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Recent falls in equity prices have not prompted downgrades to our global growth forecasts since the passthrough to the real economy is limited and part of the bad news has already been factored in to consumer confidence. But the correction will contribute …
25th May 2022
The flash PMIs for May suggest that activity slowed in most DMs compared to April, and weaker growth in new orders points to a further slowdown to come. There were some positive developments on the supply front, given further evidence that shortages eased …
24th May 2022
The PMI surveys gave an overly optimistic steer of GDP growth in advanced economies in Q1. This partly reflected volatility in imports and inventories and the effects of COVID restrictions, all of which should fade from now on allowing the PMIs to give a …
23rd May 2022
The cost of living squeeze will push net energy importers including the euro-zone and UK close to, or into, recession. While this will have some disinflationary effects in the medium-term, we doubt that it will bring inflation down on its own. So central …
20th May 2022
Provided that supply-related price rises ease, we think that it is possible in theory for central banks to bring inflation down from its current high rates without engineering a recession. However, the difficulty of fine-tuning policy suggests they may …
16th May 2022
The sharp rise in agricultural commodity prices as a result of the war in Ukraine has boosted food inflation to a multi-decade high, adding 0.6%-pts to average inflation in advanced economies compared to our pre-invasion forecast. This effect will fade as …
11th May 2022
One benefit of the current rise in inflation, at least for governments, is that it is eroding the real value of public sector debt. But this will reverse only a small part of the pandemic-related rise in government debt ratios in DMs. And the impact on …
10th May 2022
We held a Drop-In yesterday to discuss our Q2 Global Economic Outlook and the forecasts within it (see an on-demand recording here ). This Update answers several of the excellent questions that we received, some of which we couldn’t fit in during the …
5th May 2022
Uncharacteristically, euro-zone GDP rose while US GDP fell in Q1. But the weak outturn in the US partly reflected temporary factors and domestic spending remained much stronger than in the euro-zone. We expect normal service to be resumed in the rest of …
3rd May 2022
The latest manufacturing PMIs suggest that activity got off to a weaker start in Q2, as lockdowns in China led to a sharp fall in activity there. Forward-looking components of the surveys – including new orders and new export orders – suggest that …
2nd May 2022
The Flash PMIs for April suggest that activity in advanced economies generally held up better than expected at the start of Q2, despite worries of a large hit to industry from lockdowns in China and the war in Ukraine. And there were even some signs that …
22nd April 2022
Households and corporates in advanced economies amassed savings during the pandemic which could feasibly be used to support consumption and investment in the current environment of rising costs. But since saving rates are now back to around pre-virus …
21st April 2022
Although China’s Omicron wave means that its economy is facing its sharpest slowdown since early 2020, so far it looks like disruptions to global supply chains will be milder than those experienced during China’s Delta wave. But if supply chains were to …
7th April 2022
The latest manufacturing PMIs suggested that the Ukraine war and Chinese lockdowns have so far had a fairly modest impact on output in the rest of world. However, they showed that firms expect the main hit to come in the weeks ahead. And stretched supply …
1st April 2022
The Flash PMIs for March suggest that there has been little impact on growth in advanced economies from the war in Ukraine so far, but there are some warning signs for the future. Supply shortages are building again in Europe, price pressures have …
24th March 2022
Our proprietary Financial Conditions Indices suggest that global financial conditions have recently been as tight as they were during the China hard landing fears of 2015 and point to GDP growth staying below trend. Our new CE Interactive dashboard …
23rd March 2022
Claims that the war in Ukraine will prove to be a watershed moment that ends the dollar’s position at the heart of the global financial system are wide of the mark. It could accelerate the development of smaller trading blocs that use alternative …
While the parallels with the 1970s have been building, we remain unlikely to see the scale of stagflation witnessed back then. The main difference now is the apparent determination of central banks to prevent high inflation becoming persistent. There is a …
22nd March 2022
Since the onset of war in Ukraine, we have revised down our forecast for world GDP growth in 2022 from 4.0% to 3.2%. Outside Russia and Ukraine, our biggest downward revisions have been to other economies in emerging Europe and to the euro-zone. There is …
16th March 2022
Half of China’s exports are produced in areas that are now experiencing COVID outbreaks and three quarters of its exports are shipped from them. It is still possible that infections can be suppressed without causing widespread disruption to global supply …
The latest surge in global commodity prices has intensified the dilemma facing the world’s major central banks: on the one hand it will push headline inflation (and inflation expectations) even higher, but on the other there’s little monetary policy can …
10th March 2022
The rest of the world’s direct financial exposure to Russia has fallen in recent years and, in aggregate, is now small. This limits the risk of financial contagion from the collapse in Russia’s economy that is underway. If financial contagion does spread …
9th March 2022
We think that a complete ban on Russian energy imports would cause the prices of Brent crude oil and European natural gas to surge to $160pb and €300/MWh in the near term and settle at still very high levels into next year. The Russian economy would …
7th March 2022
One immediate effect of the war in Ukraine will be to push Russia several places down the league table of the world’s largest economies. However, the impact on the global economy over the long run will depend to a large extent on its political and …
2nd March 2022
The latest manufacturing PMIs add further evidence that the hit to industrial activity from Omicron was limited and should be short-lived. Although supply chain issues and price pressures no longer appear to be getting worse, they will remain a constraint …
1st March 2022
The escalation of the conflict in Ukraine has increased the risks posed to the global economy, but we still expect the broader effects to be relatively contained given limited trade and financial exposures to Russia. If more severe adverse consequences …
28th February 2022
This briefing note is intended to bring clients up to speed with developments over the weekend in the conflict in Ukraine. On the military front, while events remain in flux, the Russian advance has proceeded more slowly than had been anticipated . Kyiv, …
This Update answers eight key questions for economies and markets in light of the escalation in the Ukraine conflict overnight. All clients are invited to a Drop-In at 14.00 GMT/09.00 EST when our panel of senior economists will discuss these issues and …
24th February 2022
The Russia-Ukraine crisis poses a challenge for central banks in advanced economies as they weigh the upside risks to inflation against the downside risks to activity. For now, we suspect that the two are finely balanced and have not changed our forecasts …
22nd February 2022
February’s Flash PMIs support our earlier assertion that activity in developed economies would recover quickly from disruption related to Omicron. There is also tentative evidence that supply shortages are beginning to ease, but this has done very little …
The economic and market consequences of a war between Russia and Ukraine will depend on the severity of the conflict, and the response of the West. But in most cases the economic impact on countries beyond Russia and Ukraine is likely to be limited. The …
The Omicron hit to activity has been small compared to past waves and should prove short-lived now that cases are falling in all regions. In fact, high-frequency data suggest that activity has already turned a corner. Daily deaths are still rising in EMs, …
18th February 2022
Quantitative tightening (QT), namely the shrinking of central banks’ balance sheets, is likely to play an active role alongside rising interest rates in the tightening of monetary policy over the coming months. However, central banks will have to play it …
15th February 2022
A Russian invasion of Ukraine or severe ratcheting up of sanctions would add as much as 2%-pts to inflation in DMs, particularly in Europe. Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more …
4th February 2022
While there is still time for Omicron waves to hit global supply chains, the manufacturing PMIs suggest that there has been limited disruption for now, especially outside China and the US. That said, product shortages and price pressures remained acute in …
1st February 2022
The Q4 GDP data released over the past week underline the fact that the two largest developed markets – the US and euro-zone – have so far experienced very different crises and recoveries. These differences help to explain why economic growth in the …
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 …
24th January 2022
While ongoing supply shortages have led us to revise up our forecasts for crude oil and wholesale gas prices, we still expect significant falls this year which would reduce headline inflation in major developed markets by around 2ppts. But there are …
20th January 2022
While it is very uncertain, we estimate that disruption due to Omicron could knock around 1% off GDP in advanced economies while the outbreak is at its height, mainly due to staff absences. This would be a severe shock by pre-pandemic standards, but …
12th January 2022
Global coronavirus cases have surged, and pressure is mounting on health systems as hospitalisations rise. Given that Omicron is milder than past variants, governments are typically leaning on booster rollouts and light-touch restrictions rather than …
6th January 2022
December’s manufacturing PMIs revealed that global industry rounded off 2021 on a positive note, with output growth picking up and price pressures easing as supply problems improved. But the PMIs gave us little insight into the early effects of Omicron as …
4th January 2022
We expect growth in almost every major economy to slow next year, with the US and China in particular falling some way short of current expectations. At the same time, while headline inflation will drop sharply, core inflation will remain higher than most …
17th December 2021
The Flash PMIs for December suggests that activity is slowing across advanced economies, as new virus waves and the emergence of the Omicron variant have already started to weigh on activity in the services sector. On the other hand, the PMIs also pointed …
16th December 2021
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 …
9th December 2021
Coronavirus fears have resurged, with some restrictions being reimposed in Europe. So far, the hit to activity seems fairly modest, but it will be enough to see economic recoveries in the euro-zone and parts of emerging Europe slow in Q4. And restrictions …
8th December 2021
November’s manufacturing PMIs suggest that global industrial production has continued to expand, albeit at a slower pace than earlier this year. There are tentative signs that supply disruptions may be easing, but from a very strained starting point, and …
1st December 2021
If Omicron turns out to be malign enough to prompt tighter restrictions, we suspect that the net result would initially be for inflation to be lower than otherwise. But by worsening product and potentially labour shortages, restrictions on household …
It goes without saying that it’s still too early to say exactly how big a threat the new Omicron variant poses to the global economy. We’ll have more to say as the picture becomes clearer, but in the first instance there are three points worth making. …
26th November 2021
The Flash PMIs for November showed that although there are tentative signs that supply shortages are easing slightly, labour and product shortages are still weighing on recoveries in advanced economies. At the same time, the surveys point to record gains …
23rd November 2021
With the Turkish lira down by 9% so far today and 20% over the past week, the currency is now firmly in crisis territory. Higher inflation and tighter domestic financial conditions are likely to sap Turkey’s recovery. But given the small trade and …