Trackers point to weak start to 2021

Our COVID Mobility Trackers indicate that activity weakened towards the end of Q4, and data up to mid-January suggest that it took another leg down at the start of 2021. With countries still in the early stages of their vaccination rollouts, we are unlikely to witness a significant reversal of fortunes before Q2.
Kieran Tompkins Assistant Economist
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Global Economics Chart Book

Inflation fears to keep central banks in tightening mode

There were signs that supply shortages were starting to ease in some places at the tail end of 2021. World trade was its strongest since shortages began to bite a year ago and industrial production had picked up too, especially in the auto industry as semiconductor supply improved. Our updated G7 Shortages Indicators also suggest that general product shortages began to ease in the US and UK last month. Given the typical co-movement of our indicators, this would imply that other advanced economies might soon be over the worst of their product shortages too. However, the big picture is that shortages remain acute and will take time to unwind. What’s more, these tentatively encouraging pieces of evidence pre-date the Omicron wave, which could yet lead to renewed disruption, particularly if lockdowns become more widespread in China. Central banks sound more concerned about the associated risks to inflation than the hit to activity and we have revised up our interest rate forecasts for several economies accordingly.

14 January 2022

Global Economics Update

Further thoughts on Omicron’s economic effects

While it is very uncertain, we estimate that disruption due to Omicron could knock around 1% off GDP in advanced economies while the outbreak is at its height, mainly due to staff absences. This would be a severe shock by pre-pandemic standards, but smaller than in previous waves. And the damage should fade quickly as staff return to work and some lost output is made up. But the implications for inflation could be more worrying, meaning that most central banks will press on with policy tightening regardless. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

Global Economics Update

COVID Recovery Monitor

Global coronavirus cases have surged, and pressure is mounting on health systems as hospitalisations rise. Given that Omicron is milder than past variants, governments are typically leaning on booster rollouts and light-touch restrictions rather than resorting to more draconian restrictions on activity. Even so, output is likely to take a hit due to rising numbers of workers isolating with COVID and unable to work from home.

6 January 2022

More from Kieran Tompkins

UK Economics Focus

Most labour shortages will probably be temporary

The widely reported labour shortages should mostly prove temporary. While it may take 6-12 months before some of the underlying causes unwind, recruitment difficulties probably won’t have a long-lasting upward impact on wage growth. As such, they shouldn’t persistently lift CPI inflation.

8 July 2021

UK Data Response

IHS Markit/CIPS Flash PMIs (Jun.)

The fall in the flash composite PMI from a record high of 62.9 in May to 61.7 in June indicates that the pace of the recovery may have peaked. That suggests the monthly rises in GDP will ease back from the 2.3% m/m gain recorded in April. Nonetheless, the level of GDP will continue to climb towards and beyond pre-pandemic levels.

23 June 2021

UK Data Response

IHS Markit/CIPS Flash PMIs (May)

Another rise in the flash composite PMI from 60.7 in April to a record high of 62.0 in May points to the economic recovery shifting through the gears and picking up speed. That suggests the pace of the rises in GDP should accelerate further from the 2.1% m/m rise in March.

21 May 2021
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