Parts of the global economy are expected to surge over the
coming months and start to catch up with the U.S. and China, though the Delta
variant of Covid-19 looms as a potential headwind, according to surveys of
purchasing managers.
The U.S., which saw red-hot growth in the second quarter, is
meanwhile expected to see growth ease amid continued supply constraints, a
shortage of available workers and the spread of the new Delta variant, the IHS
Markit survey of U.S. businesses said on Friday.
Separate surveys of European businesses recorded the
strongest increase in activity for more than two decades, suggesting the
continent is set for the kind of growth already being experienced by the U.S.
Surveys in Australia, India and other parts of Asia, however, suggested the
pace of global economic recovery continues to depend on the course of the pandemic.
“The Delta variant poses a major risk to the outlook,” said
Chris Williamson, chief business economist at IHS Markit, which produced the
surveys. “Not only have rising case numbers led to a slide in business optimism
to the lowest since February, further Covid waves around the world could lead
to further global supply-chain delays.”
While economists estimate that U.S. growth peaked in the
three months through June, world growth is expected to hit its high point in
the current quarter.
For the third quarter, JPMorgan expects that economic growth
in the U.S. will ease from the breakneck pace that was likely recorded in the
second, while it expects China to slow. However, it projects the eurozone
economy to grow at an even faster pace than the U.S. will have done in the
second quarter, and with India set to rebound strongly from its second-quarter
contraction, world economic growth is set to have its strongest three-month
period this year.
In the U.S., the surveys showed that activity in the
services industry slowed for the second straight month in July. Output in the
manufacturing sector—which accounts for a smaller share of overall
activity—continued to accelerate.
The data indicate that the U.S. expansion is entering a new,
more measured, phase, economists say. Economists surveyed by The Wall Street
Journal estimate the U.S. economy grew at a seasonally adjusted annual rate of
9.1% in the second quarter, which would be the second fastest pace since 1983,
topped only by last summer’s rapid rebound from the pandemic-related shutdown.
“Some moderation of service-sector growth in particular was
always on the cards after the initial reopening of the economy,” Mr. Williamson
said.
IHS Markit said its composite Purchasing Managers Index for
the U.S.—a measure of activity in the manufacturing and services
sectors—weakened to 59.7 in July from 63.7 in June, hitting a four-month low. A
reading above 50.0 points to an increase in activity.
The global supply problems that accompanied a rapid surge in
demand earlier this year have yet to be resolved. Continued price increases for
labor, raw materials and transportation threaten to keep inflation elevated.
And the spread of the new Delta variant could damp business optimism and
consumer confidence.
Still, the surveys showed a surging economy in Europe,
recording the strongest increase in activity for more than two decades. IHS
Markit said its composite PMI for the eurozone rose to 60.6 in July from 59.5
in June, reaching its highest level in 21 years.
“The reopening of large parts of the economy is supporting a
vigorous bounceback in the services sector,” Christine Lagarde, president of
the European Central Bank, told reporters Thursday. “But the Delta variant of
the coronavirus could dampen this recovery in services, especially in tourism
and hospitality.”
The varied pace of infections and vaccination programs,
coupled with the ebb and flow of government restrictions, means that the
recovery has and will likely continue to proceed at different paces in
different parts of the world.
In Australia, for instance, businesses highlighted the
economic costs of an encounter between the Delta variant and a thinly
vaccinated population. With only 12% of the country’s population having been
inoculated to date, the rapid rise in new Covid-19 infections has prompted the
imposition of new restrictions on households and businesses.
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