• Economic momentum has eased as the initial impact of reopening late last year continues to fade, with short-term forecasts edging lower in recent months. However, the pace of growth in the major advanced economies is forecast to remain strong over the next couple of years, with consensus forecasts global growth of 5.7% in 2021 and 4.4% in 2022.
• Flash Purchasing Managers Indices suggest that the pace of growth eased over the quarter (despite overall rate of expansion remaining solid), reflecting a combination of peaking demand, supply chain disruptions, and labour shortages. Supply chain delays show no sign of easing, with delivery times and order book backlogs rising at record pace.
• Supply constraints are pushing prices higher and inflation surprises remain high (UK headline CPI inflation rose to 3.2% year-on-year in August). Rising gas and oil prices are driving up headline measures but even core inflation, which excludes those prices as well as food, is exceeding central bank targets in the major advanced economies.
• As a result, major central banks have indicated rates may rise earlier than previously thought. The Bank of England, which expects UK CPI inflation to rise above 4% year-on-year this winter, have signalled rates may rise as early as Q1 2022.

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