Blog - Capital Economics

The Chief Economist’s Note

With push from the pandemic, globalisation era gives way to US-China decoupling

Posted by Neil Shearing | Category : The Chief Economist's Note.

We argued some time ago that globalisation had peaked but that the jury was still out on what form a subsequent period of deglobalisation might take. Two years and one pandemic later and it is starting to become clear what to expect.   The era of globalisation that turbocharged world growth in the 1990s and 2000s … Continue reading “With push from the pandemic, globalisation era gives way to US-China decoupling”

Why Europe will fall further behind the US in the post-pandemic recovery

Posted by Neil Shearing | Category : The Chief Economist's Note.

Our latest COVID Recovery Monitor reveals a growing divergence between the US economy, which is rebounding, and the euro-zone economy, which is faltering. This is evident in the usual activity data and business surveys, but also in higher frequency data, including our own mobility trackers. (See Chart 1.) Crucially, all the signs suggest that the … Continue reading “Why Europe will fall further behind the US in the post-pandemic recovery”

A commodities supercycle won’t be playing a role in inflation’s return

Posted by Neil Shearing | Category : The Chief Economist's Note.

Last week we published our latest Global Inflation Watch. It argued that a strong recovery in global GDP growth this year would be accompanied by a sizeable rebound in global inflation. One of the key drivers of the impending rise in inflation is the sharp increase in global commodity prices over the past year. The … Continue reading “A commodities supercycle won’t be playing a role in inflation’s return”

Global growth narrative set to shift as pre-pandemic legacy issues resurface

Posted by Neil Shearing | Category : The Chief Economist's Note.

Two major events have taken place in the world’s two largest economies over the past week. The first is the passage of President Biden’s $1.9trn stimulus bill in the US. The second is the meeting of the National People’s Congress in Beijing. Taken together, these have the potential to reshape the narrative around the post-pandemic … Continue reading “Global growth narrative set to shift as pre-pandemic legacy issues resurface”

If yields keep rising, expect an array of responses from global central banks

Posted by Neil Shearing | Category : The Chief Economist's Note.

A sense of foreboding continues to haunt global bond markets. Having dropped back at the start of last week, government bond yields then rose again in the middle of the week and the bond sell-off intensified on Thursday and Friday. It is important to get matters into perspective: despite recent moves, yields everywhere remain low … Continue reading “If yields keep rising, expect an array of responses from global central banks”

Inflation’s revival more likely to be an American than a European story

Posted by Neil Shearing | Category : The Chief Economist's Note.

Concerns that one legacy of the pandemic will be a period of higher inflation are starting to spread. According to Eurostat, HICP inflation in the euro-zone jumped from -0.3% in December to +0.9% y/y in January. Core inflation increased from 0.2% y/y to 1.4% y/y – by far the largest monthly rise on record. In … Continue reading “Inflation’s revival more likely to be an American than a European story”

US stimulus debate highlights the global risks of diverging fiscal policy paths

Posted by Neil Shearing | Category : The Chief Economist's Note.

The past week has seen Joe Biden’s fiscal strategy come under fire from the most unlikely of places: it has caused a high-profile rift between Democrat-aligned US economists, setting the stage for a wider debate about the role of government in the post-pandemic recovery.   There are several strands to the argument, but the core of … Continue reading “US stimulus debate highlights the global risks of diverging fiscal policy paths”

Economic legacy of the pandemic will be different from previous crises

Posted by Neil Shearing | Category : The Chief Economist's Note.

Last week we launched a new service: ‘The Long Run’. This looks beyond our normal forecast horizon of one to two years ahead and analyses the issues that will shape economic prospects and financial market outcomes over the second half of this decade and beyond. You can find more details here. Most long-term forecasts rely … Continue reading “Economic legacy of the pandemic will be different from previous crises”

The pandemic is distorting everything – including the economic data

Posted by Neil Shearing | Category : The Chief Economist's Note.

The pandemic has already forced economic forecasters out of their comfort zone, but the terrain is now getting even more perilous. It is no longer sufficient to make an assumption about “the virus”. We now have to consider: vaccine rollout, vaccine efficacy, virus mutations, the lifting of lockdowns and the increasing likelihood that some restrictions … Continue reading “The pandemic is distorting everything – including the economic data”

An inflation revival won’t look like the 1970s

Posted by Neil Shearing | Category : The Chief Economist's Note.

Last week I argued that, although inflation in advanced economies is likely to rebound this year, this should not be mistaken for the start of a new post-pandemic era of higher inflation. However, this is clearly not the same as saying there will not be a period of higher inflation in some economies at some … Continue reading “An inflation revival won’t look like the 1970s”