All At C
07 June 2021
The key factors influencing markets at the moment conveniently seem to start with the letter ‘C’.
5 min read
07 Jun 2021
Household deposits rose again in April, and are now close to £1.7trn. Investec Bank calculates that £140.6bn of “excess saving” has been built up during the pandemic, although the pace is slowing as the economy re-opens. This also indicates that consumer spending has the capacity to remain very strong as the country tries to return to normal. If anything is to get in the way (apart from an unwelcome variant), it is the lack of labour supply in the hospitality industry, with widespread stories concerning a shortage of both front-of-house staff and qualified chefs.
559k jobs were added to the payroll in May. It was a nice recovery from April’s 278k, but below consensus expectations, and thus viewed as not forcing the Fed’s hand in terms of tighter policy more immediately. Most gains came in re-opening sectors such as Leisure & Hospitality and Education. Wage gains of 0.5% m/m caused a bit more concern, evidence, perhaps, of a tighter labour market despite a still high unemployment rate of 5.8%. We need to see what happens as COVID-related unemployment benefits run down over the summer.
Greater optimism was evident in the latest PMI surveys despite some COVID setbacks, as businesses continue to “look through” the current malaise towards a more fully vaccinated world (or Europe, at least). There were gains in both the Manufacturing and Services components, leaving the Composite measure at 57.1 vs 56.9. As in other regions, though, supply chains remain constrained, with supplier lead times increasing again.
China’s trade data for May showed exports a little below expectations and imports in line, leaving the overall surplus slightly higher at $45.5bn. By major export category, moving-in related household appliances and lighting continued to be strong drivers. The cross-product patterns seem to be consistent with the view that strengthening exports of non-COVID-related products are offsetting weakening exports of COVID-related products as the global vaccination initiative proceeds. Elevated commodity prices continue to support imports in value terms.
Source: FactSet
Source: FactSet