After expanding strongly in Q2, global GDP growth slowed in Q3 in response to the Delta disruption and ongoing supply chain problems.
But a renewed pickup in global growth seems likely in Q4. The decline in global Covid cases since late August is good news – the fallback in infections has coincided with a rebound in the services PMI. Fewer restrictions and waning concerns over the Delta variant may result in a normalisation of spending patterns and a reduction in household savings rates.
In addition, Q3’s slowdown was not helped by stagnation in the industrial sector, due in part to supply bottlenecks. But tentative signs that the supply chain crisis may be easing have begun to emerge. Semiconductor sales have picked up over recent months, and automakers are expecting an end-year production upturn. A rapid manufacturing rebound is probably too much to ask for, but from Q4 the industrial sector may start to support the wider economic recovery again.
While the rebound in global GDP growth will be more subdued than those that followed previous Covid-related soft patches, we don’t think last quarter’s weakness marks the start of a worsening of the global economy’s fortunes. Indeed, we continue to expect solid growth in 2022.