Overall Sentiment Still Above Pre-Crisis Levels

Oxford Economics is reporting that global sentiment is weakening, led by a decline in consumer sentiment and a modest retreat in business sentiment – and it’s likely to take a further hit in the near term as Omicron cases rise.

However, it notes that sentiment overall remains above its pre-crisis levels, providing a better starting point – especially as the Omicron wave hits the global economy.

That said, Oxford Economics found that consumers everywhere are gloomier, pointing out that this is true in both advanced economies and emerging markets: Since midyear, consumer sentiment has been decidedly less upbeat and is now running below the levels recorded just before the outbreak of the pandemic.

As for why consumers are so pessimistic, Oxford Economics says that isn’t entirely clear. Household balance sheets are still holding up, with savings and total financial assets well above pre-crisis levels. Inflation, rising globally, explains some of the gloom, as wages continue to lag price jumps.

It also reports that businesses are tempering their optimism, too, though business sentiment remains well above pre-crisis levels. This is an encouraging sign, given the importance of business sentiment as a leading indicator for global investment.

And it notes that part of the buoyancy of business sentiment certainly comes from the strength in new orders, which have held up well in 2021.

It said as well that with household and corporate balance sheets in good shape and sentiment still strong, we think it reasonable to expect that the global economy will manage to navigate the rough waters presented by the Omicron variant.

And Oxford Economics concludes: “Our global composite sentiment indicator (comprising business and consumer sentiment data for the 22 largest economies) tends to lead global growth by three months, and it paints a relatively optimistic picture for the global outlook going forward.”