Old Dogs, New Tricks
18 January 2021
Is it best to bank your profits or run with your winners?
5 min read
18 Jan 2021
GDP fell 2.6% m/m in November, as the second national lockdown hit activity. Even so, this was not as bad as expected, suggesting that some resilience to lockdowns has built up. There were also some helpful upward revisions to past data, although no disguising the hit to the accommodation and food service sectors (-44%). A double-dip back into recession in Q4 might yet have been avoided – although it will, in all probability, only postpone that event until Q1’21.
Retail Sales fell 0.7% m/m in December, with the Core measure -1.9%, both below consensus. There were also downward revisions to previous months’ data. The latest Weekly Jobless Claims picked up to 965k (from 784k), and there was also a fall and a miss for the Empire manufacturing survey. All of which is indicative of something of a hiccup in the recovery trend we have seen in the US. With new Covid cases at elevated levels and rising, and the possibility of tighter restrictions being imposed by the incoming administration, there is scope for a longer period of lacklustre data, but support will be provided by the latest stimulus package and possibly other new measures yet to be introduced.
Industrial Production handily beat expectations in November (+2.5% m/m), again providing the main area of strength in Europe’s economy. The one thing that Europe continues to boast is a big current account surplus, just over €25bn in November. That helps to continue to provide support to the euro.
China’s GDP grew by 6.5% in Q4’20, a quicker rate than pre-pandemic, beating a consensus forecast of 6.1%. Overall, the Chinese economy grew 2.3% in 2020. The recovery was driven by higher industrial production which grew 7.1% in Q4. Retail sales, continue to lag, rising 4.6%. China's trade surplus hit its highest ever monthly level in December, with exports rising 18%. New headwinds are apparent, however, as China reported an increase in Covid-19 cases. On Sunday, Beijing reported two new cases, while Hebei, the province surrounding the capital reported 54 new cases. Jilin and Heilongjiang provinces recorded 30 and 7 Covid-19 cases respectively. These increases have prompted new lockdowns.
Source: FactSet
Source: FactSet