Economic Highlights

Monthly GDP figures revealed growth of 0.4% m/m for February, with some welcome positive revisions to January’s figure (-1.4% vs -1.7%). Even so, that still leaves the economy running 7.8% below its output level a year earlier. The Bank of England announced that Chief Economist Andy Haldane would be stepping down from the Monetary Policy Committee after June’s meeting. The fact that he is one of the more “hawkish” members raised hopes for more “dovish” policy in future, although we await news of his replacement. When dinner parties are allowed again, one enduring topic of conversation will probably be house prices. Rightmove estimates that they are +5.1% y/y on average.

A “Goldilocks” week for US data. Although headline CPI of +0.6% m/m and +2.6% y/y were both a touch above consensus expectations, the “whisper” numbers suggested something even higher, and so there was instant relief. This was most visible in falling bond yields. Later in the week, Retail Sales (headline +9.8% m/m), and Weekly Jobless Claims (576k vs 769k previously) cemented positive sentiment about the US recovery, as did the Philadelphia Fed Business Outlook Survey, with its highest score since 1973.

The expectations reading of Germany’s ZEW survey unexpectedly fell to 70.7  from 76.0 (f/c 79.0), perhaps in response to the rise in Covid cases locally. And yet the Current Situation reading was better than expected (although still sharply negative, admittedly) at -48.8 vs -61.0 (f/c -54.1). Now that vaccination rates are catching up across Europe, sentiment should  continue to improve.

Q1 real GDP growth came in broadly in line with expectations, while Industrial Production and Fixed Asset Investment growth in March both missed expectations. Q1 real GDP grew 18.3% y/y, reflecting the comparison to the weak lockdown period in early 2020. The q/q growth figure of 0.6% probably gives a truer reflection of the current situation, given the gradual tightening of policy. The consensus forecast was +1.5%. March Industrial Production came in at +14.1% y/y, vs a consensus forecast of +18%. Fixed investment growth also slowed in March, but the y/y figure was still +25.6%. Retail Sales, though, did beat expectations, with growth of 34.2% y/y. There was nothing outstanding to pick out from the finer details, and China’s economy remains on track for growth of more than 8% this year.