Delta variant dampens economic optimism as autumn approaches

What a difference a few months can make in this COVID-19 economy. In the spring and early summer, people in the developed world were getting vaccinated at a decent rate, economies were reopening, people were getting back to work.

Then the delta variant started to spread, overwhelming health systems, clogging supply chains and raising prices, cutting the veils of the global recovery a bit.

Now we probably won’t go back into another global recession, but there are signs of slowing both here and in other major economies – the UK, EU, China and Japan.

A few months ago, many economists saw a clear path to global recovery paved by vaccination and stimulus from governments and central banks.

Neil Shearing of Capital Economics was one of them. Now he is not so sure.

“In a number of the world’s major economies, it’s pretty clear now in the latest data that the recovery is running out of steam – especially in the US and UK, but it’s also true in China,” Shearing said.

Shearing halved its quarterly growth forecast for advanced economies.

“The most likely outcome is that growth slows down rather than the recovery completely stopping or even reversing. The wild card, of course, is that if we get another variant like the Delta variant, maybe it’s even more virulent, ”Shearing said.

The rise in the delta weighed on consumer confidence and spending in developed countries.

But in the developing world, the economic impact is much worse, said Adam Posen of the Peterson Institute for International Economics.

“It’s about the disease – period. Not having vaccines, not having health care. It’s just a cloud over your economy for a long time, ”Posen said.

The lion’s share of the world’s gross domestic product and most of America’s trade comes from rich countries. They face continued supply chain disruptions, hampering global growth.

But political economist Sharyn O’Halloran has said those issues will likely be resolved, in time, as international businesses try to address the risks posed by the pandemic.

“What we will need to change – and this is what you see happening – is not just that you are going to have a production center in China, you are now seeing increased production coming to Mexico, Europe and Europe. Southeast Asia, and so on, ”O’Halloran said.

In other words, make sure you have multiple suppliers of raw materials, parts, and finished products around the world. O’Halloran said it was crucial not only to deal with the pandemic, but also increasingly frequent climate disasters.