The global economic recovery remains strong, helped by government and central bank support and by progress in vaccination. But although global GDP has now risen above its pre-pandemic level, the recovery remains uneven with countries emerging from the crisis facing different challenges.

Large differences in vaccination rates between countries are adding to the unevenness of the recovery. Renewed outbreaks of the virus are forcing some countries to restrict activities, resulting in bottlenecks and pressures on supply chains.

A rapid increase in demand as economies reopen has pushed up prices in key commodities such as oil and metals. Food prices are also rising boosting prices especially in emerging markets. Tensions along supply chains caused by the pandemic have added to cost pressures. At the same time, shipping costs have increased sharply.

Nevertheless, the outlook for inflation varies markedly. It has risen sharply in the US and some emerging market economies but remains relatively low in many other advanced economies, particularly in Europe.

These inflationary pressures should eventually fade. Once bottlenecks are resolved, price increases in durable goods, such as cars, are likely to ease quickly as supply from the manufacturing sector rapidly picks up. Consumer price inflation in G20 countries is projected to peak towards the end of 2021 and slow throughout 2022. Although sizeable pay increases are happening in some sectors that are reopening such as transportation, leisure and hospitality, overall wage pressure remains moderate.