Global Economic Rebound Stalls Amid Supply Bottlenecks, Inflation

The global economic recovery from the coronavirus recession is facing significant headwinds as supply bottlenecks, surging energy prices, and inflation threaten to derail the momentum gained in the early stages of the rebound. According to the latest Brookings-FT Tracking Index, global growth is slowing in key economies such as China and the US, with policymakers now facing the difficult task of supporting growth while keeping inflation under control.

Key Takeaways:

• The Brookings-FT Tracking Index for the Global Economic Recovery (Tiger) shows a snapback in growth since March across advanced and emerging economies, but recent supply shortages, energy price increases, and inflation have created problems for the global economy.
• The global economic rebound is experiencing its first major setback since the early stages of the pandemic, with supply bottlenecks and inflation becoming increasingly evident.
• The US economy is facing a softening outlook for growth, with lower business and consumer confidence, and the Federal Reserve hinting at a more aggressive stance towards monetary support amid continued high inflation.
• In China, the government is grappling with sporadic outbreaks of the Delta coronavirus variant as it attempts to rebalance its economy away from investment and towards consumption amid an energy shortage, undermining growth momentum.
• The eurozone and the UK have also seen their growth momentum slow sharply, with strong growth over the summer appearing to be a brief respite from the challenges posed by the pandemic.
• Policymakers in many major economies face the difficult conundrum of supporting growth while keeping inflation under control, even as they continue to be hit by domestic and external supply disruptions.

Statistics:

• Global growth showed historic momentum early this year but is now slowing in China and the US.
• The Brookings-FT Tracking Index has shown a snapback in growth since March across advanced and emerging economies, but recent supply shortages, energy price increases, and inflation have created problems for the global economy.
• The rate of inflation in the US has increased to 5.4% year-over-year, with energy prices and supply shortages contributing to the rise in prices.
• The US economy added 248,000 jobs in September, but the jobs recovery stalled for the second consecutive month.
• The eurozone economy has slowed sharply, with a 0.5% contraction in the third quarter of 2021, compared to a 2.1% contraction in the same period last year.

Sources:

• Brookings-FT Tracking Index for the Global Economic Recovery (Tiger)
• Financial Times
• Qilai Shen/Bloomberg
• World Bank and IMF