The Theory Of Relativity

Image source: Shutterstock - Guillermo del Olmo

What's going on?

The global economy bounced back in earnest in 2021, but you dont have to be an Einstein to know that everything looks better next to the year before

What does this mean?

We wont know exactly how much the global economy grew in 2021 until the data is released early next year, but economists are expecting the real economy that is, adjusted for inflation to grow 5.8% this year compared to 2020. They reckon all the worlds major regions will have pulled their weight, with the US expected to grow 5.5%, Europe 5.1%, and China a massive 8% versus last year.

Everythings relative, of course, and 2020 was one of the worst years for economic growth since the Great Depression. And its not like we havent had our fair share of bumps in the road, most notably from inflation: the prices of goods and services are set to end the year 3.7% higher globally than last

Why should I care?

For you personally: Give with one hand
This has had all kinds of repercussions on you personally. Jobs have been easy to come by, and youve been paid better for them too not least because workforce shortages have left companies upping their game to win you over. The bad news is that US wages which climbed by 4.8% in November compared to the year before have been outstripped by the countrys higher prices, which jumped 6.8% in the same period.

For markets: Central banks go from hero to zero.
Central banks were the darlings of 2020, stepping in with unprecedented cash injections when the pandemic took hold. This year, though, investors have become increasingly frustrated with the party line that high inflation is transitory. The US Federal Reserve finally admitted in November that its been a bit too optimistic, but thats left the central bank with a lot of catching up to do in 2022

 

Originally posted as part of the Finimize daily email.

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