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 recovery of the US labour market continues.  ADP reported 2.369mn jobs were added in June.  This was accompanied by a sharp upward revision to May’s report (initially reported as a loss of -2.760mn job and now revised to a gain of +3.065mn.  That might bring it closer to the May non-farm payrolls report (+2.509mn) but is nonetheless a rather astounding revision, which perhaps encapsulates the problem of accurately measuring the Covid shock.

The disruption from the Coronavirus continues to impact the data with the employment numbers for May showing a significant deviation from expectations and the near 2mn loss reported in the May ADP report.  Indeed, based on the preliminary numbers the economy added 2.51mn jobs over the month, which compares to the 20.69mn jobs lost in April.  Methodological problems are again in evidence ...

China

12th May, 2020 » China April Inflation

While some of the Chinese activity indicators might have perked up, there is no hiding from the disinflationary pressure stalking China’s economy.  April CPI dropped back to 3.3% yoy (4.3% in March) while PPI sunk to -3.1% from -1.5% in the previous month.  And the problem would be even worse were it not for persistent food price pressures as the impact of the earlier swine flue epidemic continues to pressure meat prices.  Indeed, CPI ex-food is now running at just 0.6%.

The monetary mutualisation of Eurozone debt (or its sovereign risk) through the ECB is becoming more likely.  The fiscal monetisation of debt through the issue of Coronabonds is becoming less likely. Monetisation is feasible.  The arithmetic works.  If you add up all projected fiscal deficits in the Eurozone for this year, the total comes to almost exactly the fire power the ECB has approved.

US

29th April, 2020 » US Prelim Q1 GDP

While the decline in first quarter GDP (-4.8% q/q ann.) was not unexpected, the outturn still doesn’t represent the full scale of the economic contraction.  The collection periods of the sample data are focused in the early part of the survey period and the assumptions the models make for the balance of the period rely heavily on these inputs.

China

15th April, 2020 » Hubei is not China

Total Covid-19 infections may just have broken the two million barrier globally. But there are encouraging signs that, at least in some places, active cases have already peaked. Scientists’ understanding of the disease is still in its infancy and there are many questions we don’t yet have clear answers to. In particular, if we’re all exposed to the same disease, why is there such a wide variation in apparent infection, fatality and recovery rates from country to country?

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