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Although the strength of the global recovery over the first half of this year exceeded many expectations, the economic outlook continues to remain uncertain. While future growth prospects are likely to stay closely linked to the path of the virus, as we journey through the autumn there are grounds for optimism.

Over the summer months, forecasting agencies took turns to upgrade their growth projections for developed nations, as a succession of economic data proved stronger than analysts’ predictions. In its latest assessment, the International Monetary Fund (IMF) increased its combined 2021 growth forecast for advanced economies by half a percentage point, primarily due to the success of vaccine rollouts and government stimulus measures supporting recovery.

The IMF assessment did highlight a divergence in fortunes between nations due to differing levels of access to vaccines. As a result, an offsetting downgrade across emerging market and developing economies meant this year’s overall global growth forecast remained unchanged. The IMF project the global economy will grow 6% this year and 4.9% in 2022.

Ongoing concerns surrounding inflation persist, despite policymakers’ insistence that any upward trend in prices will prove transient. The current levels of spending by governments and central banks can only be a temporary phenomenon and, when withdrawn, will impact on growth.

While the outlook is expected to remain relatively uncertain, there are grounds for investor optimism. Market fundamentals remain comparatively strong, with earnings growth still being fuelled by pent-up demand as economies reopen, and companies are starting to invest again as the recovery gathers momentum.


For the euro area, the IMF predict growth of 4.6% in 2021, followed by growth of 4.3% in 2022. The European Commission forecast that the volume of output for the euro area will return to its pre-crisis level in Q4 2021. Falling numbers of new infections, due to effective containment strategies and vaccination progress, have led EU Member States to reopen their economies, to the benefit of service sectors. The percentage of European companies that beat analysts’ earnings estimates (when posting Q2 earnings) hit a five-year high during the summer.

Exceeding most analysts’ expectations, inflation in the eurozone has hit its highest level since 2011 – 3% in August. European equities were boosted by the European Central Bank (ECB) pledging to keep benchmark interest rates at historically low levels.


According to Focus Economics, the Swiss economy rebounded in Q2, benefiting from the easing of domestic and overseas restrictions, leading to a reduction in the unemployment rate and a bounce back in manufacturing and services PMIs. Early Q3 data was positive, with the manufacturing PMI increasing to a record high in July. However, global supply disruptions amid the rise of the Delta variant and an elevation in domestic infection rates due to a slow-moving vaccine rollout, have weighed more recently. The failure to renegotiate an EU trade deal also clouds the outlook. The Swiss economy is expected to experience growth of 3.6% this year, followed by 2.9% in 2022.


Recent GDP figures showed that the UK economy grew strongly in Q2, although more recent survey evidence does suggest the recovery is losing momentum. Data published by the Office for National Statistics (ONS) revealed the economy grew by 4.8% in Q2, fuelled by expansion in the retail, restaurant, and hotel sectors. Despite this growth, the economy remains 2.2% smaller than it was immediately before the pandemic struck, although analysts do expect it to return to pre-COVID levels later this year. Commenting on the figures, Chancellor Rishi Sunak said, “The economy is recovering very strongly, exceeding many people’s expectations. But I’m not complacent. The economy and our public finances have experienced a significant shock. It is going to take us time to fully recover from that.”

In the UK, on 31 August, the Lloyds Bank Business Barometer revealed business confidence has risen to its highest point in over four years, as growing optimism is fuelled by expectations of stronger growth in the coming year. The equity market has largely been resilient, as the country continues its recovery. Global supply chain disruption and staff shortages could mean a slow down as businesses come under pressure.

Price rises have seen the biggest jump since records began in 1997 as the economy continued to reopen, with the Consumer Prices Index, reaching 3.2% in the year to August. ONS urges caution in reading too much into August’s price increases, which it described as ‘temporary.’ The IMF predict growth of 7% in 2021, followed by 4.8% in 2022.


In H2 2021, US GDP growth has been supported by infrastructure investment and strengthening of the social safety net, which have had positive implications for global trading partners. The IMF are projecting growth of 7% in 2021, followed by 4.9% next year. Hopes of a reset to the strained US-China relationship have also emerged. In their first conversation for seven months, US President Joe Biden spoke to his Chinese counterpart Xi Jinping recently. The White House said the 90-minute call had been initiated by Mr Biden and that the two leaders had a ‘broad, strategic discussion.’ The pair discussed the ‘responsibility of both nations to ensure competition does not veer into conflict,’ raising hopes of a potential improvement in US-China trade relations.

During the annual Jackson Hole Economic Policy Symposium in August, Federal Reserve Chairman, Jerome Powell, discussed the possibility of starting the tapering process of reducing asset purchases before the end of the year. Powell reassured investors of gradual changes in policy, which helped boost global equity markets and strengthen investor confidence.

The fact that July’s labour market data beat forecasts is a good indication of continuing economic recovery. There are tentative signs that inflation has peaked, as supply-chain disruptions work through the system.

Asia and Emerging Market Equities

The IMF are projecting growth of 7.5% in 2021, followed by 6.4% next year in the emerging and developing Asia region. Growth of 8.1% this year and 5.7% next is anticipated for China, revised down from previous estimates. Chinese equity markets have been flat after the country imposed restrictions to tackle rapidly rising virus cases. China’s manufacturing sector recently shrunk for the first time since April 2020.

Japan is anticipated to see a rebound in H2 2021, as vaccination rates progress and the economy fully reopens.


Gold is currently trading at around $1,766 a troy ounce. A weaker dollar has supported gold prices. At least 2 million barrels a day of oil refining capacity have been affected by the passage of Hurricane Ida. With oil refineries still assessing the impact on operations, Brent Crude is currently trading at around $75 per barrel.

Looking ahead

There is no question that the world is in a period of immense change, with issues relating to the pandemic, as well as sustainability, fundamentally altering the investment landscape. Some things however do not change, like the importance of holding a diversified investment portfolio and the need for expert financial advice. Please do not hesitate to get in contact with any questions or concerns you may have.

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