Double shock | Covid and war jeopardising global economic recovery 4/07/2022
The latest figures show trade activity continuing its upward path. In the first quarter 2022, global exports increased by 3.5 percent year on year. Exports from the advanced economies increased by 2.1 percent in the first quarter, clearly outperformed by exports from emerging countries which increased by 6.2 percent. For 2022 overall, global trade is expected to increase by five percent.
United States: Weak start to the current year Economic development After taking a hard beating from the Covid crisis in 2020 and contracting by 3.4 percent, the economy of the United States registered a solid performance in 2021. Overall growth for the year was 5.7 percent, the strongest growth seen since 1984. The main drivers were strong private consumption and private investment as well as expanding residential construction with the lifting of Covid restrictions and the general easing up of the pandemic. In the current year, growth is being hampered by the Fed’s interest rate turnaround, the tight labour market, China’s zero-Covid strategy, and the war in Ukraine. Although the war in Ukraine does not have as strong an economic impact on North America as it does on Europe, the United States can also expect to feel negative effects in the shape of lower growth among key trade partners and higher commodity prices. According to the second estimate of the Bureau of Economic Analysis BEA, U.S. GDP contracted by 1.5 percent in the first quarter of 2022 (seasonally adjusted at an annualised rate). The reasons for the drop are a reduction in private inventory investment, exports, and government spending combined with an increase in imports. Personal consumption expenditures and fixed investment, on the other hand, increased (BEA 2022a). For 2022 and 2023, the OECD now expects growth of 2.5 percent and 1.2 percent respectively (OECD 2022). In April, the International Monetary Fund (IMF) forecast 3.7 percent growth for 2022, 2.3 percent in 2023, and a much lower 1.4 percent in 2024 (IMF 2022). The European Commission expects growth of 2.9 percent for this year and 2.3 percent for next year (European Commission 2022). We forecast overall growth in 2022 of three percent in real terms. The unemployment rate in the United States was at 3.6 percent in May, which is almost the prepandemic level of 3.5 percent (BLS 2022a). At the same time, many Americans who withdrew from the labour market in the wake of the Covid crisis are not yet actively looking for work again. The labour force participation rate, which is the proportion of the working population that are either in work or actively looking for work, was at 62.3 percent in May and is therefore still below the pre-Covid level of 63.4 percent registered in February 2020 (BLS 2022b). The persistent labour shortage is putting upward pressure on wages and additionally increasing the risk of inflation. Total employment in the United States is expected to increase from 153.5 million in 2020 to 165.4 million in 2030, according to figures from the Bureau of Labor Statistics (BLS 2021). Unemployment is therefore likely to remain at a low level or even slightly fall further. The European Commission, for example, is expecting unemployment in the United States to come in at around 3.5 percent in 2023 (European Commission 2022). Prices are rising steadily in the United States. In May, the Consumer Price Index (All Urban Consumers, CPI-U) was up 8.6 percent compared to the same month last year (before seasonal adjustment), according to figures from the Bureau of Labor Statistics. The price hikes in gasoline (April: up 48.7 percent compared to April 2021) and fuel oil (up 106.7 percent compared to April 2021) were particularly pronounced (BLS 2022c).
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