Economic Highlights

GDP growth of just 0.4% m/m in October represented a further slowdown from the summer bounce. The 3m/3m figure looks a lot better at 10.1%, although that was down from 15.5% in September. Of course, this is all before the latest round of restrictions, and the number is generally expected to turn negative through November. The economy is now 7.9% smaller than it was pre-Covid. As one might expect, Manufacturing and Construction were firmer than Services. We would expect both fiscal and monetary policy to remain extremely supportive at least through the winter months – probably longer.

The weekly Initial Jobless Claims continue to show that the US economy has lost some of its recovery momentum. Claims rose to 853k (f/c 725k) in the week ended 4th December from 712k previously. Perhaps surprisingly, Consumer Confidence, as measured by the University of Michigan survey, rebounded from 76.9 to 81.4, reversing most of November’s decline. Some of that might have been down to vaccine news, but some analyses suggest a burst of optimism from Democrats following Joe Biden’s election victory.

The European Central Bank announced a new package of easing measures. These included a boost to its QE program via its pandemic plan (PEPP) of €500 billion, and an announcement that purchases will continue until at least March 2022, nine months longer than previously envisaged. It also extended the reinvestment of payments from maturing bonds bought through the PEPP until (at least) end-2023. In addition, there was an extension to the bank liquidity support scheme, TLTRO3, until December 2021, adding three further loans. The period of favourable loan terms was also extended by 12 months to June 2022. A firm commitment to continuing policy support rather than game-changing developments.

China’s Politburo met last week to outline policy for 2021. 5 key points: 1) The economy has improved; 2) economy policy tone is more neutral (from stimulative); 3) Greater focus on domestic demand-side reform; 4) Promotion of technological innovation: 5) Some push-back against monopolies in the platform economy.