Why waning business confidence raises red flags over global economic recovery

Name: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years
Uploaded: 2021-02-15T19:30:16.000Z
Duration: 1 min 33 s
Description: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Supply lines have been badly interrupted and the world is running short of key goods and materials, leaving the global economy with much catching up to do

Shipping containers are in short supply, with demand and prices surging worldwide, and shipping bottlenecks could easily disrupt global supply chains

Reading Time:3 minutes

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Shipping containers sit at the Yangshan Deepwater Port in Shanghai on January 11. These building blocks of global trade are in increasingly short supply, posing potential bottlenecks that could disrupt supply chains at a time when economic recovery is sorely needed. Photo: Bloomberg

David Brown

Published: 3:30am, 16 Feb 2021Updated: 4:40am, 16 Feb 2021

Imagine the challenge facing policymakers trying to salvage global reflation in the midst of a pandemic. Too much stimulus might spark higher inflation, while doing too little could jeopardise sustainable recovery.

It’s a worry now because the latest batch of world business confidence indicators seems to be showing signs of global economic activity starting to flag. Maybe it is a feature of the latest wave of lockdowns, or it could be symptomatic of the world’s economic supply chains being overstretched.

If it is a matter of supply constraints, it is likely to drag on global growth and world trade, and pose problems for major exporting nations such as China and Germany. For all the stark warnings about the risks of higher inflation, there is no reason to ease back on stimulus any time soon.

With so much dislocation to output and jobs during the Covid-19 crisis because of factory shutdowns, worker lay-offs and lockdowns, it is no surprise that the global economy has so much catching up to do. Supply lines have been badly interrupted and the world is running short of key goods and materials.

I live in the countryside, my tractor has broken down and I cannot get hold of the parts needed to repair it. Our LPG home central heating boiler isn’t working either, and we can’t replace it like-for-like as there is a supply shortage on the brand we want.

01:33

China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Instead, we have had to improvise with a natural-gas clone using a conversion kit. Many of the replacement parts coming out of Europe and China are in short supply. The worry is that this is a microcosm of what is happening in the bigger picture.

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