Strong US and Eurozone GDP growth in the second and third quarters should be followed by a gradual slowdown. Due to the ‘acquis de croissance’ going into the fourth quarter, the perceived slowdown versus the third quarter could be much bigger than what shows up in the current forecasts. In the US, the current elevated inflation will take time to decline. In conjunction with slowing growth, this could boost the stagflation narrative. Such a depiction of the economic environment seems unwarranted however, considering that inflation should decline further in the first half of next year and that the US economy should continue to grow above potential.
The Eurozone has still not reached its cyclical peak. The situation has continued to improve over the past three months and the recovery has now spread to all parts of the economy. After rising strongly since April 2020, the Purchasing Managers Index (PMI) for the manufacturing sector levelled off at a very high level in June (63.1). Manufacturing PMI is still going strong, although the indicator suffered from a dip in the “new export orders” component, which slipped to 60.9 in June. Yet this level is still high compared to its long-term average.
The German economy is strongly rebounding according to our Pulse. The blue area, representing the situation in the past three months, has clearly expanded compared to that in the preceding three-month period (the area within the dashed line). The latest data confirm that the growth momentum is strengthening. In June, the IFO climate index reached 101.8 (2015=100), a highest since April 2018. Companies were notably more satisfied with their current business. The recovery is also broad-based with the climate index progressing in all sectors.
Our Pulse continues to show a significant improvement in France’s economic situation in recent months compared to the previous three months. For activity indicators, the blue area largely surpasses the area marked by the dotted line, whereas for the confidence surveys, it exceeds or is very close to the grey hendecagon that delineates the long-term average.
The Covid-19 pandemic continued to slow worldwide for the seventh consecutive week, with the number of new cases down 5% in the week of 15-22 June compared to the previous week. This has been the lowest number of new cases since February 2021. The downward trend can be seen in all regions with the exception of Africa.
