Global Macroeconomic Trends in 2021

This section presents an overview of macroeconomic conditions in 2021 by describing a series of macroeconomic indicators that provide insight into the overall health of the U.S. and global economies, key industries, and international goods trade. In general, the indicators described in this section show that U.S. and global macroeconomic conditions continued to improve since reaching lows as recently as the middle of 2020. Among such improvements, U.S. and global gross domestic product (GDP) increased by more than 5 percent; and manufacturing output and employment outcomes improved for both the U.S. and many economies across the globe. However, increased consumer demand, coupled with lingering production and supply chain disruptions, led to high levels of inflation in the United States and most major economies, with particularly sharp increases in energy prices. Over the course of the year, the U.S. dollar appreciated vis-à-vis many major trading partner currencies.

GDP represents an aggregate measure of total economic activity and the overall health of an economy. Empirical research demonstrates that a positive relationship exists between GDP growth and merchandise trade.^[1] Estimates from the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) show that U.S. real GDP grew by 5.7 percent in 2021.^[2] The increase in economic activity during the year marked a strong recovery from a 3.4 percent contraction experienced in 2020. All major subcomponents of GDP grew during the year. Personal consumption expenditures, the largest subcomponent of GDP, grew by 7.9 percent while private domestic investment also expanded considerably, growing 9.8 percent.^[3] Imports increased by 14.0 percent, which outpaced the 4.5 percent growth in exports, and government expenditures increased by half a percent during the year.^[4]

According to the International Monetary Fund (IMF), real global GDP grew by an estimated 6.1 percent in 2021, a notable recovery from the 3.1 percent contraction experienced in 2020.^[5] Economic growth during the year was strong for both advanced and emerging market and developing economies with GDP growth of 5.2 and 6.8 percent, respectively.^[6] China, India, and the United Kingdom (UK) were among large United States’ trading partners that experienced real GDP growth rates above 7.0 percent.^[7] GDP growth in the European Union (EU), Canada, and Mexico, while positive, was below the global average during the year (figure MC.1).^[8]

Source: IMF, “World Economic Outlook Database, April 2022, Gross Domestic Product, Constant Prices,” accessed May 4, 2021.

Overall manufacturing output in the United States expanded by 6.4 percent in 2021 (figure MC.2).^[9] The expansion in manufacturing output followed a significant, pandemic-induced contraction of 6.4 percent in 2020.^[10] According to the United Nations Industrial Development Organization (UNIDO), total U.S. manufacturing output in most broad industry categories increased, including double-digit expansions in other transport equipment, wearing apparel, basic metals, pharmaceuticals, and machinery not elsewhere classified (n.e.c).^[11] One category that did not increase was U.S. manufacturing of tobacco products, which contracted by 2.8 percent during the year (figure MC.2).

Source: USITC calculations from UNIDO, “Seasonally Adjusted Quarterly Index of Industrial Production Database,” accessed March 17, 2022.

Global manufacturing production grew by 9.4 percent in 2021.^[12] The manufacturing expansion represented a strong recovery from the 4.1 percent decline recorded in 2020.^[13] Global manufacturing production growth during the year was led by growth in industrializing economies.^[14] Manufacturing output grew by 12.3 percent in China, while several large emerging and industrializing economies, including Turkey and India, also experienced double-digit growth rates.^[15] Industrialized economies experienced slightly lower levels of manufacturing production growth. Industrialized countries in Northern America, Europe, and Asia and Pacific regions grew by 6.3, 8.2, and 7.3 percent, respectively.^[16]

Outcomes in labor markets significantly influence consumer demand and in turn, international merchandise trade. Wages earned from employment represent a major source of global household income and help determine the volume of goods households can consume. As labor market conditions improve and employment levels increase, households tend to increase demand, including demand for imported goods. Labor market conditions in the United States continued to rebound in 2021 after bottoming out in the second quarter of 2020.^[17] The unemployment rate during 2021 continued to decline, averaging 4.2 percent in the fourth quarter (table MC.1). Additionally, the U.S. civilian labor force participation rate and employment-to-population ratio increased by 0.3 and 1.8 percentage points in 2021, respectively, further indicating a continued rebounding in the U.S. labor market. Nevertheless, unemployment, labor force participation, and employment-to-population rates had yet to return to pre-pandemic levels as of the end of 2021.

Table MC.1: Quarterly U.S. unemployment and labor force participation, selected quarters 2019–21

In percentages. Q = quarter.
Source: USDOL, BLS, “Labor Force Statistics,” accessed January 27, 2022.

Other indicators also suggest that, while recovering, the U.S. labor market experienced significant transformation characterized by historic rates of job quitting and switching. In November and December of 2021, the revised U.S. job quit rate of 3.0 percent—an indicator often considered a measure of workers’ willingness or ability to leave jobs—set a series high.^[18] Additionally, job openings set series records in 2021 and remained above 10 million for the entire second half of the year.^[19] Increased job openings and labor turnover may have helped drive the 4.7 percent increase in nominal hourly wages during the year.^[20] However, U.S. average worker wages adjusted for inflation fell during the year by 2.4 percent.^[21]

Estimates of working hours in 2021 show a recovery of the global labor market from pandemic lows recorded in 2020. However, global hours worked during the year remained 4.3 percent below pre-pandemic levels.^[22] India, Japan, and the UK were among the United States’ largest trading partners whose working hours remained at 5 percent or more below pre-pandemic levels (defined as annualized estimates of total working hours in the fourth quarter of 2019). Conversely, the EU, Canada, and China were estimated to have experienced stronger recoveries in hours worked. Hours worked in 2021 were 2.7 and 1.7 percent below pre-pandemic levels for the EU and Canada, respectively, while working hours in China exceeded pre-pandemic levels by 0.4 percent.^[23]

Source: ILOSTAT, “Working Hours Lost due to the COVID-19 Crisis,” accessed January 31, 2022.

Inflation, a measure of the purchasing power of money, reflects price levels in an economy. All else being equal, high levels of inflation reduce consumer purchasing power and tend to limit consumer demand for imported goods. In 2021, strong consumer demand coupled with continued COVID-19-related supply chain disruptions significantly contributed to an increase in inflationary pressures in the United States and many economies around the world.^[24] In the United States, seasonally adjusted consumer prices across the broad basket of goods measured in the Consumer Price Index (CPI) grew by 7.0 percent between December 2020 and December 2021, the largest increase in consumer prices since 1982 (figure MC.4).^[25] Inflation was driven in large part due to a 29.3 percent increase in energy prices.^[26] Additionally, durable and non-durable goods prices rose faster than aggregate CPI, 16.8 percent and 10.2 percent, respectively.^[27] Services prices increased more slowly, growing by 4.0 percent during the year.^[28]

Source: USDOL, BLS, “Archived Consumer Price Index Supplemental Files, December 2021,” accessed January 24, 2022.

Consumer price increases were also experienced by many of the United States’ major trading partners in 2021. Prices in Mexico grew by 7.4 percent between December 2020 and December 2021 (figure MC.5).^[29] Consumer prices in Canada, the EU, and the UK also expanded significantly with growth of about 5 percent during the year. However, China and Japan, along with many neighboring Asian economies, remained relatively insulated from rising prices.^[30]

Source: OECD, “Consumer Prices,” accessed January 27, 2022.

Like inflation, exchange rates can influence purchasing power. Exchange rates determine the amount of goods or services denominated in one currency that can be purchased by holders of another currency. All else being equal, an appreciation of a currency effectively increases that currency’s purchasing power for imported goods and services, and generally leads to increased imports from abroad, while making exports more expensive for consumers abroad.

The value of the U.S. dollar largely appreciated throughout 2021, growing 3.7 percent across the Federal Reserve’s broad index of global currencies.^[31] The dollar appreciation corresponded with expectations that the Federal Reserve would increase interest rates in response to rising inflation in the second half of the year.^[32] As a result, the U.S. dollar experienced significant gains of 11.6 percent and 8.3 percent against the Japanese yen and the euro, respectively (figure MC.6). The U.S. dollar also experienced volatility against several currencies of other major trading partners throughout the year. The U.S. dollar increased by as much as 9.6 percent against the Mexican peso in late 2021 but ended the year with a lower 2.9 percent gain. Conversely, the U.S. dollar fell in value against the Canadian dollar and British pound for most of the year before recovering near the end of 2021, eventually appreciating modestly against both currencies. The U.S. dollar fell by 1.4 percent against the Chinese yuan, countering the broader trend of a U.S. dollar appreciation during the year.

Source: Federal Reserve Board of Governors, “Foreign Exchange Rates,” accessed January 23, 2022.

 

---

 

Bibliography—Macroeconomic Trends

Ahmed, Aquib Iqbal. “Dollar Dominates as Inflation Heats Up.” Reuters, November 15, 2021. https://www.reuters.com/business/finance/dollar-dominates-inflation-heats-up-2021-11-15/.

Constantinescu, Cristina, Aaditya Mattoo, and Michele Ruta. “The Global Trade Slowdown: Cyclical or Structural?” The World Bank Economic Review 34, no. 1 (February 1, 2020): 121–42. https://doi.org/10.1093/wber/lhx027.

de Soyres, François. Alexandre, Gaillard. “Global Trade and GDP Co-Movement,” Federal Reserve Board of Governors International Finance Discussion Paper. May, 2020. https://www.federalreserve.gov/econres/ifdp/files/ifdp1282.pdf.

Desilver, Drew. “Inflation Has Risen around the World, but the U.S. Has Seen One of the Biggest Increases.” Pew Research Center. November 24, 2021. https://www.pewresearch.org/fact-tank/2021/11/24/inflation-has-risen-around-the-world-but-the-u-s-has-seen-one-of-the-biggest-increases/.

Federal Reserve Board of Governors. “Foreign Exchange Rates—H.10.” Accessed January 23, 2022. https://www.federalreserve.gov/releases/h10/current/.

Harding, Robin. “Asia Is the Global Inflation Exception.” The Financial Times Limited, November 25, 2021. https://www.ft.com/content/64864c6e-476b-44d1-92f2-69981272a55e.

International Labour Organization (ILO). “Working Hours Lost Due to the COVID-19 Crisis.” ILOSTAT, April 26, 2021. https://ilostat.ilo.org/topics/covid-19/.

International Monetary Fund (IMF). World Economic Outlook Update, Rising Caseloads, a Disrupted Recovery, and Higher Inflation, Jan 2022, January 25, 2022. https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022.

International Monetary Fund (IMF). World Economic Outlook, April 2022: War Sets Back the Global Recovery. Washington, DC, April 2022. https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022.

Organisation for Economic Co-operation and Development (OECD). “Main Economic Indicators Database: Consumer Prices, Percent Change on the Same Period of the Previous Year.” Accessed March 17, 2021. https://www.oecd-ilibrary.org/economics/data/prices/consumer-prices-complete-database_0f2e8000-en.

Ortiz-Ospina, Esteban. “Does Trade Cause Growth?” Our World in Data, October 22, 2018. https://ourworldindata.org/trade-and-econ-growth.

United Nations Industrial Development Organization (UNIDO). “How Does UNIDO Group Countries by Stage of Development?” Accessed April 15, 2022. https://stat.unido.org/content/learning-center/how-unido-groups-the-countries-by-stage-of-development%253f.

United Nations Industrial Development Organization (UNIDO). “Seasonally Adjusted Quarterly Index of Industrial Production Database.” Accessed March 17, 2022. https://stat.unido.org/database/Quarterly%20IIP.

United Nations Industrial Development Organization (UNIDO). World Manufacturing Production, Quarter IV 2021, March 8, 2022. https://stat.unido.org/content/publications/world-manufacturing-production.

U.S. Department of Commerce (USDOC). Bureau of Economic Analysis (BEA). Gross Domestic Product, Fourth Quarter and Year 2021 (Advanced Estimate), January 27, 2022. https://www.bea.gov/sites/default/files/2022-01/gdp4q21_adv.pdf.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). “Archived Consumer Price Index Supplemental Files: U.S. Bureau of Labor Statistics, CPI-U, December 2021.” Accessed January 24, 2022. https://www.bls.gov/cpi/tables/supplemental-files/home.htm.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). Job Openings and Labor Turnover–December 2021, February 1, 2022. https://www.bls.gov/news.release/archives/jolts_02012022.pdf.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). Job Openings and Labor Turnover–November 2021, January 4, 2022. https://www.bls.gov/news.release/archives/jolts_01042022.pdf.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). “Labor Force Statistics from the Current Population Survey, (Seas) Unemployment Rate.” January 27, 2022. https://beta.bls.gov/dataQuery/find?fq=survey:%5Bln%5D&s=popularity:D.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). “Labor Force Statistics from the Current Population Survey, (Seas) Labor Force Participation Rate.” January 27, 2022. https://beta.bls.gov/dataQuery/find?fq=survey:%5Bln%5D&s=popularity:D.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). “Labor Force Statistics from the Current Population Survey, (Seas) Employment-Population Ratio.” January 27, 2022. https://beta.bls.gov/dataQuery/find?fq=survey:%5Bln%5D&s=popularity:D.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). “Job Openings Reach High of 10.9 Million in July 2021: Economics Daily: U.S. Bureau of Labor Statistics,” September 14, 2021. https://www.bls.gov/opub/ted/2021/job-openings-reach-high-of-10-9-million-in-july-2021.htm.

U.S. Department of Labor (USDOL), Bureau of Labor Statistics (BLS). “Number of Quits at All-Time High in November 2021 : The Economics Daily: U.S. Bureau of Labor Statistics,” January 6, 2022. https://www.bls.gov/opub/ted/2022/number-of-quits-at-all-time-high-in-november-2021.htm.

U.S. Department of Labor (USDOL). Bureau of Labor Statistics (BLS). Real Earnings News Release–2021 M12 Results, January 12, 2022. https://www.bls.gov/news.release/archives/realer_01122022.htm.

U.S. International Trade Commission (USITC). Shifts in U.S. Merchandise Trade, 2020. Investigation No. 332–345, USITC Publication 5239. Washington, DC: USITC, November 2021. https://www.usitc.gov/research_and_analysis/tradeshifts/2020/index.html.