Global economic momentum is stalling in 4Q amid rising infections
New COVID-19 infections in major advanced markets have risen considerably over the past month, with both Euro area and UK, surpassing their respective first wave peaks. As a result, governments have reinstated local restrictions and quarantine requirements on travellers from abroad, leading to receding mobility. While US monthly average infections were lower in September than in the previous two months, the recent rise in numbers is underlying our expectations of weaker economic momentum in 4Q. We estimate current GDP shortfalls of G7 countries to range between 6-12%.
The recovery is losing steam as rising infections and new local restrictions have led to a fall in mobility.
We revise up 2020 US real GDP growth to -4.6% due to stronger than expected data in Q3, and revise down Euro area GDP growth to -7.8%.
US elections will define 2021 fiscal policy, with likely stronger stimulus support in case of a favourable result for the Democrats.
We expect heightened financial market volatility through the turn of the year due to political risk.
We see high level talks on Brexit as a positive signal for an eventual Brexit agreement.
Balance of risk remains skewed to the downside. No further US fiscal stimulus is expected in 2020 while trade tensions with China remain elevated.