The rise in Covid-19 cases in a few parts of Europe and Asia highlights the uncertain global economic recovery, even as restrictions are eased
Trade and inflation show diverging trends in the United States, Europe and Japan, indicating the uneven pace of pickup in demand
The energy index continued to rise owing to an increase in crude oil prices; metal prices are also hardening, indicating renewed global demand
The specter of the pandemic looms large over the global economy, with a resurgence in infections across Europe and Asia clouding the growth outlook. The differential in the pace of economic recovery across regions is starkly visible in economic data: while unemployment is falling and exports are rising in the United States (US), the euro area (EA) continues to see higher unemployment and declining trade. Inflation across advanced economies such as Europe and Japan remains muted. Economic activity in the United Kingdom (UK) and China is in expansionary mode, as suggested by gross domestic product (GDP) and Purchasing Managers’ Index (PMI) data, respectively.
However, improvement in recovery is expected to be only moderate, as enunciated by major central banks, including the European Central Bank (ECB) and the Bank of Japan (BoJ). Meanwhile, there seems to be a shift in the way monetary policy will be conducted in the US, with the Federal Reserve (Fed) targeting average inflation and signaling it may tolerate higher inflation. Lower interest rates are expected to continue for longer, as central banks maintain their stimulus programs to support their economies in the face of the persisting uncertainty.
