Refresh this chart in your browser | Edit the chart in Datastream The COVID-induced rigidities in the US labour market are easing, but the labour market remains extremely tight, implying potential upwards pressure on inflation from wages. The Beveridge curve shows the relationship between job vacancies and unemployment. When jobs are plentiful (i.e. when vacancies are high) unemployment tends to be low (i.e. workers are scarce), and labour markets are said to be tight. In this world, wage inflation tends to be higher. When vacancies are low, unemployment tends to be high, and the labour market is said to be operating with

The wedge between emerging market and US GDP growth is forecast to be its narrowest since 1999 this year, as the US enjoys a strong vaccine- and stimulus-led recovery (until earlier this month, the IMF had been forecasting that US GDP growth would outstrip that of emerging markets this year). The economic theory of convergence would suggest that GDP per capita will tend to grow faster in poorer countries than richer ones, but this has often not been borne out by the data. Perhaps aided by the rise of China, emerging economies did start to grow strongly from the turn

Among many other things, the pandemic has taught us that there is a category of work, including more or less all office-based work, that can be carried out remotely. Changes in the way we work are likely to affect the absolute level of house prices across the UK, with the demand for residential space rising and that for commercial space falling. But the impact on prices at the regional and sub-regional level may be much greater still. Indeed, alongside the cuts in stamp duty, it is likely that a significant driver of the pickup in house prices at the national

The global economic recovery is complete and world GDP is expected to converge on the pre-pandemic trend within a few months. How long the cyclical momentum lasts depends on how rapidly firms and households spend the excess savings built up during the recession, and how long the rise in inflation lasts. The speed of this recovery contrasts to that of the Global Financial Crisis (GFC); GDP has still not yet recovered to the pre-GFC trend and probably never will. Refresh this chart in your browser | Edit the chart in Datastream   The longer-term trend in growth is likely to be subdued,

Last year’s collapse in global economic activity differed in pace and scale from any previous recession. Equally the recovery, now well established in most economies, will be unlike anything we have seen before. The global V-shaped recovery is complete, with global GDP above the pre-pandemic level in 2021 Q1. This has predominantly been driven by China, though the US is within a whisker of its 2019 Q4 level. Where we go from here will partly depend on how rapidly households in the major economies spend their excess savings pots, which are estimated to be worth 8%-9% of GDP in the

Refresh this chart in your browser | Edit the chart in Datastream   The US economy has nearly recovered to pre-crisis levels of GDP as the easing of COVID-19 restrictions has led to a pickup in the consumption of goods. During the pandemic, higher incomes and lower spending caused households to build up excess savings worth close to 10% of US GDP by the end of 2021 Q1. In Fathom’s view, around 25% of these forced savings will be spent within the next twelve months. If this happens then we are likely to see a boom in the service sector and ultimately

As we enter the second half of the year, here is a stocktake on the state of the virus and the path of the global recovery. The worst of the spike in COVID-19 cases in Asia appears to be over. The new and more transmissible delta variant of the virus which was first reported in India had spread rapidly. Case numbers in Asia have since fallen, which, given low vaccination rates, is likely to be due to non-pharmaceutical interventions such as lockdowns and voluntary social distancing, offering the virus fewer susceptible hosts. However, the variant is now spreading more widely

Inflation has historically been a politically sensitive issue, with rising food costs especially unpopular with voters. Global food price indices have surged since the middle of last year and have already surpassed pre-pandemic levels. There is currently little sign of any respite. Since food makes up a substantial proportion of the overall CPI basket, the pass-through from higher food prices to headline inflation numbers can be substantial, especially in emerging economies. To the extent that higher prices erode the short-run purchasing power of households, it is unsurprising to find a relationship between the real price of food and political instability.

While the economic backdrop has improved markedly in recent months and quarters, the threat from COVID-19 has not gone away. The wave of new cases brought about by the Delta variant in India and neighbouring countries may be past its peak there, but the variant has now spread well beyond India, with the WHO tracking cases reported by 62 countries. Estimates suggest that the variant is 40% more transmissible than the Alpha variant (first identified in the UK) which itself is thought to be 40–70% more transmissible than the original strain of Sars-CoV-2 — although there are large confidence margins

Recovery has been slower to arrive in the European Union than in other advanced Western economies. The EU was three months later than the UK and US to place its first order for vaccines, and nearly a month late to approve a vaccine for use, leading to a late and slow roll out of its vaccination programme. Economic outcomes have followed suit, with EU GDP in 2021 Q1 well below its pre-COVID level, while the US economy had recovered nearly all its lost ground. But there are signs of improvement across the continent. Again, this is most obviously seen in

The global economy is set to grow strongly in 2021 amid a rebound in developed markets (DMs) led by the US. This should provide a helpful boost to exports from emerging markets (EMs). The IMF forecasts real GDP growth of 6.7% for EMs in 2021 and 5% in 2022, after a contraction of -2.2% in 2020. There are, however, six major risks which could affect EMs to varying degrees over coming quarters. In this research note we will use our Fathom Financial Vulnerability Indicator (FVI), which gauges the likelihood of sovereign, banking or currency crises in 176 countries, to help

Most large-scale macroeconomic models in use by major central banks use a so-called New Keynesian Phillips Curve (NKPC). It relates current inflation to expected future inflation and the cost pressures faced by firms, which in turn is related to the current level of output relative to potential — in other words, the degree of economic slack. So how useful is the concept of economic slack in explaining inflation in practice? Data support the idea of a relationship between the two, but nevertheless there are two difficulties: first, the nature of that relationship varies from year to year; and second, measurement