Global Economics Intelligence executive summary, March 2022

Amid high inflation, a pandemic, and Russia’s invasion of Ukraine, surveyed economies display considerable resilience; trade is strong, and manufacturing and services continue to expand moderately.

Available monthly data are mainly positive or neutral in surveyed economies. Economic performance in the first two months of 2022 reveals that demand has generally recovered to prepandemic levels and that adjustments made to maintain production have been mostly sufficient to meet it.

Faster growth is constrained by three major challenges: Russia’s invasion of Ukraine, which has created a humanitarian crisis and an energy shock, especially in Europe; high inflation; and the COVID-19 pandemic. Each challenge triggers secondary economic effects with reverberations that are not always predictable. War and sanctions have created uncertainty around Russian energy commodities; fear of supply disruptions is pushing energy prices higher. Germany and Austria, whose economies are dependent on Russian natural gas, are experiencing record consumer inflation; both countries have announced plans for gas rationing. Respondents to McKinsey’s latest global survey on economic conditions, furthermore, cite geopolitical instability as a top risk to the global economy.

The pandemic, too, continues to generate disruptions. China is experiencing a new COVID-19 wave, driven by the Omicron variant. While on a global scale the number of active cases of COVID-19 in China is negligible, the government has responded energetically to contain the spread. The policies could be affecting trade: on March 30, the Global Times reported that at least 90 ships with 400,000 containers are queuing up in Shanghai ports, an increase of 20% over last year’s level. The paper also reported that global shipping company Maersk estimates that trucking to and from Shanghai ports will be curtailed by 30% due to area lockdowns in force until April 5.

In the latest data, global trade levels remain historically high, with the CPB World Trade Monitor’s volume index reading 134.4 in both January 2022 and December 2021. The index also records all-time-high prices. Likewise the RWI/ISL Container Throughput Index reached 122 in January, equaling historic highs recorded in March and April 2021.

A view into the state of the supply chain is offered in a relatively new indicator developed by the Federal Reserve Bank of New York. The Global Supply Chain Pressure Index (GSCPI) analyzes and combines measures of transport costs and purchasing managers’ subindexes for seven economies: China, the eurozone, Japan, South Korea, Taiwan, the United Kingdom, and the United States. Readings during the pandemic years (2020–22) have touched all-time highs. The most recent readings are sharply elevated (Exhibit 1).

A new indicator by the US Federal Reserve measures historically high supply chain bottlenecks during the pandemic.
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The global and individual consumer confidence indicators of the OECD continue to decline. Retail sales growth, however, has recovered to prepandemic levels in most surveyed economies. In the United States, growth is well above the historical trend (14.0% and 17.6% year over year in January and February, respectively); recent data from China also show strong growth, of 6.7% year over year for January and February (1.7% in December 2021).

Global purchasing managers’ indexes (PMIs) for services and manufacturing signal near-term expansion. The manufacturing PMIs for individual surveyed economies are especially strong in the United States, where the March estimate of 58.5 is the highest recorded since September 2021 (57.3 in February). Also robust were readings for the eurozone (56.5 in March) and India (54.9 in February). The PMIs for services show strong expansion in the United States (58.9) and the eurozone (54.8), as well as Brazil (54.7 in February); growth was milder elsewhere.

Official unemployment rates have trended down in the United States (3.8%) and the eurozone (6.8%), while recent increases were measured in India (8.1%) and China (5.5%).

Inflation indexes for advanced economies show acceleration in consumer and producer prices; the eurozone experienced all-time high producer-price inflation of 31% in January. In emerging economies, consumer inflation continues to climb except in China; producer-price growth is decelerating, although prices are still quite high. Food prices, meanwhile, have also been surging and are forecast to continue rising in the coming months.

Commodity prices surged at the beginning of March and have since remained elevated. Gold prices are historically high but have lately remained flat, despite increased inflationary pressure. Energy prices soared in March, as uncertainty persists regarding the availability of Russian oil and natural-gas exports. The Brent crude price spiked above $125 per barrel in mid-March but came down to $105 by April 1 (Exhibit 2).

Energy prices soared in March amid uncertainty surrounding the availability of Russian energy commodities.
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Inflation expectations surged beyond the target zone for the US Federal Reserve, as reflected in the difference in yields between US Treasury bills and inflation-protected securities.

Equity markets recorded losses globally in the aftermath of Russia’s invasion of Ukraine but have since partially recovered. The Dow Jones index lost around 8% from February 8 to March 8, a period of growing speculation that Russia was preparing to invade Ukraine, followed by the invasion itself. The index has since recovered most of those losses, but at 34,663 on March 28, it is still more than 2,000 points below the historic high of 36,800, achieved in January. Russian equities plunged and the Moscow Stock Exchange suspended trading. The US dollar remained broadly unchanged; the ruble traded at 75 per dollar on February 17 and 133 per dollar on March 10 before partly recovering to 84 per dollar by March 31. Volatility indexes for equity markets and oil climbed in February and remained elevated in March. Government bond yields are still on the rise amid inflation expectations and interest rate increases.

US inflation reached an annual rate of 7.9% in February, a 40-year high, largely driven by high energy and food prices. On March 16, the US Federal Reserve raised its benchmark interest rate by one-quarter point, to a range of 0.25–0.50%. The Fed also trimmed its growth outlook for 2022 to 2.8%, from 4.0% estimated in December. Fed chair Jerome Powell signaled that the central bank would move quickly to bring prices under control and take further tightening measures aimed at reducing inflation to a “neutral” rate of around 2.4%. Powell also outlined steps to reduce the Fed’s $9 trillion balance sheet. Positive responses from investors were recorded in rising US stock indexes, while US Treasuries experienced a sell-off, driving yields up.

In the eurozone, inflation climbed to 5.9% in February, the highest in history, as energy prices surged by a record 37.1%. The European Central Bank (ECB) downgraded its forecast for eurozone GDP growth in 2022 to 3.7% (from 4.6% in the September 2021 forecast). The ECB cited the impact of future COVID-19 waves, supply bottlenecks, record inflation, and high energy prices. On March 17, ECB president Christine Lagarde discussed the inflation outlook in relation to the expected economic effects of Russia’s invasion of Ukraine. For the moment, the ECB intends to stay its policy course, with a near-zero interest rate, and will continue gradually to taper its asset purchases. Once that program ends, now likely in Q3 2022, the ECB will consider raising the interest rate, according to directional data.

In India, consumer price inflation is running slightly above the 6% limit set by the Reserve Bank of India, pushed by food and energy prices. Producer prices, however, have never been higher in India. In Brazil, inflation has been above 10% for six straight months, and in Russia it exceeds 9%. Central banks in Brazil and Russia have intervened repeatedly with rate hikes; in March, rates were respectively raised to 11.75% and 20%.

In China, the 13th National People’s Congress convened its fifth annual Two Sessions meeting in early March. The Government Work Report, delivered on the first day by Premier Li Keqiang, set a soft GDP growth target for 2022 of “around 5.5%.” The report recognized increased external risks and emphasized stability as the top economic priority.


McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each monthly release includes an executive summary on global critical trends and risks, as well as focused insights on the latest national and regional developments. View the full report for March 2022 here and here. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on McKinsey.com. The reports are available for free to email subscribers and through the McKinsey Insights app. To add a name to our subscriber list, click here. GEI is a joint project of McKinsey’s Strategy & Corporate Finance Practice and the McKinsey Global Institute.

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