Consumer demand is being held back by supply bottlenecks leading to higher prices and central bank unease. Economists at HSBC have recently lowered their 2021 GDP forecast for the eurozone to 5% but raised it for the UK to 7.1%.

How bottlenecks evolve are key for growth and inflation

“How these bottlenecks evolve in the coming months will therefore be key for the growth and inflation outlook into 2022. It seems likely that these pressures will persist until at least the middle of next year, even if they may not get much worse. But after that, how quickly shipping prices fall, backlogs alleviate, and people return to the labour force will have a significant impact on growth speeds, inflation rates, and how central banks respond.”

“We recently lowered our eurozone GDP forecasts for 2021 to 5.0% (from 5.2%) given the more drawn-out disruption to supply chains and manufacturing. There was no change to our forecast for 2022, which remains 4.0% while we see 2023 growth 0.1% higher, at 2.0%, due to stronger German manufacturing growth in H2 2022, once disruption has eased.”

“In the UK, we expect a slower rate of GDP growth in Q3 2021 than previously forecast given supply issues, but the government’s big upward revisions to growth in Q1 and Q2 means that we recently changed our annual growth forecasts for 2021 and 2022 to 7.1% and 5.1%, respectively.”


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