JAKARTA (TheInsiderStories) - Global economic growth is projected to advance 5.1 percent in 2021 and 4.3 percent in 2022 before settling to a more sustainable 3.1 percent growth pace in 2023 – 2025, IHS Markit reported today. The United States and mainland China are leading the global expansion, while Europe and Latin America are lagging behind as countries struggle to contain the COVID-19 virus.
Yet, even these regions are likely to experience growth spurts in the second half of 2021. The economist, Sara Johnson, rated as the global economic expansion gains momentum, inflation is likely to heat up, but the pace is likely to be moderate.
“While inflation is clearly a risk, a return to the double-digit inflation rates seen in the mid-1970s and early 1980s is unlikely. Global competition, supply responses, and well-anchored long-term inflation expectations will help to limit the magnitude and duration of a price acceleration,” she noted.
In the months ahead, she explained, price inflation will pick up markedly owing to comparisons with depressed prices during the 2020 lockdowns. At the same time, the exceptional commodity price increases of late 2020 and early 2021 will be passed downstream through supply chains.
Global producer prices will shift from a 1.0 percent decrease in 2020 to a 4.5 percent increase in 2021, while global consumer price inflation picks up from 2.1 percent in 2020 to 2.8 percent in 2021. Price pressures stemming from temporary supply disruptions will lessen as supply chains normalize.
As supply conditions improve over the remainder of 2021, she expect significant corrections in shipping rates and prices of lumber, iron ore, steel sheet, copper, and basic chemicals. The IHS Markit Materials Price Index, which soared 58 percent in the first quarter (1Q) of 2021 compared to last year, is projected to decrease 16 percent through the 1Q of 2022.
The semiconductor market will remain tight into 2022 with significant upside potential for prices of commodity-grade chips. Agricultural commodity prices will follow a trajectory similar to the MPI as supplies respond to strong demand and elevated prices. US farmers are expected to plant record acreage of corn and soybeans in 2021, replenishing stocks and driving prices down.
After a 26 percent increase in the 1Q of 2021, the IHS Markit Soft Commodity Price Index is projected to fall 12 percent in the next four quarters. In most industries, global capacity looks sufficient to meet projected demand in 2021 and 2022 if operating rates improve. With prices of industrial and agricultural commodities retreating from current levels, global consumer price inflation will ease to 2.4 percent in 2022.
Regional Outlook
Sparked by fiscal stimulus and confident consumers, the United States (US) economy will surpass full employment in 2022. The unemployment rate will reach a new low of 3.5 percent in mid-2023, triggering accelerations in wages and prices. Consumer price inflation will move above 2.0 percent in 2024 and reach 2.5 percent in 2026.
While inflation risks are low in China. The consumer price inflation is projected at 1.5 percent in 2021. Since the recession in early 2020, supply has rebounded faster than demand. The government has begun to unwind stimulus measures, which were comparatively small. A rebuilding of pork supplies—depleted in 2020 by African swine flu—will restrain food prices.
In Europe, gaps between potential and actual output remain, restraining inflation. Sluggish recoveries, slack labor markets, and subdued inflation expectations will keep core inflation relatively low.
“As COVID-19 vaccines reach more of the population and authorities further ease activity restrictions, consumer spending will accelerate, lifting global output to a new peak by the third quarter of 2021. Businesses will gain confidence in the expansion’s durability and move forward with new investments,” concluded by Johnson.
Written by Editorial Staff, Email: theinsiderstories@gmail.com
