Kovid, rising inflation threatens second winter for the world

Kovid, rising inflation threatens second winter for the world

The world economy is reeling in the northern hemisphere’s winter, unable to address the coronavirus crisis amid supply disruptions, rising prices and a resurgence of outbreaks.

This week's global survey of purchasing managers may point to that.  The results anticipated by economists include slowing manufacturing and services activity across the euro area and the UK, and only marginal improvement in the US.


 With parts of Europe facing new restrictions to prevent another wave of the virus, China's rebound fading and infections rising in the US, much of the global economy now faces the threat of a second northern winter crisis. This is complicated by a cost-of-living amidst rising gas prices and supply constraints.

Europe is on the fast end of the advanced-world spike.  Record infections in Germany could prompt authorities to announce new lockdowns, and Austria has already done the same.  The continent as a whole is suffering a painful peak in consumer prices.

Meanwhile, in the US, former Treasury Secretary Lawrence Summers said he sees no more than 15% chance that "all of this is going to work out well," too much to account for either extremely high inflation or a slowdown in growth. chances are.

The extent to which such results would apply will inform monetary policy deliberations on the pace of stimulus withdrawal in the Group of Seven, culminating in a grand finale of decisions in mid-December.  That's when central banks, including the US Federal Reserve, hold their last meetings of the year.

"Much of Europe is back again in the face of a fourth wave of COVID-19, and data from next week's survey should provide some early indications about the economic impact of rising infection rates."

Elsewhere this week, monetary officials in New Zealand and South Korea may raise interest rates, and minutes of the most recent meetings of the Fed and the European Central Bank will be released. <span style="display: block;margin-bottom:13px;margin-top:13px;"/> <span style="display: block;margin-bottom:13px;margin-top:13px;"/> 




A pre-holiday feast of economic data and a possible announcement on the choice of President Joe Biden to lead the Federal Reserve will be laid out for investors in the coming week.

The government's report on personal income and spending, which includes inflation measurements tracked by the Fed, will be the main course on a data-heavy Wednesday before the market closes the day after Thanksgiving.

Other releases on Wednesday include a final read on durable goods orders, revised third-quarter economic growth, new-home sales, merchandise trade and consumer sentiment. 

Current home purchase data and surveys on construction and services for November will be revealed earlier this week.

Also on Wednesday, the Fed will release minutes of its early November policy meeting in which the US central bank announced it would begin reducing asset purchases.

Meanwhile, the White House says Biden will announce whether he will re-nominate Jerome Powell for a second term as chairman of the central bank, or opt for Fed Governor Lyle Brainard instead.


Both the Reserve Bank of New Zealand and the Bank of Korea are expected to raise interest rates for the second time since the pandemic as they lead the pack in Asia and take action to step back from full-throttle stimulus and get ahead of the curve in stemming . No inflation risk.



Preliminary South Korean trade data should support the case for an uptrend, even as they show signs of stabilizing from year-on-year gains.

Reserve Bank of Australia officials will be speaking on the panel and may shed some light on how strongly the central bank will stick with its back-of-the-rate-hike-pack stance.

Tokyo inflation data at the end of the week will show whether Japan is seeing more signs of a price hike as energy costs rise. China sets its loan prime rate on Monday and Sri Lanka sets rates on Thursday.

Europe, Middle East, Africa

With more than two weeks to go before ECB officials enter a period of calm before their all-important decisions on the future of the stimulus, comments from many of them could get investors excited. President Christine Lagarde will be among the policymakers to speak.

The ECB will also release an account of its last meeting in October, when Lagarde and his colleagues struggled to convince financial markets that the bets on raising interest rates in 2022 to tame inflation were probably wrong.

In addition to monthly Purchasing Managers survey results taking place across the continent, Germany’s Ifo index on Wednesday will provide another snapshot of Europe’s largest economy – as it continues amid ongoing supply disruptions, new infections and a political system in flux. Coalition reels from talks. ,



The Bank of England’s decision in December is full of suspense about whether policymakers will raise interest rates. So public commentary by Governor Andrew Bailey and some aides could draw attention in the coming week.

Sweden’s central bank will make its final monetary decision of the year on Thursday. With the Riksbank expected to keep its interest rate unchanged at zero for some time, it is likely to remain focused on whether it will signal an increase by the end of 2024.

Going forward, Israel is expected to cap borrowing costs on Monday due to strong growth and slowing inflation, driven in large part by the shekel.

In Russia, weekly inflation will be closely watched for any clues on Wednesday whether price pressures are beginning to ease, as many economists have forecast.

Policymakers in Ghana are expected to halt interest rates on Monday, after inflation hit a 15-month high in October. Nigeria’s central bank is also expected to take a pat on Tuesday, after moderating inflation and slowing economic growth in the third quarter.

Latin America

Argentina’s budget balance data due on Monday should underscore the challenge of getting its debt back on a path of stability. The number of falling cases in Mexico has seen a jump in same-store sales, a possible harbinger of strong September retail sales readings on Tuesday.



Economic activity in Argentina has been surprisingly reversing to analysts since mid-year, and has returned to its pre-pandemic levels. Analysts see additional growth in the September figures.

Watch Brazil’s mid-month consumer price data on Thursday to push up from mid-October’s 10.34% print. Yet after continued growth since May 2020, some slowdown has been observed ahead: economists surveyed by the central bank saw inflation at 9.77% at the end of the year, while the central bank pegged it at 9.5%.



In Mexico, final third-quarter output data is expected, with all signs still pointing to a solid 2021 rebound. Economists see inflation picking up sharply in the middle of the month, which is in line with the view by Jonathan Heath, deputy governor of Bangkok, that it could reach 7.3% by the end of the year.



Finally, Banxico posted the minutes of its November 11 meeting, where it raised the key rate by a quarter point to 5% for the fourth time in a row.



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