Global | Coronavirus Watch: Delta risks versus inflation risks

We estimate world GDP surpassed pre-pandemic levels in Q2. But in recent weeks surging cases of the Delta variant have added to concerns over the strength and breadth of the recovery.

Our leading indicators of global trade and investment still point to strong growth. Consumer confidence indicators are also holding up well in the advanced economies, and consumer spending in these markets should continue to benefit from strong tailwinds in the months ahead.

But the impact of rising covid cases is visible in parts of Asia and the developing world, with service sector activity remaining subdued. In some Asian economies, even manufacturing indicators have turned down notably.

With widely varying levels of immunity globally, the rebound in world growth could thus be very patchy in the months ahead. Renewed restrictions in some economies will bite, while the full re-opening of sectors like travel and tourism remains some way off.

The rise of Delta has diverted attention away from global inflation risks. But while concerns have edged down in recent weeks, the risks have not retreated entirely. Headline and core inflation in the advanced economies rose further in June, and inflation rates are high and rising in parts of the emerging world – most notably in Latin America, Africa, and the Middle East.