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Inflation risks might spur an aggressive policy action similar to that of the mid-1990s. But this would be unusual and there are very good reasons for caution. Even those banks that start out fast will slow the pace before long. Monetary policymakers are …
10th 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 …
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. …
26th January 2022
Table of Key Forecasts Global Overview – 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 …
25th January 2022
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
There were signs that supply shortages were starting to ease in some places at the tail end of 2021. World trade was its strongest since shortages began to bite a year ago and industrial production had picked up too, especially in the auto industry as …
14th 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
Table of Key Forecasts Overview – The inflation outlook for 2022 will be dominated by three key themes. First, headline rates will fall owing to a mixture of fading re-opening inflation, falling commodity prices, and base effects dropping out of the …
22nd December 2021
Most central banks will raise interest rates next year. But in some cases, interest rates may not rise by as much as markets are anticipating. And the People’s Bank of China will cut interest rates further. With underlying inflation set to stay …
21st December 2021
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
Outside China, global inflation jumped from 5.0% to 5.5% in October, its highest level since 2008. And timely data point to a further rise in November. Base effects, fading ‘re-opening’ inflation, and falling commodity prices will drag on headline …
14th 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
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 …
2nd 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
World trade has continued to edge down from its high peak in March, as supply shortages have meant that Asian exporters remain unable to keep up with strong demand from consumers in advanced economies. Even when demand does eventually abate, large …
25th 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 …
The slump in auto production related to supply chain disruptions has dragged down the pace of the global recovery this year. And while there have been some indications that supply of auto parts is starting to pick up again, meaning there is scope for an …
19th November 2021
Rising virus numbers have caused containment measures to be reimposed in Emerging Europe and now seem to be harming consumer activity in the euro-zone. There is a strong risk of further restrictions over the winter in several economies, but in most cases …
17th November 2021
Recent indicators confirm that the global recovery has continued, but also that it has entered a slower and more difficult phase. US GDP growth slowed sharply in Q3, and our China Activity Proxy suggests that there was a large contraction there. (See …
11th November 2021
While inflation will stay well above target in both the US and Germany in the months ahead, the detail of the latest inflation prints seems to confirm that price pressures are likely to be much more persistent in the US. Crucially, rents are becoming a …
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. Households’ saving rates (showing the …
9th November 2021
The raft of Q3 data that have been released so far have been the proverbial mixed bag with some countries (e.g. France) reporting surprisingly strong growth and others (e.g. the US) surprising on the downside. However, the big picture that emerges is that …
3rd November 2021
The October manufacturing PMIs gave us more of the same – evidence that supply disruptions are getting worse, industrial output growth is weakening, and price pressures are intensifying. This fits with our view that the world economy is in for a period of …
2nd November 2021
We have long been sceptical of the conventional view that inflation expectations have been an important determinant of inflation in advanced economies. At the same time, though, we doubt that expectations are as ‘anchored’ at low levels or at central bank …
1st November 2021
The evidence keeps mounting that world trade is unable to rise any further from its elevated level. And industrial supply and global logistics are likely to continue failing to keep up with demand in the coming months, even as the global recovery slows. …
28th October 2021
Table of Key Forecasts Global Overview – The global recovery will slow in the coming quarters as the initial post-lockdown rebound fades and policy support is reduced. At the same time, supply shortages are likely to persist well into next year, which …
26th October 2021
The flash PMIs for October brought news of an encouraging start to Q4 for services sector activity, alongside yet more evidence that shortages are holding back growth in industry and stoking even stronger price pressures. If it wasn’t clear already, …
22nd October 2021
The recent upward revision to our oil price forecast does little to alter our view that inflation will fall in 2022. Even if oil prices don’t fall as we expect them to and they stay at their current level, energy inflation would drop back next year, …
21st October 2021
The pandemic is still depressing the size of the labour force in many developed countries. This probably reflects a mixture of temporary and permanent factors, so some of it may yet be reversed. But even if the bulk of the reduction in the labour force …
19th October 2021
We think that Indeed job data are useful and timely indicators of labour demand, and we will continue to monitor them in the months ahead. The latest data support the view that labour shortages are rising, and are most acute in the US, Australia, and …
18th October 2021
With shortages of goods and labour still dominating the news, and following our Focus research into global shortages, we have added a new page to the Global Economics Chart Book to monitor their evolution. While the global economy has continued to grow at …
14th October 2021
Global Inflation Watch is our in-depth quarterly guide to how price pressures are developing across advanced and emerging economies. This exclusive publication includes insight into how traditional sources of inflation are contributing to the current …
11th October 2021
It is a year since we published our “ Economies after COVID ” series, so now seems like a good time to pause and take stock of how our predictions about the legacy of the pandemic are shaping up. There is a still a long way to go until the pandemic’s full …
8th October 2021
With supply shortages set to persist for the next 6 to 12 months, the current period of “stagflation-lite” will persist a while longer. But it is likely to remain a pale imitation of the 1970s stagflation episode. Meanwhile, we do not share the pessimism …
7th October 2021
Current supply shortages have been driven by several forces which look set to persist for six to twelve months. They have caused sharp increases in some prices (most notably energy and used cars) and also limited output. Central banks are unlikely to …
6th October 2021
The key message from today’s batch of PMIs for September is that supply constraints are still limiting growth in industry, and there is little to suggest they will ease materially any time soon. So, manufacturers and wholesalers will continue to face …
1st October 2021
Concerns that price pressures will become sustained have prompted a hawkish shift. We have brought forward anticipated rate hikes in the US, UK and some EMs. But we doubt that tightening will go as far as most central banks have implied. There has been a …
29th September 2021
It is an under-statement to say that house prices have weathered the pandemic well; housing markets are positively booming. Yet the drivers of this rise in prices are rather different to those of the pre-2007 housing boom, meaning that we do not seem to …
28th September 2021
While world goods trade fell in July, the signs are that it perked up a bit in August. But stepping back from the month-to-month moves, global trade flows have broadly flattened out at a high level, and we expect this pattern to continue into 2022. With …
27th September 2021
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 …
23rd September 2021