This loss primarily reflects the impact of higher inflation as retailers faced with restricted supply have succeeded in passing on their own cost increases. The impact of bottlenecks is apparent in the recent loss of momentum in retail sales volumes. It took four and a half years for retail sales volumes to surpass previous levels by this degree after the Global Financial Crisis had ended in 2009.
The recovery has disproportionately been driven by the goods sector and this has created extraordinary pressure on supply chains and commodity markets. In contrast, real service sector spending remains some 2% short where it was before Covid-19. These show that retail sales volumes, or real retail sales, are now more than 10% above their pre-pandemic levels. The unbalanced nature of the recovery can be seen in figures tracking the spending patterns of the highly important US consumer (see chart 1). Bottlenecks and shortages have pushed inflation and wage rates higher than expected. We’ve also seen issues with labour markets, where companies have struggled with worker shortages. This has thrown up unanticipated problems in supply chains which have been beset by bottlenecks. The economic recovery following the pandemic has differed from economic recoveries of the past. We see global inflation at 3.4% for 2021 and rising to 3.8% in 2022. Our forecast is for 2021 global GDP growth of 5.6% to be followed by 4.0% growth in 2022. Inflation should moderate, but policymakers and investors face a difficult period in the interim. We do, however, see growth cooling following an exceptionally strong 2021, as the massive support offered by governments and central banks during the pandemic’s initial stages begins to fade.
Despite these, we expect 2022 to be another good year for growth as the global economy continues its recovery. The emergence of the Omicron Covid variant has reminded us of the uncertainties which remain around the global pandemic. Risks include higher-than-expected inflation and weaker growth.Anticipated withdrawal of emergency levels of support will play important role in shaping outlook.2022 is set to be another good year for growth, albeit the recovery is likely to remain unbalanced.