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The latest surge in global commodity prices has intensified the dilemma facing the world’s major central banks: on the one hand it will push headline inflation (and inflation expectations) even higher, but on the other there’s little monetary policy can …
10th March 2022
The rest of the world’s direct financial exposure to Russia has fallen in recent years and, in aggregate, is now small. This limits the risk of financial contagion from the collapse in Russia’s economy that is underway. If financial contagion does spread …
9th March 2022
Current labour shortages are not purely the result of short-term absenteeism related to the virus. Indeed, we estimate that around 80% of the shortfall can be explained by factors that will prove more persistent, such as a fall in migration. It is hard to …
8th March 2022
We think that a complete ban on Russian energy imports would cause the prices of Brent crude oil and European natural gas to surge to $160pb and €300/MWh in the near term and settle at still very high levels into next year. The Russian economy would …
7th March 2022
One immediate effect of the war in Ukraine will be to push Russia several places down the league table of the world’s largest economies. However, the impact on the global economy over the long run will depend to a large extent on its political and …
2nd March 2022
The latest manufacturing PMIs add further evidence that the hit to industrial activity from Omicron was limited and should be short-lived. Although supply chain issues and price pressures no longer appear to be getting worse, they will remain a constraint …
1st March 2022
The latest trade data suggest that the Omicron wave caused limited disruption at the turn of the year. And, for now, it looks like the impact of the Russia-Ukraine war on world trade will be small in aggregate. But the hit would become much larger if …
The escalation of the conflict in Ukraine has increased the risks posed to the global economy, but we still expect the broader effects to be relatively contained given limited trade and financial exposures to Russia. If more severe adverse consequences …
28th February 2022
This briefing note is intended to bring clients up to speed with developments over the weekend in the conflict in Ukraine. On the military front, while events remain in flux, the Russian advance has proceeded more slowly than had been anticipated . Kyiv, …
This Update answers eight key questions for economies and markets in light of the escalation in the Ukraine conflict overnight. All clients are invited to a Drop-In at 14.00 GMT/09.00 EST when our panel of senior economists will discuss these issues and …
24th February 2022
The Russia-Ukraine crisis poses a challenge for central banks in advanced economies as they weigh the upside risks to inflation against the downside risks to activity. For now, we suspect that the two are finely balanced and have not changed our forecasts …
22nd February 2022
February’s Flash PMIs support our earlier assertion that activity in developed economies would recover quickly from disruption related to Omicron. There is also tentative evidence that supply shortages are beginning to ease, but this has done very little …
The economic and market consequences of a war between Russia and Ukraine will depend on the severity of the conflict, and the response of the West. But in most cases the economic impact on countries beyond Russia and Ukraine is likely to be limited. The …
The Omicron hit to activity has been small compared to past waves and should prove short-lived now that cases are falling in all regions. In fact, high-frequency data suggest that activity has already turned a corner. Daily deaths are still rising in EMs, …
18th February 2022
With equilibrium interest rates in developed markets probably still close to record lows, actual interest rates are likely to peak at a far lower level in this cycle than in most previous ones. The main risk to our forecasts is that cyclical inflationary …
16th February 2022
Quantitative tightening (QT), namely the shrinking of central banks’ balance sheets, is likely to play an active role alongside rising interest rates in the tightening of monetary policy over the coming months. However, central banks will have to play it …
15th February 2022
While data from the past month have been consistent with global economic activity picking up some pace towards the tail end of 2021, timely data point to a weak turn of the year as the Omicron wave took its toll. For example, virus caution and government …
11th February 2022
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
