Macro trends

In the third quarter of 2021, the global economy has continued to recover from the crisis caused by the COVID-19 pandemic, mainly thanks to progress in vaccine rollout against COVID-19 and the significant economic stimuli adopted by public authorities. Activity indicators show, however, that the economic recovery process has lost momentum in recent months, especially in countries such as the United States and China.

Furthermore, upward pressure on prices has recently increased more than expected. Consumer inflation remains at unusually high levels, well above average levels in 2010 and 2019. In September, annual inflation stood at 5.4% in the United States and 3.4% in the Eurozone.

Both the recent slowdown in growth and inflation rise in recent months are partly due to a series of problems in global supply chains, caused, among other factors, by the relative strength of demand versus supply, after the rapid reopening of the economy which was possible thanks to the drop of COVID-19 infections. Meanwhile, commodity prices have risen sharply in recent months, especially energy prices, reinforcing upward pressures on prices and downward pressures on economic activity.

In this context, the United States Federal Reserve is preparing to start the process of withdrawing monetary stimuli. Specifically, the rollback in its bond-buying program is probably to begin in the last quarter of 2021 and, in terms of monetary policy, it is likely that interest rates will be gradually adjusted upward starting the end of 2022. In any case, the approach of economic policy in the major regions is expected to settle in the coming quarters.

According to BBVA Research estimates, the recovery process of the global economy is expected to continue in the coming months, although at a slightly slower pace than expected three months ago and global GDP will expand around 6.1% in 2021. Also according to BBVA Research forecasts, growth will reach 5.9% in 2021 in the United States, 8% in China and 5.2% in the Eurozone. Furthermore, inflationary pressures are expected to remain relatively high, though they will most likely moderate next year as problems in global supply chains remedied.