The fast-spreading Delta variant of Covid-19 has slowed the
pace of the global economic recovery but won’t derail it, according to new
forecasts released by the Organization for Economic Cooperation and
In its latest quarterly report on the economic outlook
published on Tuesday, the Paris-based research body lowered its growth
forecasts for the global and U.S. economies in 2021, the first downgrade since
December of last year, when new infections were surging.
But it also raised its forecasts for next year, indicating
that some output has been delayed by, rather than lost to, the Delta surge. It
also raised its forecasts for inflation this year, but continues to expect that
the pace of price rises will ease in 2022 as vaccination programs advance in
Asia and other parts of the world.
“We still think it’s transitory,” said Laurence Boone, the
OECD’s chief economist. “The disruption of supply chains is mostly due to the
The OECD lowered its growth forecast for the U.S. economy in
2021 to 6% from the 6.9% projected in May, and trimmed its global growth
forecast to 5.7% from 5.8%. It raised its growth forecast for the eurozone, but
left its projection for China unchanged despite worries about the country’s
property market as China Evergrande Group appears on the brink of collapse. The
company’s debt burden is the biggest for any publicly traded real-estate
management or development company in the world.
“We are concerned about what’s happening on the financial
side,” Ms. Boone said.
The OECD forecasts come amid mounting signs of a cooling of
growth after the period of rapid expansion that accompanied the reopening of
parts of the services sector in a number of large, rich countries that were
first to vaccinate large shares of their populations.
The Delta variant appears to have taken some of the momentum
out of that process of reopening, while its rapid spread in Asian countries
that hadn’t been able to vaccinate their populations has prompted new
restrictions on manufacturing and logistics that have worsened shortages of
parts and finished consumer goods destined for Western markets.
“That’s been central to the problems we face,” said Stephen
Loftus, chief commercial officer at
Brompton Bicycle Ltd., a London-based maker of folding bicycles.
The company has seen a surge in demand as workers in its
home city and elsewhere seek safe alternatives to what were perceived as risky
public transport systems. It made a third more bicycles in the period from
April to August than it did over the same stretch of 2020, with sales to the
U.S. up by half over the past 12 months.
But Mr. Loftus believes it could have made and sold many
more of its bicycles if it had been able to get hold of the parts it needed,
while factory shutdowns in Vietnam designed to slow the spread of the Delta
variant hindered its ability to make and sell a range of bags that fit its
However, Mr. Loftus doesn’t believe that unsatisfied demand
has gone away, and that means Brompton will have at least another year of
rising output, likely boosted by fresh buyers as more workers return to their
workplaces in the world’s large cities.
“We’ve got a lot to pick up from the demand that hasn’t been
fulfilled,” he said. “That’s reflected in the fact that we have retailers that
have got no stock in store.”
With demand for many consumer goods still strong, and many
services industries yet to return to their pre-pandemic levels of output, the
global economic recovery is set to continue into 2022, aided by vaccination
programs. According to the OECD, the U.S. economy will grow 3.9% next year, a
faster expansion than the 3.6% increase in gross domestic product that it
forecast in May. Globally, it sees economic output rising 4.5%, slightly faster
than its previous projection.
Bottlenecks of the kind that have held Brompton back have
contributed to a recent pickup in the pace of price rises across the world, and
the OECD raised its inflation forecasts for most of the Group of 20 largest
economies. Responding to its own increase in costs, Brompton said it had raised
bicycle prices by around 5%.
But the OECD doesn’t expect to see further pickups in
inflation during 2022, and sees the pace of price rises easing in the U.S. and
the eurozone, although it does expect an acceleration in China. It expects
expanding vaccine programs in poorer countries to help ease bottlenecks. While
a rich country like Spain has vaccinated just short of 90% of its adult
population, Indonesia has inoculated roughly a third.
Even so, the OECD said central banks in rich countries
should set out their path away from policies designed to provide emergency
support to their economies. But its main concern lies with a number of large
developing economies, such as Brazil, which have seen inflation rise rapidly,
prompting their central banks to raise their interest rates quickly. With debt
levels high, rising interest payments for households and businesses could delay
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