The “hot” global economy is finding its pace

Export Development Canada predicts another strong year of global economic growth in 2022.

It expects a 5.5 percent increase in world gross domestic product, slightly below six percent in 2021.

This is despite the Omicron-related resurgence of the COVID-19 pandemic.

“The trajectory of the global economy seems to have been decoupled from the trajectory of the virus,” Stuart Bergman, EDC’s chief economist, said in a recent webinar.

Policymakers are shifting their focus to managing hospitalization and mortality rates compared to managing infection rates, and this allows companies to function better.

“The world economy is hot. That’s not changing. There’s no denying that if you look at the data,” he said.

Agriculture is one of the sectors that leads the load.

“As wealth increases, the first thing consumers spend their money on is food,” Bergman said.

They want more protein and better quality food and Canada can deliver on both fronts, he said.

Consumers around the world have adapted and changed what they consume and how they consume it, moving to online shopping.

Retail sales in the United States are up 23% from pre-pandemic levels. Canadian sales have risen 10 per cent more modestly.

This momentum is expected to continue due to the accumulated demand that already existed before the pandemic.

“Once we got into lockdowns, there were suddenly a lot less things to spend your money on,” Bergman said.

This has led to an excess of cash available in Canada amounting to 13 per cent of gross domestic product. In the US and the European Union, it is closer to 17 percent.

“This is a huge wall of cash,” he said.

It is expected to drive the continued growth of the world economy in 2022 and beyond despite the continuing pandemic.

World trade has retreated, with exports now 2% above pre-pandemic levels in advanced economies and a staggering 23% in emerging economies.

Add to that high government stimulus spending, easy liquidity, and substantial business investment, and it looks like the global economy is back to normal.

But there are still lingering concerns. Supply chain shortages and shipping issues are at the top of the list.

EDC believes that there is capacity to meet the shipping needs of the world. It’s just a matter of getting the goods to where they need to be.

Emerging economies have shipped massive amounts of consumer goods to advanced economies, but the flow of ships and containers back to these emerging economies has been blurry, creating a global imbalance.

This is expected to be resolved by mid-2022.

The other big warning of the forecast is inflation. Canada’s inflation rate was 4.7 per cent in November.

EDC believes this is a temporary increase related to additional system costs caused by supply chain problems.

Logistics problems, manufacturing headaches, and rising labor costs will cost U.S. retailers about $ 200 billion this holiday season.

The fear is that higher costs like this will become more permanent if wages get out of control. Workers and unions are demanding wage increases to help pay for rising consumer goods costs. And they have the advantage because of the shortage of skilled labor.

“The balance of power seems to have shifted, at least for now, to the employee,” Bergman said.

Germany’s largest union is looking for a 5.3% pay rise for its members. John Deere workers in the U.S. have recently ended a month-long strike after getting a 10% increase.

Higher wages allow workers to afford to pay higher prices for goods, which leads to the continuation of the inflationary cycle.

However, central banks around the world are telegraphing that there are rising interest rates on the horizon, which should help control inflation.

Other risks to the EDC forecast include additional variants of COVID, reduced government stimulus programs, and geopolitics, such as growing tensions between Russia and Ukraine.

from
https://vegetablesnow.com/the-hot-global-economy-is-finding-its-pace/