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.
Continue reading

More from Global Economics

Global Economics Update

Global PMIs flattening off at high levels

The main takeaway from today’s batch of manufacturing PMIs is that industrial output growth looks to have peaked. Output indices have generally stopped rising, and new orders indices have come off the boil. Even so, with supply unable to keep up with demand, price pressures show little sign of abating.

2 August 2021

Global Economic Outlook

Pandemic rebound peaks but recovery story still intact

The initial post-pandemic resurgence is nearing its zenith, but strong policy support and limited private sector debt should allow most economies to grow at a healthy pace over the next two years. The US and China were among the fastest to recover to their pre-virus paths or even beyond, so it is no surprise that they are slowing first, whereas growth in the euro-zone and Japan has yet to peak. The spreading Delta variant is a risk, but mainly to Emerging Markets where vaccination is less advanced. As goods shortages ease, activity normalises, and commodity prices fall, most economies should see inflation drop back towards central bank targets and policy tightening will generally be more limited or come later than markets expect. Even in the US, where inflation is a bigger threat, we do not expect interest rate hikes until the first half of 2023.

28 July 2021

Global Trade Monitor

World trade recovery levelling off

Real world goods trade edged down in May, suggesting that the recovery has levelled off. True, this slight fall comes after an impressive rebound since May last year, global trade remains well above its pre-virus level, and trade data are usually volatile. Nonetheless, the timely evidence indicates that May’s outturn was not a blip and was instead the beginning of a period of normalisation in the pace of trade growth.

26 July 2021

More from Global Economics Team

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
↑ Back to top