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Macro Matters

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Independent Strategy Blog: Macro Matters

Google activity data through to 17th remains positive, with none of the anxiety present in markets transmitting into the real economy while all the fuss about the Delta variant also seem to be having minimal impact in the real world – a function of the hugely successful vaccine programmes that continues to rollout globally and has reached effectively full coverage in nearly all of the major economies.

Google activity data through to 10th September shows a continuing pick-up in activity, underpinned by a continuing rise in mobility.  Again, leading the drive higher has been Europe, notably Germany and Spain, but France, Italy and the UK also registered decent improvements.  The bounce over the last couple of weeks is really a function of the ending of the summer holidays and start of the new school year.  But economic activity is also looking fairly solid too.

Labour market growth slowed a little more than expected in August, amid some disruption to the services recovery from the Delta strain.  But there were still +235k jobs added (mkt +750k) and we saw upward revisions to prior months, so the net impact was still positive, leading to a further decline in the unemployment rate to 5.2% from 5.4% and the U6 rate dropped down to 8.8% from 9.2%.  The participation unchanged at 61.7%.  Govt payrolls shrank a little after recent strong gains (-8k) but manufacturing continued to grow (+37k).  Weekly hours were 34.7 from a downward pay revised 34.7, which by itself remains elevated from its pre-pandemic range.

Google activity data through to 27th August showing some stabilisation.  The overall picture does not look too dissimilar to last summer when economies were operating relatively normally between the first and second waves.  The picture for economic activity remains more positive than for overall mobility, as travelling habits and restrictions in some places continue to crimp that side of things.  But as we’ve seen this year that hasn’t stopped the overall economic recovery from continuing.

Another month of strong payroll gain, the headline number showing a net gain of 943k jobs (mkt 870k) while revisions also shifted upward (a net 146k added for the past three months).  703k of the July gain came from private payrolls (mkt 700k).  Manufacturing added 27k jobs and government 240k, accounting for all of the surprise.  Labour participation edged up to 61.7% which left the unemployment rate at 5.7% (down from 5.9% but above the 5.4% median guess).  Prime age participation (25-54) saw a further surge, for both male and female workers.  This is a positive trend and reinforces our lack of concern for labour scarcity.  It’s important to contrast this with the post-GFC period where prime participation continued to fall after the initial crisis.

Google activity data through to 31st July continues to paint a broad picture of resilience, with limited impact from the increase in Covid cases.  Even in the economies in our group that have been most impacted by the Delta surge, the effect on activity has been pretty limited and economic activity continues to improve.

Global daily new infections increased 7% (after 8%) in the latest 7 days.  Total active cases rose by 8% for the second week.  These are not the exponential increases one would expect if Delta were going to blow the top off the lid of the global economy.  The drivers were developed economies (EU, US and Japan) and SE Asia.  Global fatalities per day fell from 10k to 9k.

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.

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