Surge in gas prices adds to near term price pressure

In this Update, we answer six key questions about the surge in natural gas prices. The key point is that it will keep inflation in DMs and many EMs above central bank targets for a few months longer than we had previously assumed. Governments are already preparing to limit the economic damage and central banks are likely to look through this temporary spike in inflation. But this comes at a time when a host of shortages are already pushing up prices and adds to the upside risks to our inflation and interest rate forecasts.
Jennifer McKeown Head of Global Economics Service
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Global Economics Chart Book

Shortages limiting growth and boosting inflation

With shortages of goods and labour still dominating the news, and following our Focus research into global shortages, we have added a new page to the Global Economics Chart Book to monitor their evolution. While the global economy has continued to grow at a fairly healthy pace, businesses are reporting that shortages are limiting growth, particularly in advanced economies. Suppliers’ delivery times have continued to lengthen, backlogs of work are mounting and congestion at ports has increased. Most of the shortages should begin to ease in the year ahead, but shortages of labour could be relatively persistent. Staffing issues seem most pronounced in the US and UK, implying that the risk of sustained above-target inflation is also greatest in those economies.

14 October 2021

Global Inflation Watch

Shortages skew inflation risks to the upside

Inflation is set to stay higher for longer than we previously envisaged due to surging energy prices and goods shortages. The boost from energy will go into reverse next year due to base effects and lower oil and gas prices. Goods shortages are worsening and will persist for some time given lean inventories, pandemic-related shutdowns in Asia, and strong demand for imported goods. These pressures should start to ease next year. But there is a risk that the shortages trigger a more persistent pick-up in price pressures, particularly when labour is also in short supply. Staff shortages are most pronounced in the US and intensifying rapidly in the UK and Canada. In all, while we expect inflation to ease back to below target in the next couple of years in Japan and Europe, it will settle at higher rates in the US.

11 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

More from Jennifer McKeown

Global Economics Update

The effects of supply shortages

Supply shortages may continue to limit growth and put upward pressure on prices for several months to come before a new wave of COVID infections is brought under control, economies reopen, and spending patterns normalise. Shortages have related to both goods and labour, but in this Update we will focus on goods, answering six key questions about the shortages and their potential implications.

9 September 2021

Global Economics Update

PMIs show supply shortages still limiting growth

August’s global manufacturing PMIs brought more evidence of a slowdown in the sector. Growth was always going to fall back as activity approached more normal levels, but supply shortages are also playing a role. There is early evidence that the adverse effects of these shortages may have peaked: indices of suppliers’ delivery times and input prices have stopped rising, although they remain at very high levels.

1 September 2021

Global Economics Update

PMIs show growth and inflation easing a touch

The flash PMIs for August confirm that growth in developed economies is slowing from a strong pace. This normalisation was always to be expected after the rapid post-pandemic revival, but the renewed rise in virus numbers and staff and materials shortages also seem to be playing a role. The surveys suggest that price pressures are still strong, but they no longer seem to be intensifying.

23 August 2021
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