 Supply constraints weigh on IP and retail spending growth  Rise in infections could temper but won’t derail 2H growth pickup  China eased to limit growth slide; more hikes from other EM CBs  Next week: Weak China GDP and US RS; US core inflation stays high Yes, and it counts!

We published a 2H21 outlook essay this week emphasizing growth acceleration amid sustained elevated inflation. Divergent policy impulses underlie our view that the first-half rotation in growth leadership from China to the US will persist. However, we expect the heavy lifting in second-half growth to come from a move to sever the link between the COVID-19 virus and mobility.

Buoyed by accelerating vaccination rates, Europe, Japan, and EM ex. China all are projected to unleash substantial pent-up consumer demand that sharply accelerates global growth to a 6.7%ar in 2H21.

The potential growth impulse associated with successfully severing the mobilityinfection link is huge as household demand (particularly services spending) remains depressed a full year into the expansion. While global GDP likely approached its 4Q19 level last quarter, we estimate global consumption remains roughly 3% below pre-crisis levels. Importantly, the ingredients needed to unleash pent-up demand are falling in place at midyear. Mobility is moving higher across the world, evidenced by the rise in our Google activity index out of the past year’s range (Figure 1). Related to this development, private sector confidence is rebounding smartly (Figure 2). Business sentiment has been elevated for some time, and consumer surveys delivered broadbased increases in May and June that push global confidence above its average for the previous expansion.

The biggest risk to the outlook is that the spread of new variants will shortcircuit the pickup. Indeed, the recent turn upward in global infections suggests a third wave may have begun. We took a first step toward downgrading currentquarter growth this week on the heels of a fourth state of emergency declared for Japan until late August, covering the period of the Olympic Games. Moderate restrictions are being put in place elsewhere, particularly in EM Asia. Notably, the UK is pressing ahead with the removal of its remaining restrictions on July 19 despite a recent spike in infections and hospitalizations.