August 2021 Survey – Monthly Inflation Forecasts
Our monthly inflation (CPI) charts show recent actual outturns (blue) since January 2021 and consensus estimates (red) from this month’s survey up to July 2022. Rising inflation pressures – heightened by weak base-year effects – have increased speculation over the timing of monetary tightening from ultra-loose policy positions adopted by central banks to nurse economies through the worst of the pandemic.
Despite a 5.4% (y-o-y) US inflation surge in July, matching June’s 13-year high, the Federal Reserve believes that this is due to transitory effects, driven by base-year effects, pent-up demand and supply chain stresses. Still, some commentators believe that interest rate hikes could be brought forward elsewhere in the world (to limit possible FX volatility). Understandably, policymakers are wary of acting prematurely given that GDP recoveries remain in their infancy and exposed to virus-related disruption.
Taken from Consensus Forecasts – G7 and Western Europe, August 2021.
January 2021 Survey – Assessing 2021 GDP Growth and Inflation Expectations
Amid the unprecedented disruption fuelled by the global coronavirus pandemic, forecasts for 2021 Real GDP Growth have fluctuated sharply this month, and the standard deviations remain unusually high as experts attempt to gauge how quickly economic growth might recover toward pre-crisis levels. In any event (and as the table below shows), only the United States is expected to achieve an overall net gain in GDP over 2020 and 2021, supported by new stimulus from the Biden-led government. Other selected economies will struggle in the wake of fresh lockdowns in early 2021, as the second wave stretches health services to their limits. As well as enduring the steepest plunge in growth in 2020, optimism in the UK outlook has dropped markedly since October, even after a Brexit deal was struck with the EU at the eleventh hour.
The GDP consensus dropped a full percentage point this month to +4.3%, while downgrades among European countries (Germany and France shown here) have also been noticeable, as doubts creep in over the huge logistical challenge of vaccinating large populations rapidly, and the prospect of further anguish in services and tourism if social and travel restrictions are prolonged. High frequency data has, at least, signalled that manufacturing has been gradually gaining resilience. In Japan, lower inflation expectations reflect renewed price weakness due to the slump in demand. Despite years of policy stimulus to restore price stability, policymakers are discouraged by the GDP outlook.
Taken from Consensus Forecasts – G7 and Western Europe, January 2021.
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