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Macro Matters

Macro Category

Independent Strategy Blog: Macro Matters

Despite the resurgence of Covid cases in certain places, the global economic recovery remains on track. That’s based on Google’s fast track data (through to March 27th).  Europe, which suffered last week, was on the up again with improvements in Germany, France and Spain.  The dip in Italy also looks to have based out, helped by a pick-up in the last couple of days.  The UK meanwhile continues on its improving streak.

Google’s fast track data has painted more of a mixed picture over the past week (to 20th March).  For the most part the overall trend is still one of improvement, but fairly pronounced declines in a couple of countries in our sample has taken a toll and is rather concerning.

The latest batch of Google mobility data, which take us up to 13th March, hints at a slight slowdown in the rate of improvement, amid some setbacks in some of the individual countries we survey.  But this looks like ebb and flow and doesn’t detract from the underlying trend, which remains one of improvement.

The improvements made in mobility and economic activity continues based of the latest batch of google mobility data.  The series take us up to 6th March and based on that the recovery remains on the front foot, underpinned by expanding vaccine coverage and the resulting boost to confidence that has delivered as well as the overall decline in infection rates, even if that trend looks to have flatlined more immediately.

February Non-farm payrolls recorded a 379k gain, comfortably exceeding the +182k median forecast.  This leaves the 3m average at +80k.  Private sector payrolls were significantly better than the headline print at +465k, manufacturing added +21k jobs while government dropped -86k.  The surprise might have been even higher were it not for the weather events in Texas, which was behind the 939k people not at work due to the weather (Feb average is 385k).  The unemployment rate ticked down to 6.2% and participation was unchanged at 61.4% despite this.  The workweek did drop though, to 34.6, although this is from a rather elevated 34.9.

Based on Google mobility statistics we’re seeing a sustained improvement in activity now.  This is only likely to gather speed as vaccine coverage continues to expand, restrictions ease, alongside the seasonal improvements one should expect upon the arrival of spring, and, with a bit of luck, some UV.

The past week hasn’t really seen any substantial shifts in activity, even if it’s increasingly clear that we’re past the worst as Covid cases continue to decline globally and the first signs of the vaccine impact start to percolate into the data. In the overall rankings, it is the Europeans that remain the most depressed compared to pre-pandemic levels of activity, with the UK languishing at the bottom of that league.  Germany and France took a step back based on the data, while there was a further mild improvement in Spain and Italy.

Global

10th February, 2021 » Early signs of recovery

With the continued decline in new reported Covid cases globally, it is no surprise that we’ve started to see an improvement in overall activity levels.  At least based on the Google data. Indeed, all but one of the countries in our sample recorded a week on week improvement.  The worst was France and that was simply stable.  Europe remains at the bottom of the pile in terms of overall activity, but the corner has certainly been turned and we’d expect to see this pick-up to extend and accelerate over the coming weeks.

Global

3rd February, 2021 » Steady, ahead of recovery

Another week of relative stability as measures to contain the pandemic remained static in most places.  More draconian restrictions in Europe leave the region at the bottom end of the spectrum while EMs and Asia rate far better.

Covid-19 vaccinations rising at a rate of around 40% per week.  Not much difference between EU 38%, UK 30%, US 36%.  Odd given vaccine wars!  The percentage of the population vaccinated at least one time now stands at 1.2% globally, EU 2.7%, US 8.4%, UK 13%.  While this is rising fast, this is still way short of herd immunity. And the percentage of the population fully vaccinated is still very low — less than 1% of the population everywhere except the US, Israel and a few small states (UK 0.7% and EU 0.4%).

Global

27th January, 2021 » Stuck in the doldrums

Economic activity seems to be bedding down in the doldrums amid lockdowns and other varying restrictions on activity.  Europe continues to suffer the most, although weak activity remains a broad phenomenon.

The noise of the holiday period might have overstated the extent of the decline in economic activity but there is no doubting that the backdrop remains very depressed.  Lockdowns and other restrictions remain the driver of this, with Europe bearing the brunt of the hit.  But high levels of Covid infection continues to dampen the economy even in places where efforts to tackle the virus are less draconian.

As we move into 2021, we are getting a clearer picture into the extent of the slowdown in economic activity that the resurgent Coronavirus has triggered.  Although the Google mobility indices were already indicating a sharp deterioration, the scale of the decline reported through to the turn of the year was exaggerated by holiday effects, as we noted last time.  Data through to the 8th of January, which was released yesterday, gives us a clearer picture of how things stand.  And while it is not quite as bleak as over the Christmas and New Year period, the data still paints a fairly poor picture of global economic health.

December Non-farm payrolls recorded a -140k drop, quite a bit below the markets +71k guess.  This takes the 3m average down to +283k.  Private sector payrolls were a little better than the headline print at -95k, helped by manufacturing which added +38k jobs while the decline in government moderated to -45k.  That was still the fourth consecutive decline but is largely census related.  Despite the headline miss revisions were very positive, +91k in November alone

China

7th January, 2021 » China December FX Reserves

December saw a further solid increase in Chinese FX reserves, the headline holdings number rising US$38.03bn m/m to US$3,216bn.  Again more than half of the rise can be attributed to valuation adjustments as the US dollar continued to depreciate against the balance of the PBoC’s reserve holdings.

The re-acceleration of Covid infections has hit mobility hard over the past two weeks.  Although there are clearly seasonal factors at work (which the Google data series do not account for), we’ve clearly seen a pronounced deterioration in both mobility and economic activity above and beyond what could have been normally expected. This has been concentrated in Europe, with a particularly severe drop in Germany where our economic activity measure suggests things are even worse than at the peak of the crisis last April.  Italy and the UK have also registered steep falls, while Spain and France have seen more modest drops.

The ECB’s fingerprints remain all over the Eurozone money supply and credit numbers, with M3 hitting 11% yoy in November, the strongest reading we’ve seen thus far. This continues to be propelled by M1 which is up 14.2% yoy, overnight deposits up €1.053trn year-to-date.  We’ve also hit something of a milestone with overall M3 now back at pre-GFC/EZ debt crisis trend levels.

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