“Excess” household savings could yet boost spending

With household saving rates still elevated in most developed economies, “excess savings” have continued to rise. If people were to run down these savings, this would breathe new life into consumer recoveries.
Vicky Redwood Senior Economic Adviser
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Global Economics Update

What if energy prices keep rising?

While ongoing supply shortages have led us to revise up our forecasts for crude oil and wholesale gas prices, we still expect significant falls this year which would reduce headline inflation in major developed markets by around 2ppts. But there are upside risks. In a plausible scenario involving Brent crude hitting $120pb, headline inflation would stay far above target in major DMs, at about 5.5% on average in 2022.

20 January 2022

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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

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Long Run Update

COP26 unlikely to alter economic outlook

The UN’s annual climate change conference, COP26, has the potential to be an important milestone but it is just one step along the path required to limit global warming. Accordingly, it will not on its own stop climate change from clouding the long-run economic outlook for many emerging markets in particular.

2 November 2021

Global Economics Update

Has the pandemic permanently reduced the workforce?

The pandemic is still depressing the size of the labour force in many developed countries. This probably reflects a mixture of temporary and permanent factors, so some of it may yet be reversed. But even if the bulk of the reduction in the labour force persists, this does not alter the big picture that the overall lasting damage to economies’ supply capacity has been limited considering the scale of the downturn.

19 October 2021

Global Economics Update

Economies after COVID: one year on

It is a year since we published our “Economies after COVID” series, so now seems like a good time to pause and take stock of how our predictions about the legacy of the pandemic are shaping up. There is a still a long way to go until the pandemic’s full effects can be judged, not least because the pandemic is not even over yet; only a few countries are at the point of transitioning to treating COVID-19 as an endemic disease. But, so far, it is looking like we were right to judge that the legacy of the pandemic would be found in broader issues like consumer behaviour and globalisation, rather than narrow measures of GDP.

8 October 2021
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