Rocky Mountain Economic Summit Inflation, Europe, EM
Megan Greene Senior Fellow, Harvard Kennedy School Senior Advisor, OECD Columnist, Financial Times Twitter: @economistmeg July 2021
Inflation debate reflects massive philosophical schism in economics US Stimulus (legislated) vs Output Gap:
Source: CBO, Larry Summers.
Small firms complaining they can’t find workers…again Small businesses’ biggest challenges:
Source: NFIB.
Firms planning to raise prices, not wages Little sign of a wage spiral:
Source: NFIB, TS Lombard.
Consumer wage expectations still low Consumer expectations for income:
Source: Conference Board, TS Lombard.
Inflation expectations still well-anchored Inflation expectations muted in medium-term
Source: Bloomberg.
Some drivers of inflation abating Inflation drivers:
Source: Bloomberg.
European surveys outperform Surveys outperform:
Source: IHS Markit, ifo, INSEE, INSTAT, European Commission, Morgan Stanley Research.
EU catching up on vaccinations Covid-19 vaccines, % of population vaccinated per day (7-day moving avg):
Source: The Economist.
Potential impact of Delta variant on tourism in SEurope GDP Impact From New Delta Variant Restrictions in 3Q (%)
Source: Morgan Stanley Research.
Also vulnerable: - France (vaccine hesitancy) - Eastern Europe
Fiscal help is coming, but probably won’t help much Absorption of EU funds: 100 90 80 70 60 50 40
2007-2013 MFF (ERDF+CF+ESF)
30
2014-2020 MFF (ERDF+CF)
20
2021-2026 NGEU grants
10 0
2021-2026 NGEU loans Year 1
Year 2
Source: Breugel, Zolt Darvas..
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Emerging Markets in for a rough ride as rates normalize Debt burdens rise significantly (% of GDP):
Source: IMF.
EM external balances remain muted, but could change quickly:
Source: IIF, Haver.