In China, total industrial sector profits surged by +179% year-on-year (YoY) in the first two months of 2021. This incredibly strong figure was supported, in large part, by a weak comparable from 2020 (January to February 2020 was the height of the pandemic in China), but it still demonstrates the extent of China’s economic recovery post-pandemic. The NBS Non-Manufacturing PMI rose to a four-month high of 56.3 in March (any PMI reading above 50 indicates expansion) – the twelfth straight month of growth in the Chinese service sector. The Manufacturing PMI also rose in March, to 51.9, beating consensus estimates of 50 and hitting its highest point since December 2020. These latest data point to a continued strong economic recovery in China through 2021, with some evidence this may be accelerating.
In the US, the Conference Board’s Consumer Confidence Index (measure of broad consumer spending outlook) surged to 109.7 in March – the highest it has been in a year, and a major beat against expectations. The S&P CoreLogic Case-Shiller Composite Home Price Index jumped +11.1% YoY in January – a major jump that beat expectations and the biggest annual increase in house prices since March 2014. The Federal Reserve Bank of Dallas General Business Index for Manufacturing in Texas, a key measure of state manufacturing conditions, surged +11.7 points from the previous month to 28.9 in March – the highest level since August 2018. These latest data are very positive signals that we are seeing a strong economic rebound in the US economy, which is set to continue.
The optimism in the aforementioned data is not, unfortunately, being seen in Europe. According to the IFO Economic Outlook for the Eurozone, Q4 2020 GDP dropped 0.7%, and expected GDP growth for Q1 2021 is negative 0.4%, then moving into mild recovery with +1.5% in Q2 2021 and +2.2% in Q3 2021. This is a mild rate of recovery by the standard of the rest of the world, and likely a function of the new wave of COVID infections delaying re-opening. The vaccine-led recovery in Europe will come eventually, but until the roll-out effectiveness improves we will likely continue to see relatively disappointing data for Europe compared with the other major economic centres.
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