Overview

• Recent trends for new COVID-19 cases have been encouraging for many advanced economies, in stark contrast to upturns in South America and parts of Asia. Google Mobility data for India shows a sharp contraction in activity in recent months, which point to downside risk to our strong forecast growth for 2021. Access to vaccines remains highly uneven, meaning that the overall global recovery will continue into 2022, before slowing to its long term trend (3.5%) in 2023.
• Inflationary pressures are coming through global supply chains –as surging commodity prices and shortages of inputs drive up producer prices. These supply side pressures are contributing to the upturn in consumer price inflation. This will not necessarily result in central banks lifting policy rates, as some inflationary pressure is likely temporary and many central banks will tolerate slightly above target inflation, particularly while unemployment remains elevated.
• In Q1 2021, major advanced economies diverged even further in their recovery from last year’s recession. While US GDP growth accelerated, and Canada recorded another solid result, GDP declined qoq in the Euro-zone, UK and Japan. While conditions are still mixed, we expect rapid growth to occur across all the major AEs at some stage this year as vaccinations roll-out and case numbers are brought under control, leading to a sustained easing in activity restrictions.
• When compared with the strength of aggregate readings for the advanced economies, PMI surveys for emerging markets are softer –in a large part reflecting China’s more rapid recovery from COVID-19 in 2020 and its slower subsequent growth. The latest readings for May were weaker, driven by India, reflecting the impact of measures to slow the spread of COVID-19. Tighter restrictions have also been introduced in other parts of Asia (including Singapore, Taiwan and Malaysia).

For further details, please see The Forward View – Global June 2021