Macroeconomic Comment: Global Economy in Conflict between High Growth and Overheating/Inflation

06/10/2021 – The OECD has once again raised its expectations for global growth this and the next year, now forecasting 5.8% this year and 4.4% next year. The International Monetary Fund even expects 6% for this year. This is considerably more than the 3.5% slump in the first year of the pandemic. Leading indicators increased again in May, raising concerns about overheating and inflation, especially in the US, where stimulus measures have been and continue to be particularly distictive. The Federal Reserve Bank justifies its extremely expansionary monetary policy despite the strong upswing referring to the danger of still high unemployment. However, several economists attribute the delayed recovery in the US labor market to overly generous payments to laid-off workers who are in no hurry to return to the labor market. In addition, many companies used the crisis to further streamline their processes and become more digital. Large companies are currently offering incentives, including higher wages, to fill vacancies that are at record levels. The 4.2% annualised inflation spike reported in April was surprising, and a further increase near 5% is expected.

Read more in this mon th’s Macroeconomic Comment by Peter von Elten.

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