Independent Strategy

Macro Matters

A deeper look at data

Independent Strategy Blog: Macro Matters

Macro Matters is the Independent Strategy high frequency research area.  We aim to try and offer a glimpse into our analytical process by making available some of the files and data we use to analyse macro developments and financial markets.  It also includes some supplemental weekly technical analysis, which helps us measure shifts in sentiment and bigger changes in trends, complementing the work we do on the macro side. If you’d like to discuss anything in more detail, please reach out.

Analysing the weekly vaccinations data some things stand out:

  1. Daily infections are falling everywhere except in South Asia (+18% on the week to 384k/day).
  2. EU daily infections are down 19% for last week (vs. previous seven days).
  3. Global vaccinations are up 14% on the week. Some signs of vaccine fatigue in the US (+8%) & UK (+6%).
  4. The EU crossed (what I think is a critical) threshold of 30 vaccinations per 100 population with 33. Share of the population with 1 shot or more is 24% up from 21%.

During lockdown people shopped online.  Not all needs could be met online.  So pent up saving grew to 4-8% of GDP most places.  Now it is expected some of the pent-up savings will be spent as Pandemic declines in rich countries.  It may be more in the EU than expected.  Because it is harder to shop online in the EU.  So pent up demand may be greater.

Post-Easter recovery has gathered pace with a substantial improvement in European mobility and economic activity over the past week (to 17th April).  The rebound was fairly even across Germany and Italy, with a more modest improvement in Spain, although that comes from a substantially better starting position.  France also saw a pick up in activity, but given higher Covid case loads this was modest in comparison.  And with the UK lockdowns easing France now carries the mantle of the weakest of our survey group, a position it looks set to retain for a while.

Attached are the vaccination figures for major areas. Global vaccinations rose 14.5% on the week. The EU is now at 25 (up from 21 last week) shots per 100 people — getting closer to the 30 level that may be the threshold at which vaccines may start to limit transmission. But still only 18% of the population has had at least one shot.  Still way behind the UK, US, Israel etc on both measures. But EU has faster vaccination rate, so the gap should close in about 6 weeks on shots per 100 pop basis.

Easter drag having an impact across most markets, leading to a drop in overall global economic activity over the past week (to 10th April).  This seasonal drag is mixed up with tighter restrictions in many European countries in reaction to the more recent increase in Covid cases and slower rollouts of vaccines.  But comparing the improving countries with the laggards still gives us some insights as to the severity of the drop here, with around half the decline in France Germany and Italy appearing to be a function of Easter, with the rest the virus.

March surprised mildly to the upside of consensus expectations, headline CPI hitting 2.6% yoy following a 0.6% mom increase.  The main driver was the transport component (i.e. gasoline prices).  These went from a net drag of -0.39%pts last year to a +0.96%pt driver of the yoy rate this time round, so a net swing of 1.35%pts, or half of overall yoy CPI rate.

Vaccinations rose 15% for the week to April 11. But.... What matters going forward for markets in the vaccination data is that the EU has reached a 20% vaccination rate (defined as % of population to receive at least one shot).  The rate at which there seems to be a market decline in infections is 30%. At current vaccination rates the EU will get there in 4 weeks and will approach the current UK and US rates in 8 weeks.

Despite the resurgence of Covid cases in certain places, the global economic recovery remains on track. That’s based on Google’s fast track data (through to March 27th).  Europe, which suffered last week, was on the up again with improvements in Germany, France and Spain.  The dip in Italy also looks to have based out, helped by a pick-up in the last couple of days.  The UK meanwhile continues on its improving streak.

Google’s fast track data has painted more of a mixed picture over the past week (to 20th March).  For the most part the overall trend is still one of improvement, but fairly pronounced declines in a couple of countries in our sample has taken a toll and is rather concerning.

The latest batch of Google mobility data, which take us up to 13th March, hints at a slight slowdown in the rate of improvement, amid some setbacks in some of the individual countries we survey.  But this looks like ebb and flow and doesn’t detract from the underlying trend, which remains one of improvement.

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