Independent Strategy

Macro Matters

April 2021

Independent Strategy Blog: Macro Matters

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.


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