ECB: Supply Bottlenecks Casting Shadow over Near-Term Global Growth

23 September 2021

By David Barwick – FRANKFURT (Econostream) – Supply bottlenecks pose a threat to global economic growth in the short term, the European Central Bank said on Thursday.

In its sixth economic bulletin of the year, the ECB said that the global recovery continued, ‘although persisting supply bottlenecks and the spread of the more contagious Delta variant of the coronavirus (COVID-19) cast a shadow over the near-term growth prospects.’

Surveys indicated reduced growth momentum, especially in emerging markets, it said. In the euro area, production was being restrained by shortages, though this was not keeping manufacturing from staging a robust recovery, the bulletin said.

While Delta had not necessitated renewed lockdowns in the euro area, it could hold back global trade and prevent complete economic reopening, the ECB said.

European consumers ‘remain somewhat cautious in the light of the pandemic developments’, but rapid labour market improvement ‘holds out the prospect of higher incomes and greater spending’, according to the bulletin, while corporate optimism is boosting investment.

‘At the same time, there remains some way to go before the damage to the economy caused by the pandemic is overcome’, the ECB said, given still-lower employment compared to pre-pandemic levels and a large number of workers in job retention schemes.

‘The economy is expected to rebound firmly over the medium term’, the bulletin said. ‘As the economy recovers further, and supported by the Governing Council’s monetary policy measures, underlying inflation is expected to rise over the medium term.’

However, this would be gradual, as wages would grow ‘only moderately’, the ECB explained. ‘Measures of longer-term inflation expectations have continued to increase, but these remain some distance from the ECB’s 2% target.’