Alliance Bernstein: Global Macro Outlook Q2 2021
KEY FORECAST TRENDS
- The near-term outlook for global growth is likely to be determined by two key factors: the pace of COVID-19 vaccination programs and fiscal stimulus.
- The US is at a significant advantage over other advanced economies in these areas, and we expect economic growth there to reach 6.5% in 2021 and 4.6% next year. This would push the level of output above the pre-pandemic trend.
- With rising COVID-19 cases likely to delay the reopening of economies in Europe, we’re more cautious on the euro area’s prospects. Output there is not expected to reach pre-pandemic levels until well into 2022.
- In China, output is already above the pre-pandemic trend. With economic and social stability paramount, China is likely to exert a stabilizing influence on global growth.
- We think the global economy is on the cusp of a new, more inflationary, regime. The first signs of this may become evident as base effects and higher commodity prices push headline inflation temporarily higher.
- This is a more challenging backdrop for central banks. The US Federal Reserve (Fed) has been surprisingly relaxed about rising bond yields but may be approaching the limits of its tolerance—especially if the equity market comes under pressure.
- Other advanced-economy central banks are in a different place and will continue to push back strongly against rising bond yields. The return of US exceptionalism should continue to support the dollar against the euro and the yen.
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