World GDP fell while inflation rose even further in quarter 2, 2022 – Fitch

The world economy saw an unusual combination of falling Gross Domestic Product (GDP) set against high and rising inflation in the second quarter of 2022 as supply-shocks and ongoing pandemic related disruptions blighted the recovery.

According to Fitch Ratings, falling activity and rapidly rising prices in the second quarter of 2022 highlight the risks of a stagflation environment emerging in the medium-term.

Real GDP fell in sequential quarter-on-quarter (q/q) terms in Quarter 2 2022 (2Q22) in the US, China, UK and Poland and is also estimated to have fallen quarter-on-quarter in Russia and India as highlighted in Fitch’s August “20/20 Vision” chart pack.

This reflected a variety of factors including pandemic lockdown restrictions in China, inventory dynamics related to earlier supply-chain disruptions in the US and the broader impact of supply-shocks and inflation pressure stemming from the Russia-Ukraine war.

While not all of the Fitch 20 countries have yet reported 2Q22 GDP outturns, it is highly likely that world GDP fell, given the weight of the US and China in the global GDP aggregate.

Global CPI inflation rose further in 2Q22 despite having started the quarter at already highly elevated levels – and monthly data show pressures continuing to intensify into 3Q22.

Inflation is not far from double-digits in the US and the eurozone; it recently breached 10% in the UK.

Fitch’s bi-monthly “20/20 Vision” chart pack covers the 20 major economies that are the focus of Fitch’s Economics team’s global macro analysis.

It plots five years of high frequency economic data for 20 variables, with consistent coverage across each country.