How will the future of globalisation play out?

While the downside risks of a global trade war are often overstated, we think the bigger concern is that the world splits into competing regional blocs that do not cooperate on trade or investment. This could cause global supply chains to splinter and technology transfer to seize up, ultimately leading to much weaker global growth. It would also be fertile ground for other unorthodox economic policies.
Andrew Kenningham Chief Europe Economist
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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

More from Andrew Kenningham

European Data Response

Euro-zone Flash HICP (May) & Unemployment (Apr.)

The jump in euro-zone inflation to 2.0% in May will not be the end of the upward trend, but we expect inflation to drop back sharply next year as temporary factors are reversed.

1 June 2021

European Economics Weekly

Drop back in bond yields takes pressure off ECB

The fall in sovereign bond yields over the past week may make things a little easier for the ECB Governing Council when it meets on 10th June. We think it is likely to replace its commitment to make “significantly” higher bond purchases than in Q1 with a less specific commitment to keep financing conditions favourable. Next week we expect to learn that inflation got very close to 2% in May (data on Tuesday) while the final PMIs for May will show a big improvement in Spain and Italy (Thursday). Retail sales data for April (Friday) will probably fall in m/m terms as a lot of shops were closed in France. Finally, note that the Capital Economics London “office” will be closed on Monday.

28 May 2021

European Economics Focus

ECB climate rhetoric to run ahead of action

The ECB will make a big splash about climate change when it concludes its monetary strategy review this autumn. In practice, it is likely to make progress in addressing climate-related risks in the banking sector. The Bank may also announce some steps towards “green QE”, but that is easier said than done and comes with many risks, so we think progress will be slow. That said, the ECB’s willingness to consider a form of directed credit could be a sign of things to come.

18 May 2021
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