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Independent Strategy Blog: Macro Matters
Global

25th November, 2020 » Weak Europe, US to follow?

The latest google mobility statistics suggest things have stabilised a little.  Although the devil is in the detail.  On the DM side, Europe looks fairly static from last week but this masks a further sharp drop in Italy, which offset something of a bounce in France and the generally steadier picture we’ve seen in Germany and Spain.

We’ve seen a further downturn in the European mobility, as national lockdowns continue to bite, with the UK, France and Italy all falling significantly over the past seven days.  Spain and Germany have been steadier, helped by the fact that they’ve been able to bend the Covid infection curve, with new cases rolling over and doing so from lower infection levels.  Looking at things globally the picture looks more balanced, European weakness offset by ongoing improvements across Asia and in the larger emerging markets.

The latest Google mobility data is starting to show the impact of lockdown 2.0.  What is interesting is how both Lockdown 2.0 is being implemented compared to the draconian measures enacted back in the spring, and how these restrictions are varying in their impact country to country.  The regional divergences we identified last time persist.  This is again a function of the resurgence of the virus in northern hemisphere developed markets, and the measures taken to combat this.

US

6th November, 2020 » US October Payrolls

October Non-farm payrolls number came in at +638k (mkt +600k), leaving the 3m average at +934k.  But the private payrolls number comfortably bettered expectations once again at +906k vs. 690k mkt.  Manufacturing payrolls grew but not as much as hoped (+38k vs. +50k est) while we saw another month of government job losses, -268k following on from -220k in Sep.  Revisions overall were slightly positive though

The tale of diverging fortunes between Asia and Europe (and to a lesser extent the US) persist in the latest Google mobility numbers, as rising Covid infections in certain countries drag on mobility.  The second round of national lockdowns in Europe have started to drag on overall mobility.

UK

23rd October, 2020 » UK September Retail Sales

UK September retail sales boomed again, with the headline print rising a further +1.5% m/m (Consensus Est +0.4%) taking y/y growth to +4.7%, the highest since April 2019.  Core retail sales (Ex-fuel) performed even more strongly, jumping +1.6% (mkt +0.5%) on the month and 6.4% yoy.

The resurgence of Coronavirus in the developed economies, specifically Europe and to a lesser extent (so far) the US is leading to a clear divergence in economic activity  According to the latest global mobility and economic activity data (running through to 16 October), DMs continue to show a deceleration in activity.

Global mobility and economic activity data, published by Google, is pointing to some loss in the momentum of recovery.  Although the mobility indices continue to register small improvements (despite the resurgence of the virus in many places), economic activity is not following through from that.

China

7th October, 2020 » China September Reserves

China’s September reserve numbers showed a modest decline to US$3.143trn from US$3.165trn in August.  And nearly all of this can be accounted for by FX valuation adjustments.  Given the large trade and current account surplus China is currently running though this still implies ongoing outflows of capital, with our rough calculations pointing to an annualised outflow of US$200bn.

To refresh, these indices measure the level of activity as measured against the pre-pandemic level using the Google Mobility Indexes, adjusted by Independent Strategy.  Activity is a smoothed average of the economic and mobility measures, which provides a guide to the current recovery trend.  The data runs through to the end of September.

US

2nd October, 2020 » US September Payrolls

September non-farm payrolls number came in under expectations at +661k (mkt +850k).  But the private payrolls number bettered at +877k vs. 850k mkt, while manufacturing payrolls also beat (+66k vs. +35k est) with a loss of 216k on the government side explaining the headline miss.  There was a sizable upward revision to the jobs gained in August too.

US

30th September, 2020 » US September ADP

ADP reporting a further strong month of job gains (or jobs recovery) with the749k increase and net 53k upward revision to August quite a bit ahead of expectations, although consensus estimates should be taken with more of a pinch of salt than usual given the variables in play.  It was mid-sized firms that drove the increase, alongside small businesses.  There was actually a deceleration in job creation at larger firms, although they still added workers.

These indices measure the level of activity as measured against the pre-pandemic level using the Google Mobility Indexes as adjusted by Independent Strategy.  Activity is an average of the economic and mobility measures.  The data are weighted and averaged over seven days to define the trend.  The data runs through to 11 September.  The current deviation from where things stood pre-crisis is shown in Figure 1.

China

7th September, 2020 » China August FX Reserves

Slight increase in Chinese FX reserves in August, the $10.2bn m/m gain taking total holdings to $3.165trn.  But the build should have been far greater based on exchange rate changes and balance of payment flows.  Indeed, adjusting for FX valuation changes reserves actually fell again slightly (for the third consecutive month).

US

4th September, 2020 » US August Non-farm Payrolls

August’s non-farm payrolls report came out basically in line with expectations (+1.371mn vs +1.400mn consensus).  While we saw a modest downward revision to the July release, the report reinforces the overall “repairs underway” story for the labour market.  Part of this was due to further strong growth in government payrolls (+344k), private payrolls (1.027mn) were rather further from the markets more confident expectations.

We’ve been honing high-frequency indicators to follow the pace of recovery in major economies from the depths of the Covid pandemic lockdowns. Our indicators, entitled mobility and economic activity indexes, measure the level of activity against the pre-pandemic level using the Google Mobility Indices and the Dallas Fed’s Mobility Engagement measure. We adjust these to obtain a smoothed and comparable index of near-time activity.

US

7th August, 2020 » US July Non-Farm Payrolls

Another solid non-farm payrolls report, with 1.763mn jobs added in July, taking the 3-month gain to 9.27mn.  That means the US has now recovered roughly 40% of the jobs shed during the turmoil of March and April.  The report cements confidence that the labour market continues to repair, mirroring the conclusions of yesterday’s weekly jobless claims, if not the lower than expected ADP print we got on Wednesday.

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