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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Global Economics Update

PMIs show growth easing and inflation pressures rising

The flash PMIs for September show that the pace of growth slowed across developed economies towards the end of Q3, suggesting that the boost to activity from reopening is fading. But inflationary pressures show no signs of abating, with indicators of firms’ price pressures increasing again in September.

23 September 2021

Global Economics Update

Thinking through how we could be wrong on Evergrande

If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s economy. The latter is probably the bigger risk for the global recovery. In view of the wider interest, we are also sending this Global Economics Update to clients of our Emerging Markets Service.

Drop-In: Evergrande – What are the risks to China and the world? Chief Asia Economist Mark Williams and Senior China Economist Julian Evans-Pritchard will be joined by Senior Markets Economist Oliver Jones to take your questions about the Evergrande situation. They’ll be covering the implications of collapse for China’s financial system and growth outlook, and assessing the global markets fallout. Register here for the 0900 BST/1600 HKT session on Thursday, 23rd September.

22 September 2021

Global Economics Update

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.

21 September 2021

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Global Inflation Watch

Inflation picture more nuanced than headlines suggest

While rising commodity prices and supply shortages are boosting inflation everywhere for now, the outlook is mixed. The boost from energy prices will fade soon as the anniversary of last year’s slump in the oil price passes. And while shortages of inputs including semiconductors, metals and lumber may persist for a bit longer, they should ease in time as supply recovers and consumption patterns normalise. However, some economies face greater risks of sustained inflation than others. Among the advanced economies, spare capacity is likely to be eliminated soonest in the US and signs of widespread labour market tightness are most pronounced there and in Australia. Among the EMs, strong recoveries in China and East Asia are doing little to generate prices pressures but the risks are greater in Central Europe.

21 June 2021

Global Economics Chart Book

Near-term inflation pressures mount

Near-term inflationary pressures appear to be building. Some of this reflects factors that are likely to be only temporary, such as the “reopening inflation” associated with the easing of virus-related restrictions. We also think the broad-based rally in commodity prices will go into reverse later this year. But there is a risk that shortages of commodities could constrain the production of goods and services, leading to a more broad-based rise in inflation. So far, there is most evidence of a rise in underlying price pressures in the US, which is consistent with our forecast of a prolonged upward shift in core inflation there.

17 May 2021

Global Economic Outlook

Recovery to proceed apace despite rising risks to EMs

A rise in virus cases and some setbacks to vaccination programmes have pushed back the recoveries in some countries somewhat, but we still expect strong global growth of over 6% this year. The US will continue to lead the way thanks to its strong policy stimulus while the euro-zone will lag further behind than most expect. Downside risks are rising among the EMs, relating partly to struggles to get the virus under control in major economies, including India and Brazil. And while China has emerged strongly from the pandemic, growth there will soften as credit is restrained. This mixed outlook has some interesting implications for inflation: we see significant risks of a sustained pick-up in the US but a more modest threat elsewhere.

23 April 2021
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