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Economic data continues to send positive signals

US data continues to point to recovery in the world’s leading economy, while despite the proliferation of the ‘Delta variant’ there are ongoing reasons to be positive about the outlook for recovery in human health too.

Key takeaways

  • The latest survey data indicated that US economic activity continues to rebound. The ISM manufacturing survey has proven over many decades to be a powerful leading indicator of US economic activity, despite the fact that manufacturing accounts for a relatively small part of the US economy. June’s reading came in around the level last seen in mid-2004, when the economy was rebounding following the bursting of the so-called tech bubble.
  • Meanwhile, US employment data is also improving, albeit slowly. Since May last year, ‘non-farm’ payroll data (a measure of the US workforce which excludes agricultural workers and a small number of other sectors) has shown improvement in all but one month. In March and April 2020, 22.4 million jobs were taken out of the US workforce due to the COVID-19 pandemic, but a total of 15.6m jobs have since been added back.
  • On home shores, UK household deposits (savings) declined in May. UK consumers did continue to repay credit card debt, they also borrowed more than they paid off for the first time since last summer. Data suggests that this borrowing was fuelled by personal finance and car loans.
  • In pandemic news, despite the rapid increase in new cases in the UK, registered deaths are back to normal levels for this time of year. Nevertheless, the ‘Delta variant’ of the COVID-19 virus poses a major risk, and its proportion among cases has doubled (at least) over the past week in Germany and France. Further afield, Australia is also struggling to contain an outbreak of the Delta variant, despite an extremely low number of cases overall.
  • With this in mind, it is important to remind ourselves that the vaccines are also working, and vaccination programmes are reducing hospitalisations and deaths versus the peak of the pandemic crisis. Even in London, which has the lowest rate of vaccination in the country, the evidence that vaccines are working is compelling. New cases are currently concentrated in younger age groups, with fatalities fortunately relatively few.

Weekly market moves

  • A positive week overall for global stock markets saw emerging markets play the laggard, underperforming their developed market counterparts in a strong US dollar environment.

  • Bond prices rose marginally over the week (bond yields, which move inversely to prices, fell).

  • Commodities performed well over the seven-day period, with oil and precious metals (such as gold and silver) in positive territory.

What to look out for this week

  • This Wednesday will see the release of the FOMC (Federal Open Market Committee) minutes which will give more insight into the outlook for US interest rates, especially after recent policymaker suggestions that we could see rate hikes in 2023.

  • At the end of this week, the G20 finance ministers and central bank governors will meet in Venice, where they will continue to discuss changes to global corporate taxes.

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