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Global Macro Outlook - Q2 2022

AllianceBernstein (AB) profile picture
AllianceBernstein (AB)


  • The magnitude of the war’s impact on growth and inflation will be determined by how much and for how long energy prices rise.
  • The war, economic sanctions and the associated rise in energy costs are likely to exacerbate global shipping impediments, too, which had begun to recover from the pandemic.
  • We expect most central banks to continue tightening monetary policy, even as consumers face a hit to real incomes from rising energy prices.
  • Perspective is important: the reopening from COVID-19 pushed global economic growth well above long-term trends, and US households in particular now have a reservoir of savings that will allow them to smooth consumption through trying times.

The Macro Picture

Just as the global economy was on the cusp of recovery from the COVID-19 pandemic, the world faces a second shock in the Russian invasion of Ukraine. As with any geopolitical risk event, the situation can change rapidly, making forecasting the economic outlook particularly difficult. These are uncertain times. More often than not, the global economy can shrug off geopolitical disruptions in fairly short order and with minimal long-term impact. That said, the direction of travel emerging from the ongoing crisis is clear: growth will be lower than previously expected and inflation higher.

The magnitude of the impact on growth and on inflation will be determined by how much energy prices rise and how long they stay high. Consumer demand for food and energy-related commodities is largely inelastic: higher prices for food and gasoline won’t reduce demand for those necessities, but will instead force consumers to spend less on other goods and services, slowing growth more broadly. The longer it takes for commodity prices to find a new equilibrium, the greater the downward pressure on global growth.

We don’t expect the war in Ukraine to impact every country identically. Instead, the impact will fall disproportionately on the European economy and some emerging markets with significant exposure to Russia and Ukraine. Geographical proximity and non-commodity trade linkages are a clear transmission mechanism between the war and the economic outlook in Europe. So is the reliance of Western Europe on commodity exports from both Russia and Ukraine; roughly one-third of Western Europe’s natural gas comes from Russia. The growth rate of real household income in Europe was already negative in year-over-year terms before the war; with the spike in energy prices, households will find it even harder to maintain their spending levels. We think Europe’s economy is more likely than not to slip into recession in the next

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Comments (2)

Nice presentation of information ; hope you are correct or even better .
I dislike Monday morning quarterbacks but since I had been preaching this before hostilities broke out.
The "leaders" of the free world should have shown some backbone when Russia started the so-called training exercises on the border. My take, Nato exercises on the opposing border. At the least the US should have had the 82nd air born division in place, would have Russia felt quite so free to invade? I have my doubts. Would it have led to the US facing a conflict with Russia, I very much doubt? Why do we suppose that Putin waited until the current administration pulled the stunt in Afghanistan?
As a conscripted Vietnam combat veteran, I understand the waist, terror and horror of war, to stand by and watch the atrocities that we are seeing on a daily basis is beyond my understanding! Yet we watch an administration argue about providing fighter jets that belong to Poland. I say SHAME on the United States.
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