World Economic Prospects Monthly

Overview: Supply‐chain bottlenecks stunt industry▀ We have downgraded our global economic forecasts for H2 2021 and Q1 2022 because of Delta‐related disruption and the mounting evidence that supply‐chain bottlenecks are likely to constrain activity for several more months. As a result, our world GDP growth forecast for this year has been lowered to 5.8% from 5.9% last month and 2022 is nudged down to 4.7% from 4.8%. ▀ The global composite PMI fell in August, confirming that peak growth has already passed. The sharp drop in the services sub‐index as well as in consumer sentiment in the advanced economies probably reflects the latest Delta‐driven Covid wave and the realisation that the pandemic is not yet over. ▀ Although we have become more cautious about the Q3 consumer outlook, particularly in the US, we continue to expect the Delta wave to delay rather than undermine the recovery. This primarily reflects the fact that higher immunity levels now lessen the risk of major lockdowns. ▀ We have also lowered our assessment of the growth outlook for the industrial sector. Despite buoyant industrial surveys and booming order books, global industrial production has broadly flatlined in H1 due to well‐flagged supply chain and transportation issues. ▀ With firms continuing to report lower‐than‐desired inventories and growing problems in sourcing inputs, any upturn in industrial activity in H2 is likely to be modest. Parts of Asia may benefit from a Q4 upturn if restrictions to combat the spread of Covid are loosened, but we expect a less front‐loaded and a more gradual increase in industrial activity from here.