There’s room for more fiscal support if needed

Concerns about the new Omicron variant raise the question of whether there is scope for policy to be as supportive during a new wave of the virus as it has been so far in the pandemic. Significant policy stimulus would probably only be needed if things got really bad again. If they did, financial markets would probably tolerate a further rise in government spending and borrowing; instead, the constraints would be political ones.
Vicky Redwood Senior Economic Adviser
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Global Trade Monitor

Trade rebound chimes with better news on supply chains

After gradually trending lower for much of last year, November marked the second consecutive month of strong growth in world trade, which reached a new record high. This adds to evidence that some product shortages began to ease towards the end of 2021. Even so, it will be well into 2022 at least before shipping bottlenecks improve materially. In the meantime, freight rates are likely to remain elevated.

26 January 2022

Global Economic Outlook

Growth to disappoint, but rates will rise regardless

Global growth will be slower this year than last and we expect outturns in major economies including the US and China to be below consensus forecasts. The US economy will be hindered by persistent labour shortages and reduced policy support while China will suffer from a slowdown in export growth and further weakness in the construction sector. Headline inflation is very likely to fall, but we expect core inflation to remain elevated across the developed world as shortages persist and wage growth picks up. Accordingly, most central banks are set to raise interest rates, although China will be a notable exception.

25 January 2022

Global Economics Update

PMIs: Omicron hit worse in the US than other DMs

The Flash PMIs for January suggest that Omicron has dealt a big blow to both industry and services sectors in the US in recent weeks, while other DMs have got off more lightly. But with new cases falling in several DMs, we think the economic hit will prove short-lived and will be mostly made up for in the months ahead.

24 January 2022

More from Vicky Redwood

Global Economics Focus

Will labour shortages spur productivity gains?

One possible upside of the current labour market shortages in developed economies is that they could push firms towards expanding output by raising investment and productivity instead of relying on cheap labour. However, any gains in productivity may not materialise quickly enough to prevent central banks from reacting to the pick-up in wage growth. In view of the wider interest, we have also made this Global Economics Focus available to clients of our Long Run Service.

2 December 2021

Global Economics Update

“Excess” household savings could yet boost spending

With household saving rates still elevated in most developed economies, “excess savings” have continued to rise. If people were to run down these savings, this would breathe new life into consumer recoveries.

9 November 2021

Long Run Update

COP26 unlikely to alter economic outlook

The UN’s annual climate change conference, COP26, has the potential to be an important milestone but it is just one step along the path required to limit global warming. Accordingly, it will not on its own stop climate change from clouding the long-run economic outlook for many emerging markets in particular.

2 November 2021
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