August 2021: Global Recovery Peaking

• In August 2021, Fitch Solutions decided to keep its 2021 global growth forecast unchanged at 5.7%. Real GDP data revealed that growth momentum remained strong in Q2 2021 in large part owing to the significant easing of restrictions in recent months, which led to a significant pickup in activity throughout the first half of the year.
• Despite the acceleration in activity over the second quarter, Fitch continues to monitor two key areas, which could pose downside risks to its global outlook. First, there has been a sharp pick up in the number of infections globally, particularly of the Delta variant, and second, high frequency data are easing already.
• Rising caseloads of the Delta variant pose a downside risk to growth, particularly for countries with low vaccination rates. Initial data suggest that despite a sharp rise in the number of cases, fatality rate remains low in regions such as North America and Europe, where vaccination rates are higher than their emerging market counterparts.
• High frequency data suggest that momentum is starting to ease. It seems that the global PMI (Purchasing Managers Index) may have peaked already, which suggests that incoming data are no longer beating expectations to the degree that they were several weeks ago. While slower growth is to be expected over the coming months as base effects wear off, Fitch notes that shortages and supply chain challenges are also factors behind the weakening of momentum.

(Source: Fitch Solutions)