Tapering vs QE Stock-Flow Confusion | US Govt Shutdown FAQ | Euro Chart Pack: Fast Re-Start | Infrastructure-Energy Outlook | ESG Roadmap and Reminder

Welcome to another edition of?Essential Economics! As a growing number of central banks begin tapering and commentators talk about the end of QE, I blog on the potential confusion between stocks and flows . The drama in Washington DC continues around the debt limit and potential shutdowns; our US sovereign team weighs in. Europe continues to put up strong economics numbers and our latest chart pack provides the details. Challenges around energy transition continue to mount despite the strong recovery argues our latest infrastructure and energy report . And our global head of sustainable finance Bernard de Longevialle provides a roadmap and some reminders around our ESG approach . Enjoy!

QE and Tapering: Keeping Stocks and Flows Straight

Economists are sometimes accused of mixing stocks with flows. (Have you used a debt-to GDP ratio recently?) The latest example is tapering versus QE. As the economic rebound from COVID continues, central banks are beginning to normalize monetary policy settings, in some cases by tapering their asset purchases. ?This is not the end of QE, as my recent blog argues, but only a first step. Eliminating QE - excess reserves in banking sectors that are holding down yields and spreads – will take years.

To read the blog, click here .

Sovereign View on US Government Shutdown

Our sovereign team continues to monitor developments as a potential U.S. government shutdown looms and the government remains at an impasse over the debt ceiling. We expect that Congress will address the debt ceiling on time, either raising it or suspending it, understanding that the consequences on the financial markets of not doing so would be severe and extraordinary. It would be unprecedented in modern times for an advanced G-7 country, like the U.S., to default on its sovereign debt.

Source: Peterson Institute of International Economics.

In contrast with failing to resolve the debt ceiling issue, a potential government shutdown does not have a direct impact on the sovereign's creditworthiness.

To read the FAQ, click here .

European Chart Pack: Faster Re-Start

Our European macro team argues that the economy has responded better to the grand reopening than we expected, with consumer demand for services as the main driver. This led us to revise our 2021 GDP growth forecasts upward for almost all countries we cover. Vaccination progress has enabled government to lift most restrictions to economic activity, but the pandemic is not yet behind us, and uncertainty remains regarding potential future resurgence of the virus.

The rebound has also led to raw material shortages and soaring energy prices, and we expect producers will start passing some of the higher costs to end users from next year, albeit only gradually.

To access the chart pack, click here .

Infrastructure and Energy Outlook

While the economic outlook improves, the challenges presented by the energy transition continue to mount. New ambitious 2030-2035 global policy objectives show the challenge ahead to double installed renewables electricity generation sources this decade. Price affordability will become an increasing focus as the roll-out of renewables and transition away from oil and gas will come at a cost. Changing consumer behavior will be equally important.

This illustrates the limited alternative renewables currently on offer in an economy that remains anchored in hydrocarbons.

To read the full report, click here .

ESG Roadmap And Reminders About Our Approach

At S&P Global Ratings, we analyze ESG factors in two separate ways: i) as part of our analysis of credit ratings, and ii) as part of our ESG-specific evaluations and opinions. As part of our commitment to transparent communications, in this report we lay out our plans, the indicative timeline, and reminders about key concepts--such as how ESG factors influence creditworthiness, the importance of materiality, as well as where to find our views about an entity's ability to manage ESG risks and opportunities.

We remain committed to providing a breadth of analytics related to environmental, social, and governance factors.

To read the full report, click here .?