ASR Economics Quarterly: Growing Pains

A supply-constrained recovery

Supply-side disruptions and a resurgence in Covid cases have led us to downgrade our near-term growth forecasts and raise our 2021 inflation numbers. The persistence of these two shocks is critical to the economic outlook for the next twelve months.

Delta concerns aggravate demand-supply mismatches

The good news is that Covid vaccines are working, and most economies should have over 90% of their population double jabbed within six months. This in turn should allow supply chains to operate more efficiently, and backlogs to gradually recede. 

Growth-inflation trade-off to improve in 2022 

The upshot is that demand has been deferred rather than destroyed; our near-term downgrades are matched by upgrades to 2022. With inflation also likely to fall next year and central banks keeping policy loose, the outlook looks benign for investors.