PMIs: US outperformance a sign of things to come

The flash PMIs for January suggest that the US economy shrugged off containment measures at the start of 2021, but that restrictions did indeed weigh on activity elsewhere in DMs. The surveys also provide some evidence that supply shortages are exerting upward pressure on input costs for manufacturers.
Gabriella Dickens Assistant Economist
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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

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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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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

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PMIs imply that goods shortages are pushing up prices

The global manufacturing PMI held broadly steady in May as a sharp drop in India’s survey was offset by rises in other major economies whose recoveries appear to be continuing unabated. Meanwhile, goods shortages are exerting upward pressure on prices, and there are some signs that they are also weighing on output, particularly in the euro-zone.

1 June 2021

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Higher costs and delays are not damaging demand

The further rise in real trade in March suggests that external demand continued to recover, even as capacity constraints related to shipping were intensifying. And while shipping costs have risen and delays worsened in the weeks since these data were recorded, so far at least, there is little evidence that these factors are weighing on external demand.

26 May 2021

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PMIs: supply is struggling to keep up with demand

The flash PMIs for May suggest that the recovery is well underway in those economies that are now on top of the virus. However, supply is still struggling to keep up with surging demand. And as well as exerting upward pressure on prices, there are some tentative signs that supply shortages are starting to weigh on manufacturing output, particularly in the US and the euro-zone.

21 May 2021
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