Here Comes the Sun: Less Fear and More Hope
March 9, 2021
Investors are believing more and more that 2021 is gonna be a good year at least for those fortunate enough to have survived 2020.
- The OECD revised up projected growth this year rather substantially.
- The mistake of 2009 when the U.S. Congress opened fiscal spigots insufficiently isn’t being repeated. The $1.9 trillion American Rescue Plan will become law within days.
- U.S. Treasury Secretary Yellen asserted confidently that recent inflation fears are overblown. Fed officials aren’t about to abort plans to maintain strong monetary stimulus over coming years.
- The rollout of Covid vaccinations is accelerating and becoming more efficient. At the same time, daily Covid cases and deaths have declined considerably. The CDC issued less restrictive guidelines for people who’ve been fully vaccinated.
- The weather is warming up. The U.S. Northeast is getting its first taste of spring.
The market response to the above encouraging developments has been strengthening stock markets (Nasdaq futures are up more than 2%) and a retreat of sovereign debt yields of 7 basis points in Italy, 6 bps in Canada, 5 bps in the United States, Germany, France, Spain and the Netherlands, and 4 basis points in Great Britain.
Amid less risk aversion this Tuesday, the trade-weighted dollar eased back 0.2%. Dollar/yen is unchanged, but otherwise the dollar is down 0.8% versus the peso, 0.6% against the Aussie dollar, 0.5% relative to the Swiss franc, 0.4% versus the loonie and kiwi, 0.3% against sterling and 0.2% vis-a-vis the Chinese renminbi. Gold recovered through the $1700 threshold, and WTI oil is steady.
Japan and Euroland each released revised fourth quarter GDP figures. Japanese GDP was revised downward by a percentage point to +11.7% at an annualized rate. That equates to a 1.1% contraction compared to the final quarter of 2019 and to an average 2020 drop of 4.8%. inventories exerted a 2.3 percentage point drag on the fourth quarter growth rate. The 2020 recession culminates a multi-year period of near stagnation that saw Japanese GDP rise only 0.8% in 2016, 1.7% in 2017, 0.6% in 2018 and 0.3% in 2019.
Euroland GDP growth last quarter was also revised downward but just marginally to an non-annualized -0.7% from -0.6% reported initially. Fourth quarter 2020 over 4Q 2019 growth was negative 4.9%, and the average growth rate for all of last year was negative 6.6%. Germany, Spain, Portugal, Cyprus, Romania, Hungary and Finland managed to maintain positive rates of growth last quarter, but economies that contracted included France, Italy, Belgium, the Netherlands, Austria, Poland, and Ireland. For the whole euro area, personal consumption sank 3.0%, and net exports exerted some drag, while government spending and business investment made positive contributions. Euroland employment climbed 0.3% in the quarter but was 1.9% below its year-earlier level.
U.S. small business sentiment recovered to a 2-month high in February.
The OECD‘s latest update of projected growth has be revised up 1.6 percentage points to 5.6% for the global economy, led by a doubling of projected U.S. growth in 2020 to 6.5%. For 2022, both global and U.S. GDP are expected to advance 4.0%.
South African GDP expanded by a significantly greater-than-forecast 6.5% last quarter but still contracted 7.0% in 2020 as a whole, making such the worst year in three-quarters of a century.
Germany’s current account surplus of EUR 16.9 billion in January was a billion euros greater than in January 2020. The seasonally adjusted trade surplus printed at EUR 22.3 billion compared to a monthly average of EUR 16.7 billion in the final quarter of 2020 and EUR 14.9 billion for all of last year.
Japanese real household spending fell 7.3% on month and 6.1% on year in January. Labor cash earnings recorded a smaller 0.8% on-year decline that month, and M3 money continued to show accelerated on-year growth of 9.5% in January-February versus 9.1% last quarter, 8.5% in 3Q 2020, 5.3% in 2Q and 3.0% in the first quarter of 2020.
On a brighter note, Japanese machine tool orders, which as recently as last August were 23.3% fewer than a year earlier, recorded a 36.7% on-year jump last month.
The Australian monthly business confidence index compiled by the National Bank of Australia improved four index points to its best score since early 2010, and the companion index of Australian business conditions rebounded six points in February after dropping 7 points the month before.
New Zealand business confidence, in contrast, slipped to a 4-month low this month.
Industrial production in Italy rose by a greater-than-expected 1.0% in January but still recorded a negative change from a year earlier (this time -2.4%) for the 23rd month in a row.
Irish industrial production was 28.5% greater in January than its year-earlier level.
Taiwanese CPI inflation of 1.37% in February was the highest in 13 months, and wholesale price inflation of -0.35% was the least negative in 22 months.
Hungarian CPI inflation rose 0.4 percentage points to a 5-month high of 3.1% last month.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland GDP growth, German current account surplus, Japanese GDP growth, OECD Growth forecasts