Incoming data confirm that solid global growth momentum continued throughOctober. Indeed, this week’s industrial activity and trade readings from theUS, China, and Japan point to upside risk to our current-quarter global GDPforecast. We are turning increasingly downbeat on near-term growth, however,as a result of the intensification of the COVID-19 outbreak. Daily mobilitydata have rolled over in recent weeks and now point to a sizable 0.6% outrightcontraction in global consumer goods spending in November (Figure 1). Havingalready projected a large GDP contraction across Europe this quarter, wenow look for the US GDP to shrink 1%ar next quarter as the COVID-19 contagioncontinues to intensify. Lockdown restrictions are on the rise and closeto 10 million US workers are likely to lose their unemployment benefits at thestart of next year, amounting to an income loss of roughly $170bn annualized.

With the US and Europe now projected to contract and with the pandemicworsening, the rest of the world is likely to buckle. Revisions elsewhere are intrain. Canada saw a surge in its COVID-19 cases following its OctoberThanksgiving, which sends a worrisome signal for the US holidays. Whileprovincial authorities have tightened restrictions and mobility is declining,more stringent measures will likely be needed in Canada and we now look forgrowth to stall next quarter. In Sweden we see a similar outcome as risinghospitalizations challenge the government’s strategy to build herd immunity.From a far lower level, Japan and Korea have also experienced rising infections,and likely will impose limited restrictions. While both countries are in agood position to manage the outbreak and should benefit as global goodsspending continues to grow, we expect a material downshift to take holdacross North Asia as we turn towards the new year.

The first signal of the impending downshift in global growth should comefrom the November PMIs.While unable to capture the magnitude of growthswings this year, the PMIs have identifiedmomentum shifts. Japan reported a 1-pt fall in its all-industry flash reading today and we expect declines in theother flash reports out on Monday, led by a 10-pt plunge inthe Euro area.

Despite the clear and present dangers weighing on the neartermoutlook, we expect a strong rebound to start in 2Q21. In part, these revisions reflect the view that the damage from the second-wave of the pandemic will be short-lived. More importantly, however, we now have greater conviction that the pandemic will fade from the scene in 2H21 as mass vaccination should begin around mid-year. In addition, we expect weaker US growth will elicit a fiscal response. We now look

for a $1 trillion US stimulus package to be enacted soon after the Biden administration takes office. Together these forces are expected to deliver more than 5% average global growth in the middle quarters of 2021.