The latest edition of our quarterly Barclays Global Outlook is now available to investment bank clients on Barclays Live. We present the main themes from this quarter’s edition.
Three themes loom large as our Research analysts survey the macro landscape:
Global growth is slowing: After the V-shaped recovery, we believe global growth has passed the peak of the pandemic recovery and is likely to moderate in the coming months. The deceleration is due mainly to the fading of the one-off boost from reopening, as well as a slowing fiscal impulse in much of the world. We cut our 2021 growth forecast in China to 8.2% from 9.4%. As important, we expect the US to grow between 2.6 and 3.2% next year, depending on the size of new fiscal stimulus. The euro area continues to do better than expected, making it an outlier for now.
Bond markets still believe in the Fed’s inflation credibility: While inflation is high on investors’ list of concerns, we expect it to moderate as supply chain bottlenecks resolve, stimulus fades and vaccinations ease labor supply constraints. We believe that fears of central banks falling behind the inflation curve and losing credibility are overstated. A well-behaved bond market has been a benign backdrop to the risk rally all summer and that should continue, even as the Fed moves towards cutting asset purchases by the end of the year.
China's policy shifts are sparking alarm, but macro effects are limited: China’s recent regulatory efforts targeted at narrowing gaps in wealth have stirred markets globally. However, we see limited macro significance in these initiatives as we expect future measures to be more evolutionary in line with China’s long-stated goals. The bigger risk to China’s near-term growth comes from the government’s zero-tolerance policy on COVID.
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