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Table of Key Forecasts Global Overview – The outlook for the world economy has darkened again and we have reduced our forecasts for all major economies, leaving them further below the consensus of economists. We now anticipate recessions in the euro-zone …
21st July 2022
We held a Drop-In earlier today to discuss recent developments in Sri Lanka, where the economic and political crisis is going from bad to worse. This Update answers several of the questions that we received. How bad is the economic situation? In a …
14th July 2022
Recent data suggest that global economic activity was even weaker than we initially thought in Q2, with GDP probably contracting in several major economies including the euro-zone, UK and China. The earliest signs for Q3 are not good, with business …
13th July 2022
Even though workers are accepting cuts in their real pay, nominal wage growth is still above “acceptable” rates for central banks in DMs of 3% to 4%. This underlines why interest rates need to head into restrictive territory to weaken economic activity …
5th July 2022
Policymakers will have breathed a small sigh of relief at the latest manufacturing PMI surveys because they contained lots of signals that global goods price inflation will ease later this year. Demand softened, backlogs cleared, delivery times improved, …
1st July 2022
The consumer recovery in advanced economies has been characterised by particularly strong spending on goods and a weaker pick-up in services demand. There are signs that goods spending is now flattening off as households are able to buy more services. But …
30th June 2022
Official data showed that world trade rose slightly in April and limited data for May suggest that it probably rose further as disruptions from lockdowns in China eased. But weaker global final demand for goods, due to a gradual normalisation in spending …
28th June 2022
Table of Key Forecasts Overview – While inflation has broadened out and surprised to the upside in 2022 (see Chart 1), we maintain the view that it will fall sharply in the year ahead. For one thing, we expect commodity prices to fall. Even if we are …
Having held up better than much of the data in recent months, the S&P Global PMIs have finally taken a considerable leg-down in the US and euro-zone. While the PMIs are still consistent with economic expansion rather than recession in Q2, they nonetheless …
23rd June 2022
There is still scope for an improvement in labour supply in the US, UK and euro-zone, which might over time alleviate some of the tightness in their labour markets. But it could yet take a long time to materialise. Unemployment rates are now back at, or …
We have raised our interest rate forecasts as banks double down on hawkish stance Alarming inflation picture points to more big hikes in the near term…. … but weakening activity will warrant a slower pace of tightening before long. It’s been a momentous …
22nd June 2022
Equilibrium interest rates in advanced economies are probably still very low. However, there is still a lot of uncertainty about how far above this equilibrium interest rates will have to go in the near-term to quash inflation. Even if we are right in …
21st June 2022
We held a Drop-In yesterday to discuss recent developments in central banking and related financial market implications. This Update answers several of the questions that we received, some of which we couldn’t fit in during the event and some that we are …
17th June 2022
Global economic activity might have contracted slightly in Q2, which would be the weakest outcome in recent history aside from the height of the pandemic and the Global Financial Crisis. Part of the weakness reflects a likely slump in Russian GDP, but we …
15th June 2022
Surging food prices are a cloud over the global economic outlook. While food inflation should fall sharply next year, it will remain high in the near term, eating further into households’ spending power and weighing on discretionary spending. What’s more, …
14th June 2022
Housing markets are now showing signs of starting to weaken. While the consensus is that house price inflation will merely slow, we expect outright prices to fall in several of the most vulnerable markets. We have highlighted before which housing markets …
13th June 2022
The latest manufacturing PMIs suggest that industrial activity weakened a touch in May. But while the forward-looking components of the surveys imply that weaker demand will weigh on output in the months ahead, there were some further signs that …
1st June 2022
We expect the most aggressive policy tightening cycle in decades to cause a slowdown in global economic growth, not a severe downturn. The biggest risk is that inflation stays higher for much longer than we anticipate, causing central banks to raise …
It remains a mixed picture when it comes to how well the labour force is recovering in the wake of the pandemic. The recent improvement in some countries supports our view that much of the pandemic-related drop may be reversed eventually. But this could …
31st May 2022
After a growth spurt late last year, world trade flatlined in Q1. The Ukraine war and lockdowns in China raised concerns that renewed supply bottlenecks would choke up world trade. However, notwithstanding the reported surge in US imports in March, it …
27th May 2022
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
The switch from global QE to QT is imminent But not all banks will participate, with the BoJ still buying and the ECB on standby QT will contribute to a rise in yields, especially in US, but no global market meltdown The focus of recent weeks has been on …
18th 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
Recent data have shown the firmest evidence yet that high inflation is damaging real consumer spending in advanced economies. Real retail sales fell in the US, UK, and euro-zone in March, while increases in Australia and Japan reflected temporary rebounds …
13th 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
Table of Key Forecasts Global Overview – We have revised our forecast for world growth this year to further below the consensus to reflect the growing ill effects of high inflation. While inflation should ease as the year goes on, the drag on real incomes …
27th April 2022
While official data showed that world trade held up well in February, timelier national indicators suggest that exports from some Asian economies have fallen since then. This slowdown seems to reflect weaker global consumer demand, which we expect to …
26th April 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
World GDP appears to have expanded at a below-trend pace in Q1 as high inflation limited real consumer spending and supply shortages and Omicron waves continued to disrupt activity. March’s broad-based drop in consumer confidence suggests that consumer …
14th 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
Table of Key Forecasts Overview – The war in Ukraine has caused price pressures to intensify again and we now expect global headline inflation to be one percentage point higher on average this year than we previously envisaged. Now is probably the point …
4th 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 latest available official data suggest that world trade held onto gains from Q4 in January, and timely indicators suggest that it may have edged up in February. It will be May before we have comprehensive official data on the hit to trade activity in …
29th March 2022
We think that property markets are the weak link when it comes to the impact of tightening monetary policy. A modest rise in interest rates might only cause price falls in a few obvious candidates. But rates might have to rise only a bit further than we …
25th March 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
War in Ukraine will not prevent policy tightening as inflation remains elevated. In the past, tightening cycles have tended to end in recession. But soft landings are achievable and delaying now would increase future risks. The war in Ukraine has worsened …
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 …
We warned at the start of the year that global growth would disappoint, while inflation would surprise to the upside in 2022 and recent events have added to those concerns. The surge in commodity prices related to the war in Ukraine means that headline …
15th March 2022
