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Coronavirus to end 43-quarter global growth streak

For now, our best guess is that the economic disruption related to the coronavirus will cost the world economy over $280bn in the first quarter of this year. If we’re right, then this will mean that global GDP will not grow in q/q terms for the first time since 2009. We assume the virus will be contained soon, and that lost output is made up in subsequent quarters, so that world GDP reaches the level it would have done had there been no outbreak by the middle of 2021.
Simon MacAdam Senior Global Economist
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Global Trade Monitor

Rebound in trade likely to prove short-lived

Official data showed that world trade rose slightly in April and limited data for May suggest that it probably rose further as disruptions from lockdowns in China eased. But weaker global final demand for goods, due to a gradual normalisation in spending patterns, lower real incomes, and higher interest rates, will be a headwind to world trade in the coming months. And although shipping costs remain elevated, the sharp fall in spot freight rates tentatively points to some easing of inflationary pressures for goods.

28 June 2022

Global Inflation Watch

Hawkish turn to dampen inflation

While inflation has broadened out and surprised to the upside in 2022, we maintain the view that it will fall sharply in the year ahead. For one thing, we expect commodity prices to fall. Even if we are wrong about this, prices are unlikely to rise enough to prevent base effects from dragging heavily on headline inflation. What’s more, goods shortages and logistical bottlenecks have improved in some places, spending patterns are normalising, and inventories are being rebuilt. We expect these trends to continue, causing goods price pressures to ease. And, compared to our last Inflation Watch, we think that central banks will deliver more policy tightening, which should help inflation to settle around targets in two years’ time. The key upside risk is that tight labour markets and high inflation expectations will generate persistently high pay growth. Equally, though, central banks might hike rates too far and trigger disinflationary recessions.

28 June 2022

Global Economics Update

PMIs suggest marked slowdown underway in DMs

Having held up better than much of the data in recent months, the S&P Global PMIs have finally taken a considerable leg-down in the US and euro-zone. While the PMIs are still consistent with economic expansion rather than recession in Q2, they nonetheless point to a much slower pace of growth at the end of the quarter, and the forward-looking components are even more downbeat about demand in Q3.

23 June 2022

More from Simon MacAdam

Global Economics Update

How far will rising commodity prices boost inflation?

We think that the broad-based rally in commodity prices will go into reverse later this year, so the upward pressure on inflation in advanced economies should be temporary. But there is a clear risk of a more sustained pick-up in inflation, especially if shortages persist. Drop-In: Great Inflation 2.0 – Are we facing a 70s revival? (1100 ET/1600 BST, Thurs 13th May) A special 20 minute briefing during which Jennifer McKeown, the head of our Global Economics Service, and Senior Global Economist Simon MacAdam will discuss whether advanced economies are in for a repeat of inflation levels last seen during the 1970s. Register here.

12 May 2021

Global Economics Focus

Great Inflation 2.0? Lessons from the 1970s

Policy stimulus and tolerance of inflation by central banks may lead to higher inflation in some G7 countries in the coming years. Given the parallels with the run-up to the high-inflation era of the 1970s, it is natural to be worried about history repeating itself. While we accept that medium-term inflation risks are probably skewed to the upside, the lessons from history suggest that the chances of a Great Inflation 2.0 are low.

29 April 2021

Global Economics Update

A closer look at ‘excess’ household savings

Income support and limits on spending had already led households in advanced economies to build up almost $3.5tn in extra cash by the end of 2020, equating to 7.6% of GDP. And the stockpile of these supranormal savings will continue to grow in 2021. We suspect that this money will be used to pay down debt and invested rather than spent in a hurry. Financial investment will support asset prices, while lower debt burdens will strengthen household finances, potentially supporting growth further down the line.

26 April 2021
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