NEW YORK (NYTIMES) - Rising prices, fallout from the war in Ukraine and continuing supply chain chokeholds slowed growth around the world in the first quarter and hobbled efforts by major economies to recover from the pandemic.
The latest evidence came on Friday (April 29), when the European Union said the 19 countries that use the euro grew only 0.2 per cent overall during January, February and March compared with the previous three months.
One day earlier, the United States announced its economy unexpectedly shrank in the first quarter, a stark reversal from massive growth in 2021 and raising recession fears. That spectre led to the S&P 500’s 3.6 per cent plunge last Friday, with US stocks now down more than 13 per cent in 2022.
China, the world’s second-largest economy behind the US, reported signs of significant weakness this month as another wave of Covid-19 infections prompted widespread lockdowns.
Its manufacturing activity slumped to its lowest level since February 2020, official data showed on Saturday, the latest sign of economic pain as Beijing doggedly pursues its zero-Covid response.
"The overarching message is that the global growth outlook is souring, and it is deteriorating at a faster rate and in a more serious way than most analysts have anticipated," said Mr Neil Shearing, chief group economist at Capital Economics.
There is significant variation in the causes, as well as the forecasts, among the three major economic blocs.
Although total output in the US contracted, analysts tended to be more sanguine about the American economy's prospects, noting that consumer spending was strong despite high inflation and that the labour market remained tight.
By contrast, China's report of 4.8 per cent growth in the first quarter masks just how much that economy is suffering from a slump in the real estate industry, overinvestment and pandemic-related shutdowns.
As for Europe, it is much more affected by the war in Ukraine.
"Growth around the world is evolving at different speeds," said Mr Gregory Daco, chief economist of EY-Parthenon, but "inflation is present almost everywhere in most sectors".
Those divergent economic backdrops may cause governments and central banks to choose different, or even conflicting, policies as countries try to slow inflation without tipping into recession.
In the US, the Federal Reserve is set on raising interest rates to bring down inflation, Mr Daco said, while governments in Europe may end up funnelling more money to their citizens to blunt the impact of rising energy prices.
And China, he said, is caught in a bind: "They do not want to let go of their Covid-zero policy, but they realise the drag on economic activity from that policy is massive."
