Economic and financial risk insights: risk landscape - what's new?
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This article was written
Xin Dai, Senior Economist Insurance Analyst, Swiss Re Institute
Fiona Gillespie, Economist Macro Strategy, Swiss Re Institute
Jerome Jean Haegeli, Group Chief Economist, Swiss Re Institute
Economic activity continues to benefit from the lifting of pandemic-related restrictions on mobility as vaccination rollout programmes in different countries progress. Signs of improving momentum show in the composite Purchasing Managers' Index (PMI) in the US and EU, which reached record highs in May, driven by recovery in the services sectors. However, growth paths are diverging across markets. For instance, momentum in China's economy has moderated recently after the return to pre-COVID levels of output last year. In the US, meanwhile, massive fiscal stimulus should continue to support demand as the economy continues to open up more. The euro area continues to lag, and we expect a notable pick-up in growth from the second quarter onwards only.
Meanwhile, global inflation pressures are rising and we have revised up our forecasts for consumer price inflation (CPI) in the US and the euro area.
Global economy is on track for strong recovery on the back of reopening, ongoing vaccination rollouts and massive fiscal stimulus in the US.
We have revised up our 2021 CPI forecasts for the US and EU in view of rising price pressures in the coming months. Inflation remains a key risk to the global economy and insurance markets.
That said, we expect interest rates will remain low for longer.