Economic prospects have continued to diverge further across countries; vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising death tolls. In its latest Global Economic Outlook, the IMF has downgraded growth prospects for emerging market and developing economies while forecast for advanced economies is revised up[i]. Meanwhile, stock markets across the world continue to sustain the strong momentum started in mid-Q1[ii].
Chart of the month: The IMF expects the U.K. to match the U.S. in posting the fastest growth among G7 economies this year
Source: International Monetary Fund July forecasts, Blend Network[iii]
Politics & Economics
- In its latest Global Economic Outlook published in late-July, the IMF said that the global economy is projected to grow by 6% in 2021 and by 4.9% in 2022. Prospects for emerging market and developing economies have been lowered for 2021, especially for Emerging Asia. By contrast, the forecast for advanced economies is revised up[iv].
- The IMF expects the UK to match the US with the fastest economic growth rates among G7 this year, with both forecast to post 7% expansions. Inflation, meanwhile, has exceeded the Bank of England’s 2% target for two consecutive months and there are mounting worries that if consumer price growth starts to exceed 4% year-on-year, price pressures will start to look less transitory and become much more of a concern[v].
- America’s other tech stars also reported stellar earnings. Apple’s quarterly net income of $21.7 billion was driven by iPhone sales; it is on track for a record profit for its fiscal year. Alphabet reported its best-ever quarter for revenue and profit, of $18.5 billion. And Microsoft had another bumper three months as the pandemic boon to its cloud-computing and Team feature businesses helped generate a profit of $16.5 billion[vii].
- According to the Nationwide House Price Index[viii], annual house price growth remained in double digits but fell back to 10.5% in July, down from the 17-year high of 13.4% recorded the previous month. In month-on-month terms, house prices fell by 0.5%, after taking account of seasonal effects, following a 0.7% rise in June[ix].
- Global stock markets have continued the strong momentum started in mid-Q1[x]. Some of the world’s major indices such as the S&P500, EuroStoxx50 and Germany’s DAX ended July in positive territory for the sixth straight month, while London’s FTSE100 was pretty much flat (-0.07%). The Dow Jones Industrial Average and Nasdaq Composite both were up by more than 14% each on the year to the end of July.
FX & Commodities
- Oil producing nations agreed to increase output to reduce prices and ease pressure on the world economy. OPEC countries and partners such as Russia said they will boost supply from August after prices climbed to two-and-half-year highs during Covid-19. By early-August, the Brent crude oil price was up 43% this year to almost $74 a barrel[xi].
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[i] Source: https://www.imf.org/en/Publications/WEO/Issues/2021/07/27/world-economic-outlook-update-july-2021
[ii] Source: https://uk.investing.com/
[iii] Source: https://www.bloomberg.com/opinion/articles/2021-08-02/u-k-covid-recovery-bank-of-england-should-mind-its-policy-gap-with-the-fed
[iv] Source: https://www.imf.org/en/Publications/WEO
[v] Source: https://www.bloomberg.com/opinion/articles/2021-08-02/u-k-covid-recovery-bank-of-england-should-mind-its-policy-gap-with-the-fed
[vi] Source: https://www.economist.com/the-world-this-week/2021/07/31/business-this-week
[vii] Source: https://www.economist.com/the-world-this-week/2021/07/31/business-this-week
[viii] Source: https://www.nationwide.co.uk/about/house-price-index/headlines#tab:Headlines
[ix] Source: https://www.propertynotify.co.uk/news/nationwide-house-price-index-annual-house-price-growth-cools-in-july-but-remains-in-double-digits/
[x] Source: https://uk.investing.com/
[xi] Source: https://www.bbc.co.uk/news/business-57882449