The global economy has performed well over recent months, although some darker clouds are already gathering on the horizon due to many different reasons.
The continuing spread of the Delta variant of the coronavirus has dashed all hopes of a rapid end to the pandemic and removal of restrictions worldwide. Vaccination rates for the global population are also still a long way short of the level that might allow a relaxation of some restrictions. Central banks across the globe are still preoccupied with using all means at their disposal to shore up the economy.
Until a few weeks ago, the heads of the major central banks in the US and Europe unanimously spoke of merely “temporary” inflation. Unfortunately, it looks increasingly likely that the majority of the price increases will remain even after the pandemic and that higher inflation rates will be part of our everyday life for an extended period. Energy prices, and especially the price of gas, which is extremely important for Europe, have skyrocketed not only due to supply bottlenecks, but also to the move away from nuclear and coal for electricity production as part of the global trend towards renewables. Everything is becoming more expensive. Meanwhile the engineering and consumer electronic industries are facing major problems in the supply of semiconductors. The automotive branch in particular has already had to run down production massively in many locations. Taiwan produces around 55 % of the world’s chips, which explains the country’s importance for China and means a likely escalation of tensions between China and the US.