Risks to our upbeat view stem mainly from the virus

Our GDP forecasts for this year sit some way above the rest of the market. The greatest risks to this upbeat view stem from unanticipated shifts in the virus and the fight against it, rather than the more orthodox macro events that typically derail forecasts.
Neil Shearing Group Chief Economist
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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

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

More from Neil Shearing

Long Run Update

Scar free? The implications of a full economic recovery

While the consensus has become more optimistic about the near-term recovery, most analysts – and the majority of central banks – still believe that the pandemic will leave a legacy of lower global output over the long term. We disagree. And if we’re right, there will be profound consequences for everything from the future path of GDP to the outlook for inflation and the public finances.

21 May 2021

Global Economics Update

Four questions (answers) on r/Wallstreetbets

The volatility caused by retail investors co-ordinated on the r/Wallstreetbets forum does not pose a direct threat to the global economy, but it does illustrate some of the financial vulnerabilities that can stem from ultra-loose monetary and fiscal policies. In this Update we answer four important questions about the events of the past week.

1 February 2021

Global Economics Update

Surge in shipping costs adds to near-term price pressure

The surge in global shipping costs over the past six months is likely to be short-lived and several factors will dampen the full pass-through to consumer prices. Even so, it adds to a growing list of developments that point to a rise in inflation over the first half of this year.

19 January 2021
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