GlobalThe evolution of consensus forecasts can often yield useful insights about the plight of the world economy. And the latest Blue Chip survey of economic forecasters, published earlier this week, is no exception. The latest January survey, for example, suggest that global growth prospects remain hostage to the COVID pandemic. But inflation concerns are also mounting in some countries and taking a toll on their growth outlook at the same time. Those inflation concerns are now mapping more into the interest rate outlook as well in some of those countries following recent hawkish communications from, for example, the US Fed and the Bank of England. The absence of any material inflationary pressures in Japan and China has been noteworthy, however, as has the relatively dovish response to recent events in Europe from the ECB. And the implications of all this for expected interest rate differentials between the US and most other major economies has had some predictable implications for consensus forecasts for the US dollar as well.
In what follows we briefly discuss some of these considerations with reference to a few exhibits.
Growth forecasts pared back in the US and Europe, lifted in China and Japan
We'll start with the outlook for economic growth. Consensus forecasts for GDP growth in most major economies for 2022 have been pared back in recent months (see figure 1 below). COVID considerations, inflation concerns and the policy response to both of these have been arguably to blame.
Figure 1: The evolution of consensus forecasts for GDP growth for 2022