Independent Strategy

Macro Matters

Working through the latest Google mobility update (through to 5th June) you get an increasing sense of normality.  Although most places are still showing activity levels below where they were pre-pandemic, the gap looks pretty small and momentum remains strong.  Of our survey group four recorded w/w declines but really this is part of the ebb and flow rather than anything more sinister going on.  Even India has managed to move higher as the recent Covid wave there continues to abate.

While the US added 559k jobs in May according to the non-farm payrolls report, this marked another downside surprise for the series where the median estimate was up at 650k.  There was a modest upward revision to the April numbers (278k vs. 266k initially reported) but that doesn’t move the needle.  Private payrolls growth came in at 492k while manufacturing payrolls added 23k job and government 67k.  The unemployment rate dropped to 5.8% from 6.1% but this was aided by a decline in participation (61.6% from 61.7%).

The latest Google mobility update (through to 29th May) continues to show strong progress towards normalisation of the global economy. Of our survey group only three (23% of sample) recorded a w/w decline in activity and all of this was in places that shouldn’t really be a cause for concern. And the most notable victim of the virus (India) has finally managed to bounce. We also saw upticks in Japan, where an increase in cases had also worried.

The latest Google activity figures (through to 22nd May) continue to support the strong global recovery narrative with the latest improvement being driven by ongoing gains in Europe.  Indeed France and Germany led the increase in activity last week, with Italy, Spain and the UK also in our top group (alongside Russia).  Mexico, Australia and the US recorded small gains too.

In the last 7 days: Global Daily Infections fell 19.6% and the RO/RE rate has fallen to 0.79 from 0.89 and 1.36 nearly a month ago.  This level of RO/RE indicates a waning pandemic.  Daily infections fell in all regions except Latin America and Asia.  In India daily case fell from 341k/day to 263k/day.

Israel Ceasefire in Gaza fairly predictable, the assault has gone on for a sufficiently long time to serve most political objectives of the warring parties.  As such it is a sustainable halt to hostilities, repeating the cycle we’ve seen numerous times in the past. There are two fights going on here, on is technological and the other political. Israel have struck Hamas very harshly, depleting its stockpiles and damaging its infrastructure.  It has also demonstrated its technological capabilities to defend Israel from rocket attacks (for the most part) — Hamas were not able to overwhelm Iron Dome despite their best efforts.

On a global basis the latest Google activity figures (to 15th May) show a further modest improvement in the recovery rate, maintaining the solid uptrend we’ve seen since the start of the year.  Obviously we’ve seen setbacks in certain places, the most extreme case being India, but this hasn’t been enough to move the global needle.

The headline non-farm payrolls jobs figure surprised on the downside in April, with 266k jobs created versus the median forecast of 978k.  And the March figure was also revised downward by 146k.  Obviously, it was private payrolls that disappointed (+218k vs. 893k survey) while manufacturing jobs contracted slightly (-18k).  Government couldn’t make up for that but did offer a +48k contribution.  The unemployment rate actually ticked back to 6.1%, a result of the 0.2% pt improvement in participation and the work week ticked up again.

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