Lending facilities offering vital support

This month has seen a further shift among the world’s major central banks from essential liquidity provision to recovery support, with a focus on uptake of the various lending programmes. The results so far have been somewhat mixed. It seems likely that uptake of the various schemes will rise in the months ahead as the newer ones become better established and as government schemes are gradually phased out.
Jennifer McKeown Head of Global Economics Service
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How much of the rise in inflation is due to ‘base effects’?

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Our Mobility Trackers show that global economic activity is benefitting from the removal of restrictions in advanced economies. Good progress with vaccinations suggests that this trend should continue, albeit with risks around new variants. The story is less positive for EMs, where vaccination has typically been slow. But there are hopeful signs that China could soon be exporting vaccines on a very large scale.

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Recoveries regaining pace after slow start to the year

Global GDP growth slowed sharply in Q1 as most parts of the world grappled with renewed waves of coronavirus. The US and Korea were among the few exceptions where recoveries accelerated. But with global infection numbers now falling, activity seems to be gaining momentum again. The Global Composite PMI rose to its highest level since April 2006 in May. What’s more, our high frequency COVID Mobility Trackers suggest that activity has risen sharply, particularly in Europe, as restrictions have eased. Other than in particular sectors such as motor vehicle production, there is little evidence so far that recent supply shortages are holding back output. But there are growing signs of inflationary pressure around the world, most notably in the US. Fears of higher inflation should prompt numerous central banks in emerging economies – especially in Central & Eastern Europe – to shift towards tighter monetary policy in the coming quarters. But central banks in major DMs will look through higher inflation this year and next.

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Will vaccine hesitancy prevent economies reopening?

There are signs that countries whose rollouts are advanced have hit something of a limit, with the remaining population now reluctant to be vaccinated. But this will not necessarily prevent economies reopening once the vulnerable are vaccinated. Potential vaccine-resistant strains are the bigger threat. Recent weeks have seen a slowdown in vaccinations in several economies due to a reduction in…

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US pay pressures are the exception, not the norm

While pay growth has risen across the developed economies, in several cases this reflects reduced hours or the fact that a disproportionate number of low paid workers have lost their jobs. There are clear signs of labour shortages in the US, but for now at least it is the exception rather than the norm.

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Monitoring inflation as economies open up

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