A Half Of Two Quarters
05 July 2021
As we wrap up the first half of the year it's clear that there were some distinct differences between the first three months and the second.
4 min read
05 Jul 2021
Economic Highlights
Welcome to our Economic Highlights, bringing you market updates from across the UK, US, Europe and China, as well as the FTSE weekly winners and losers.
UK
The second estimate of Q1 UK GDP saw a slight downward revision to -1.6% q/q. Attention has already shifted to the Q2 rebound following the reopening of the economy, with monthly data pointing to a robust recovery.
The household saving ratio, jumped from 16.1% in Q4 to 19.9% in Q1 – the second highest quarterly reading since the series began in 1963 (after the peak of 25.9% in Q2 2020). This corroborates the evidence from household bank deposit figures of a substantial amount of savings having been amassed during the pandemic. The release of even a small part of these excess savings has the potential to boost GDP growth significantly and turbo-charge the recovery. Investec Bank’s forecast for 2021 GDP growth is currently 7.9%.
US
US Nonfarm Payrolls rose 850k in June, above consensus, reflecting a continued boost from reopening. The household survey was more mixed however, with a surprising rebound in the jobless rate from 5.8% to 5.9%. Hourly earnings rose sharply among hospitality workers, but the economy-wide pace was close to expectations at +0.3% m/m.
Adjusted measures were more positive, with the U6 underemployment rate, for example, improving by 0.4% to 9.8%. This reflected a decline in the number of part-time workers for economic reasons (-644k). All in all, though, the report failed to move the needle, and, if anything, was about as close to a “goldilocks” outcome as investors could have hoped for.
Europe
The EU jobless rate fell by a surprisingly high 382k in May, although the unemployment rate fell just 0.1% to 7.3%. It peaked at 7.7% in September 2020, having been as low 6.6% pre- COVID.
The latest PMI survey revealed that manufacturers are hiring new workers at the highest rate for at least two decades (since these surveys began). These numbers to not include workers still furloughed, although those are also dropping quickly now.
Japan
Despite all the worries about the latest COVID case increase, more restrictions and what could be empty venues for the Olympic Games, the Bank of Japan’s Tankan survey index rose from -5 to +14, indicating robust output growth.
Manufacturing equipment demand from China was strong. However, Services activity was more subdued, as might be expected. Japan is well behind other developed countries with its vaccine programme, but is beginning to catch up.
China
The Caixin China General Services Business Activity Index (headline services PMI fell sharply to 50.3 in June from 55.1 in May. Sub- indices suggest growth of new business plunged in the services sector, employment contracted, and inflation pressure eased.
The main influence appears to be the resurgence of COVID-19 infections in the Guangdong province, which has led to port closures and much slower trade.
Source: FactSet
Source: FactSet