US economic policy uncertainty based on media coverage has declined since the start of the year. In the US, business uncertainty about sales revenue growth has been edging higher whereas uncertainty about employment growth continues its downtrend. The European Commission’s uncertainty index has jumped following the war in Ukraine. This has also caused an exceptionally large increase in the geopolitical risk index, which is based on media coverage. The cross-sectional standard deviation of daily stock market returns of individual companies – a measure of financial uncertainty – has risen in the US and the euro area, albeit to a limited degree.
Elevated inflation has become widespread. It raises the risk of further price increases because companies may be more inclined to raise prices when most others are doing the same. This would make high inflation more persistent, implying that it would take more time for inflation to converge back to target. Persistently high inflation could weaken the credibility of the central bank and cause an un-anchoring of long-term inflation expectations. To pre-empt such a development, monetary authorities could decide to tighten policy aggressively. Research by the Federal Reserve shows that US inflation has become more persistent. This helps to understand the increasingly hawkish rhetoric of Federal Reserve officials and their insistence on the need to frontload monetary tightening
After the World Trade Organisation (WTO), the International Monetary Fund also revised significantly lower its forecast for global trade for 2022. Exports are now expected to rise by 4.4%, compared with an estimate of 6% in October. This is above the WTO’s projections of 3% growth in 2022. Given the sharp rebound seen in 2021 – an increase of 9.8% – a lower rate of growth in goods exchange was expected. However, the war in Ukraine and the difficulties facing China in terms of its economy and the public health situation are important headwinds to growth. Some signs of this slowdown can already be seen: the global manufacturing PMI index for new export orders dropped sharply in March (-2.8 points to 48.2), reaching its lowest level in 18 months (chart 2)
According to the latest figures from Johns Hopkins University, 5.9 million cases of Covid-19 were reported worldwide between 13 and 19 April (down 24% relative to the previous week), the lowest level since the end of December 2021. The number of cases continued to fall in Europe and Asia (down 26%), South America (down 24%) and Africa (down 13%), while a further increase was seen in North America (7%) for the second time in a row (chart 1). To date, the threshold of 11 billion vaccine doses has been reached, including 1.8 billion follow-up doses. This means that around 65% of the worldwide population has received at least one dose of a vaccine (chart 2).
The number of new Covid-19 cases reported worldwide fell for the third consecutive week. For the first time since January 2022, the number of new cases for the week has fallen below the symbolic level of 10 million on average for a moving seven-day period. Some 8 million new cases were recorded between 7 and 14 April, a fall of 21% on the previous week (Chart 1). Numbers continued to fall in Europe, Asia, South America and Africa, although North America saw an increase after three months of virtually continuous falls. Meanwhile, 65% of the world’s population has now received at least one dose of a Covid-19 vaccine (Chart 2).
The resilience of the global economy is tested by multiple shocks: rising Covid-19 infections in China, the war in Ukraine, the huge increase of several commodity prices, the prospect of aggressive monetary tightening in the US. The significant carry-over effect from last year is an element of support when assessing the outlook for annual growth this year. In addition, the drivers of final demand were supportive at the start of the year and in many cases still are. High inflation is weighing on consumer sentiment in the US and the Eurozone but fortunately, thus far, employment expectations of Eurozone companies remain at a very high level and in the US, the labour market remains very strong
The global manufacturing PMI has declined slightly in March after a brief and limited rebound in February. It is at its lowest level for this year. In the US however, the upward trend continues whereas the Eurozone saw a significant decline. Within the Eurozone, Ireland was an exception and the index has rebounded to its January level. Japan, Mexico, South Africa and in particular Brazil saw an improvement in March. China and Vietnam recorded significant declines.
The Covid-19 pandemic slowed worldwide for the second consecutive week, with a significant 14% decline in the number of new cases reported between 31 March and 6 April compared to the previous week. New fact to notice: this improvement benefitted all regions (chart 1): South America and Africa (-27%), Asia (-20%), Europe (-11%) and North America (-5%). Meanwhile, vaccination campaigns continue to progress. To date, 11.4 billion doses of the vaccine have been administered worldwide, bringing to 65% the share of the global population that has received at least one dose of the Covid-19 vaccine.
After a week of stabilisation, global Covid-19 case numbers have started to fall again. 11 million new cases were recorded between 24 and 30 March, a 9% drop on the previous week. In more general terms, the number of new cases has continued to fall in North and South America, whilst Asia saw its first fall in case numbers after two months of near-continuous increases. In Europe, by contrast, the situation was stable for the second week in a row.
The latest cyclical surveys show the impact of the war in Ukraine. Confidence of households and companies has dropped, although, concerning the latter, significant differences exist between countries and sectors. In Germany, the IFO business climate has plummeted whereas in France, the decline is more limited. Services tend to be doing better than manufacturing. Importantly, employment expectations of companies remain at an elevated level. It is a key factor to monitor in view of what it signals about companies’ confidence in the medium outlook as well as for its influence on households’ sentiment about their future personal situation. This last point is particularly important given the plunge in household confidence, which is largely related to concern about the general economic outlook
Our different uncertainty gauges are complementary, in terms of scope and methodology. Starting top left and continuing clockwise, US economic policy uncertainty based on media coverage has declined since the start of the year but the latest data are for February and do not yet reflect the impact of the war in Ukraine. That also applies to uncertainty based on business surveys, which has been declining since the beginning of the year. Geopolitical risk – based on media coverage – has seen a huge jump following the invasion of Ukraine. For the same reason, the cross-sectional standard deviation of daily stock market returns of individual companies – a measure of financial uncertainty – has risen in the US and the euro area, although to a rather limited extent.
Bottlenecks in shipping transport are already intense and could get worse. First, it is becoming very difficult, not to say impossible, to move merchandises by rail and road networks between China and Europe, because of the routes crossing Russia and the conflict zones in Ukraine. Furthermore, many Chinese production lines, and logistics around the country’s ports, have been disrupted by a resurgence of Covid-19 cases and the authorities’ ‘zero-Covid’ policies.
After a week of rises, figures for the Covid-19 pandemic have stabilised worldwide, albeit at a high level. 12 million new cases were recorded around the world in the week of 17-23 March, a figure similar to that in the previous week. However, the picture is uneven around the world.
After trending downwards since the end of January, Covid-19 figures have been ticking upwards again around the globe: 11.7 million new cases were reported between 10-16 March, a 9% increase over the previous week. This increase is due to the highly contagious Omicron variant and to the easing of health restrictions in several countries. The increase in the number of new cases was especially striking in Asia and Africa, up 15% and 12%, respectively.
With the Omicron variant now becoming dominant in most countries, the number of new Covid-19 cases worldwide continues to fall. However, the pace of this decline has slowed during the week of March 3-9 (-2% compared to the previous week). By region, South America and Africa saw big falls, at 38%, followed by North America (-30%) and Europe (-7%). In contrast, case numbers in Asia rose by 15%. Meanwhile, 64% of the world’s population has now received at least one dose of a Covid-19 vaccine.
The war in Ukraine has caused a jump in commodity prices that will trigger a further increase in inflation and will weigh on GDP growth. Unsurprisingly, the narrative that stagflation is in for a comeback is gaining ground, as shown by the increasing number of media references to this topic. Stagflation is a multi-year phenomenon of high inflation and a high rate of unemployment. Although inflation is high, the other conditions are clearly not met today. Monitoring financial markets developments is useful in gauging whether stagflation risk is on the rise. This can be done by comparing the developments in breakeven inflation and the high yield corporate bond spread
The global manufacturing PMI moved slightly higher in February on the back of a sizeable increase in the US and a slight weakening in the euro area where the index improved strongly in France and declined in Germany. Brazil and Mexico recorded better data but the index is still below 50. The PMI in China improved and crossed the 50 line.
The number of new Covid-19 cases continues to decline in most regions of the world. Moreover, retail and leisure traffic held to an upward trend in Spain, Belgium, France, Germany, Italy, the UK and the US, even though some declines were observed for the most recent data points. In Japan, retail and leisure traffic continues to improve.
After a spectacular rebound in 2021, global trade in goods is likely to see slower growth this year. The World Trade Organisation’s latest forecasts show that trade in goods will rise by 4.7% this year, following a jump of 10.8% in 2021. The global PMI manufacturing new orders index also fell below the 50 threshold in January, for the first time in a year and a half. That said, the slowdown will not be visible in all sectors. Indeed, demand for semiconductors remains very high, and this dynamic largely explains why Taiwan continues to record rapidly rising export orders.
The question of the persistence of high inflation matters because it will determine the extent of monetary tightening necessary to bring inflation under control. Key factors are growth of unit labour costs, the price elasticity of demand and its mirror image, the pricing power of companies. The latter two are conditioned, at least in part, by the cyclical environment: when growth is very strong, price elasticity of demand will be lower and pricing power higher than normal. A regression analysis between the PMI output prices index and the PMI input prices index (explanatory variable) shows that recently in the US and the euro area, pricing power has increased quite significantly
Sixteen million new Covid-19 cases were confirmed during the week of 9-15 February, a 20% decline from the previous week. All regions reported declines, with new cases down 44% in North America, 34% in Africa, 26% in South America, 14% in Europe, and nearly 12% in Asia.
In the week of 2-8 February 2022, 19.9 million confirmed new cases of Covid-19 were reported worldwide, 14% less than the previous week. This is the second consecutive week of decline. All regions contributed to this decline: North America (-38%), Africa (-24%), South America (-17%) and Asia and Europe (nearly -5% each).
The global manufacturing PMI declined in January, which is partly related to the drop in the US, whereas the euro saw a further increase. The index jumped in Austria and moved higher in Germany, after having been stable for several months. The data were weaker in Greece and Italy. The improvement continued in Japan but the situation worsened in Brazil and Mexico with the respective PMIs dropping further below 50. The Chinese PMI weakened and has moved below 50.
According to the latest data from Johns Hopkins University, more than 22 million new cases were recorded around the world between 27 January and 2 February, a fall of 3% on the previous week. Nearly 61.3% of the world’s population has now received at least one dose of a Covid-19 vaccine. The last two weeks have brought an increase in visits to retail and recreation facilities in Spain, Belgium, France, Germany, Italy and the USA. The UK saw a bigger increase, probably due to the removal of nearly all health protection measures, whilst the downward trend in Japan continued.
The number of new daily cases of Covid-19 has continued to rise in most parts of the world. Over the same period, several individual countries saw falls (Chart 4, black line): United Kingdom (-11%), USA (-9%), Argentina, Spain (both -5%), and Italy (-3%). Meanwhile, Japan (109%), Brazil (70%) and Germany (58%) stood out for their soaring case numbers. At the same time, vaccination doses hit the symbolic 10 billion mark.
