Global Economics Intelligence executive summary, October 2021

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Despite the challenge of pandemic-related disruptions, the global economy is exhibiting strong overall demand. Industrial growth can be measured in almost all surveyed countries and the eurozone. The global purchasing managers’ indexes (PMIs) for manufacturing and services show healthy expansion, with respective readings of 54.1 and 53.4. Unemployment is generally falling, and world trade has effectively recovered to prepandemic levels. The public-health situation has improved in most surveyed economies, especially as vaccines against COVID-19 have become more available and vaccination programs are finally making real progress. Public-health experts are guardedly optimistic but urge continued caution and emphasize the need for even wider vaccine distribution and acceptance.

The main economic challenges are supply-chain bottlenecks and rising inflation, a view reflected in the latest results from McKinsey’s Global Survey of economic sentiment. For the moment, these challenges pose significant obstacles to smoother postcrisis recovery paths, slowing industrial growth, suppressing consumer sentiment, and causing populations real hardship. Fortunately, most economists and forecasting institutions expect that these difficulties will be relatively short lived. Inflation expectations, for example, rose in October to 2.9%, a level still within the inflation targets of most central banks (Exhibit 1).1


Pandemic-related discontinuities in the global supply chain should subside eventually, but most experts believe that they will worsen before the system recovers its equilibrium. The rapid recovery of industrial production and trade following pandemic-triggered closures has sorely tested logistics capacities. For the moment, the completion, shipping, and delivery of orders face worldwide shortages of ships, berths, containers, trucks, and labor.

The effects of the struggle for growth amid these disruptions has become evident in the lower GDP expansion in the third quarter of 2021. During that period, China grew at an annualized rate of 4.9%, missing expectations of 5.2% growth and slower than the 7.9% pace set in the second quarter of this year. At the same time, the US economy grew at an annualized rate of 2.0%, below expectations of 2.7% expansion and a considerable slowdown from the 6.7% pace set in the second quarter. Analysts attribute the slower US growth to the resurgence of COVID-19 in the summer of 2021, pandemic-related supply-chain issues, and the falloff in consumer spending on durable goods after government stimulus checks were spent.

The eurozone economy expanded 2.2% in the third quarter of 2021 (seasonally adjusted, quarter on quarter), exceeding consensus expectations of 2.0% growth. In the largest constituent economies, the pace was faster in France (3.0%) and Italy (2.6%) than in Spain (2.0%) and Germany (1.8%). Along with positive GDP growth, the eurozone is experiencing higher inflation, which reached 4.1% in October (3.4% in September). This is the highest inflation in 13 years and is mainly due to high energy prices (+23.5%). In a statement ahead of the data release, European Central Bank (ECB) chair Christine Lagarde maintained the bank’s view that overall inflation will descend to the ECB target of 2% by 2023. She also pushed back against suggestions that the ECB could raise the key interest rate in 2022.

In other recent global data, the consumer confidence indexes declined in most surveyed economies, amid pandemic concerns and rising inflation. Retail-sales growth also declined, except in the United States. The subdued consumer activity is not surprising, given high inflation, especially in the emerging economies. Among the many drivers of inflation, energy prices are a major culprit. The price of fuel oil and natural gas pushed upward in September and October. In the past year, the price of oil (Brent) has doubled, from around $40 per barrel to more than $80. Consequently, some energy providers switched to coal, but coal prices have nearly quadrupled in the past year, from $57 per ton to more than $220 (Exhibit 2).

The price of fuel oil and natural gas pushed upward; some energy providers consequently switched to coal, causing coal prices to double.

Industrial growth has been widespread. Individual manufacturing PMIs mainly show expansion. Readings remain strongest in the United States (58.4 in October) and the eurozone (58.3); in India (55.9) the pace of expansion has quickened steadily for three months. In China and Russia, the indicator crossed into expansion in October (Exhibit 3). As for services growth, the PMIs for the sector in all surveyed economies show relatively strong expansion.

The purchasing managers' indexes in all surveyed economies continue to show expansion.

Trade growth has been strong but uneven. The most recent data is for August, when the CPB World Trade Monitor measured a month-on-month increase of 0.8% in world trade, after a decline of –1.4% in July. Based on strong growth in Chinese ports, the Container Throughput Index (ISL) rose to a historic high of 126.6 in August (123.4 in July). National data from August show trade increases in Brazil and Russia and declines in the eurozone and Russia.

Equity indexes exhibited mixed performance in September and October; consistent gains were recorded in markets in Russia and India. Volatility indexes have mainly declined, though the index for equities (VIX) has remained somewhat elevated since shortly after the pandemic began. The Dow and the S&P indexes still fluctuate around record highs. Higher inflation has tended to drive up the cost of capital for governments in recent weeks, as yields on most government bonds have lately increased. In its effort to slow inflation, Brazil’s central bank introduced its largest interest-rate hike in nearly 20 years, by 150 basis points; the new policy rate is 7.75%.

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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 October 2021 here and here. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on The reports are available 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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