Economy highlights

Macro

• We expect global economic growth to slow to 3.1% in 2022 from an estimated 5.9% in 2021 due to lingering shortages of labor and other supplies, and reduced global monetary and fiscal stimulus, compounded by shortages and disruptions created by the Russia-Ukraine war.¹
• We expect the U.S. to remain the global growth locomotive through the first half of 2022, based on resilience against the spike in energy and other commodity prices.
• Absent unexpectedly severe disruptions from the pandemic, we believe strength will rotate toward labor-intensive services industries as the reopening in the U.S. and abroad regains momentum.
• Investor uncertainties over U.S.-China trade tensions have been exacerbated by China’s regulatory crackdown under its common prosperity development strategy.

Domestic

• We expect broad-based strength supporting above-average economic growth to extend through most of 2022’s first half, supported by the economy’s reopening and strength in housing, consumer spending, and business investment.
• We believe consumer-price inflation will gradually slow from its late 2021 highs as price pressures rotate from goods to labor-intensive services susceptible to wage pressures, increased rent, and strengthening demand.

International

• We expect economic growth abroad to slow to a more sustainable pace in 2022. Our view is based largely on China’s policy changes and Europe’s structural restraints combined with COVID-19, economic policy, and the effects of rising fuel costs.
• We believe that the recovery in Europe’s services sector could be tested by pressure on inflation-adjusted incomes from high and rising inflation.