Independent Strategy

Macro Matters

July 2021

Independent Strategy Blog: Macro Matters

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.

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