Economic trends

Global economic growth is one of the main drivers of demand for our commodities. We monitor the growth trends in major advanced economies like China, India, Japan, Europe and the United States to identify challenges and opportunities for our portfolio.

Key trends
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Worldwide

In our base case, the world economy would be 6 per cent smaller by the end of 2021 than if COVID–19 had not happened.

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China

China is on a clear recovery track after the initial shock of COVID-19.

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USA

The eleven year expansion of the US economy came to an abrupt end as lockdowns led to a steep contraction in economic activity.

Global economic growth trends

  • Global economic growth

    COVID-19 has disrupted billions of people around the world and continues to devastate many developing nations that are ill–equipped to cope with such a pronounced call on their hard and soft infrastructure.

    The world economy will contract in calendar year 2020. In our base case, the world economy would be 6 per cent smaller by the end of 2021 than if COVID–19 had not occurred.

     

  • Chinese economic growth

    China is on a clear recovery track after the initial shock of COVID-19.

    The Chinese economy shrank 10 per cent in the March quarter when hundreds of millions of people were unable to return to work after the Lunar New Year. Building sites and factories were able to restart reasonably quickly after the first wave was contained, which helped the economy rebound 11.5 per cent in the June quarter.

    The major risk to China’s V–shaped recovery is the possibility of a new wave of infections emerging (potentially from imported cases) that requires further lockdowns on a significant scale.
    Exposure to China’s recovery has allowed iron ore and copper prices to recover from the lows brought on by COVID-19, and by the end of the year, annual steel production is expected to surpass the 1 billion tonnes mark for the first time.

    In the medium to long-term, Chinese Supply Side Reform, the trend towards larger furnaces and more stringent environmental policies are all expected to underpin the demand for high quality seaborne iron ore and metallurgical coal.

     

  • Major advanced economies

    The eleven year expansion of the US economy has come to an abrupt end.

    COVID-19 lockdowns led to both a steep contraction in economic activity and the loss of more than 20 million jobs.

    Fiscal support of around $3 trillion has been mobilised, but the path of the virus, as well as the upcoming Presidential and Congressional elections remain sources of uncertainty.

    All US states have reopened to some degree and have seen widely varying levels of success in terms of new infection rates. These re-openings and have allowed the labour market to begin its healing process, which is likely to take some time.

    Europe and Developed Asia found it difficult to absorb the disruptions to their manufacturing value chains.

    Japan had a relatively difficult time suppressing its initial outbreak and it struggled to cope with the collapse in auto demand at home and abroad while also dealing with the financial and psychological blow of delaying the Tokyo Olympic Games.

    South Korea was somewhat resilient, containing its outbreak relatively effectively while also benefitting from the observed improvement in the global electronics sector.

    In Europe, a variety of national responses to COVID-19 have been put in place. While stimulus plans were slower to come to fruition than in the US and are of a smaller scale, they are arguably more strategic and effectively targeted. Many of these responses place an emphasis on “building back better” by sponsoring an accelerated energy transition.

     

  • Indian economic growth

    India’s economy collapsed under the pressure of COVID-19 with economic activity contracting severely in the last half-year.

    Returning India to a healthy medium term growth trajectory will require a reduction in policy uncertainty, an increase in social stability, and increased international competitiveness in manufacturing and traded services.