turkey’s recovery. But given the small trade and financial links with the rest of the world, and that most EM external positions are in better shape than in the past, there are unlikely to be significant global spillovers. Drop-In: Turkey's Currency Crisis - Mapping the Endgame 3pm GMT, Tuesday 23rd November 2021 Join Senior Emerging Markets Economist Shilan Shah and Jason Tuvey, who leads our Turkish coverage, for a discussion about this latest crisis, the extent of potential EM contagion and likely paths ahead.

23 November 2021

More from Global Economics Team

Global Inflation Watch

Inflation picture more nuanced than headlines suggest

While rising commodity prices and supply shortages are boosting inflation everywhere for now, the outlook is mixed. The boost from energy prices will fade soon as the anniversary of last year’s slump in the oil price passes. And while shortages of inputs including semiconductors, metals and lumber may persist for a bit longer, they should ease in time as supply recovers and consumption patterns normalise. However, some economies face greater risks of sustained inflation than others. Among the advanced economies, spare capacity is likely to be eliminated soonest in the US and signs of widespread labour market tightness are most pronounced there and in Australia. Among the EMs, strong recoveries in China and East Asia are doing little to generate prices pressures but the risks are greater in Central Europe.

21 June 2021

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.

17 May 2021
↑ Back to top