Overview

COVID 19 continues to be the main driver of growth both in the recovery phase and as the Delta variant spreads. With vaccines looking promising 2021 looks like being a bounce back year. 2022 likely to be above average. 2023 trend growth.

In the US huge fiscal stimulus has seen very strong growth in the first half of 2021 which we expect to continue into the second half bringing growth up to 6.2% in 2021 and around 4.3% in 2022. The combination of stimulus and supply shortages have seen very strong
increases in wage and price pressures. The Fed thinks this is temporary and recent data supports this. We expect the Fed to announce tapering intentions in November (subject to reasonable Payrolls in October) and actual tapering in late 2021 or early 2022. Rate rises are
probably 12 months beyond that.

China was one of the few economies to grow in 2021. Lots of stimulus that is now being withdrawn. Growth easily above 6% target. In 2021 more like 8.5%. But recently the virus has returned and the economy may slow significantly if lockdowns continue. Evergrande a new issue but probably wont see Government action unless threatens systemic issues

Growth in Europe, UK appear to have bounced back significantly. Japan is more a concern but we expect a better second half in 2021 and into 2022.

Developing world hard hit by the virus ( eg India and Indonesia).

Other theme globally is the return of inflation from supply side problems (and stimulus). Markets v the Fed and other central banks.

For further details, see the NAB Rural Commodities Wrap September 2021