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.

The headline Q2 GDP number looks like quite a big miss as +6.5% q/q ann. versus the +8.5% mkt median.  And Q1 was revised down a touch too.  But the underlying picture still looks pretty robust in reality.  In fact, the bulk of the miss could be attributed to the ongoing disruptions that Covid continues to generate, specifically in terms of the further sharp decline we saw in inventories, which knocked 1.1% pts from that 6.5% rate.  Government spending was also notably weak (its contribution knocking a further -0.3% pts off the headline), particularly government investment.

Amid the ongoing spread of the Delta variant the Google activity data through to 24th July is showing a fairly clear picture as to where the damage is being done.  And its perhaps not much of a surprise to see that the places where vaccine rollout has been most efficient are faring rather better than in the countries where efforts have been rather more pedestrian.

Covid-19 Database Weekly Update: Vaccinations, Daily Infections, Fatalities, Active Cases, Hospitalisations for regions and countries covering last week and until 27 July  for vaccinations.

The Google activity data through to 17th July continues to support the recovery thesis, with global activity remaining near its recent peaks and economic activity holding above its pre-pandemic starting point (+3pts).  Mobility meanwhile has eased a little bit, remaining 17pts below where it stood pre-Covid.

Vaccinations Total global vaccinations administered rose 6% (down from a growth rate of 7% in the prior period), an increase of 210mn.  The rate of increase fell everywhere in both developed and developing economies, with the exception of Southeast Asia.

The Google activity data through to 10th July throwing up nothing to alter the underlying view that the economic recovery continues to move ahead.  Global activity is trundling along near recent highs.  That is important given the recent uptick in Covid cases as the Delta variant continues to spread – largely we would stress among unvaccinated groups, which also happen to be in most cases those that are unlikely to suffer from the more severe symptoms that forced lockdowns earlier in the Pandemic.

Strong payroll gains with some additional impetus from upward revisions.  Overall the economy added 850k jobs in June (mkt 700k) up from 583k in May (revised from 559k), of which 662k came from private payrolls (mkt 600k).  Manufacturing added 28k jobs and government 188k.  Labour participation unchanged at 61.6% and the unemployment rate actually ticked up to 5.9%, as job gains were netted off with an increase in the labour force.  Note prime age participation (25-54) increased for both male and female workers.  This is positive and should dampen worries about labour scarcity.

Looking at the Google activity data through to 26th June it looks as if there are some early signs that the recent pick up in infections/increase in risk perceptions has started to eat into activity a little.  But even in places where infection rates have risen fairly rapidly – the UK for example – the corresponding drop off in activity has been mild.

Covid-19 Database Weekly Update: Vaccinations, Daily Infections, Fatalities and Active Cases for regions and countries covering the last 7 days, up to 30 June 2021. Key investor relevance: 

  1. The data shows a sharp split between developing countries, doing better, and developed countries still mired in the pandemic, but now with rising vaccinations from a low base
  2. The major risk is that the Delta variant spreads in developed countries that have opened up.  Of course, there is now a greater tolerance for “just living with acceptable levels of Covid-19”.  But there are limits.

Total global vaccinations rose 11.8% or by 260mn – roughly stable on the week.  Vaccinations per 100 of the population is now above the critical 30 level in all regions except South Asia (India 20), Russia (24) and Africa (3).  Share of population fully vaccinated: world 10%, EU 24%, US 45%, UK 46%, South America 11%, Asia (ex China, which does not report) 7.9%.

Google mobility indices show a further and broad based improvement in the week to June 12th.  Global economic has all but recouped its post-Covid losses, but mobility is still some distance behind (a deficit of ~17% based on the data), although the trend here remains an improving one too.

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