Down in the Delta

The central pillar of our global outlook is that vaccines will sever the link between COVID-19 and economic activity. While we expect this process to take place gradually—as the GDP-weighted share of the fully vaccinated still only averages around 35% for the countries we cover—we project progress on this path to be sufficient to unleash significant pent-up demand in 2H21. The growth bounce is already well established in the US and we believe it started in Europe last quarter. Next week’s Euro area GDP report should show the region swinging from two quarters of contraction to a 6.5%ar jump last quarter. The July rise in mobility and the flash PMI shows that momentum in Europe continues to build. We view this region as a guide to what happens next for the EM (outside China), where rising vaccinations unleash a powerful reopening dynamic. With sustained US strength accompanied by a pent-up demand bounce across Europe and the EM, we have expected global growth to accelerate sharply.