World daily cases continued to accelerate last week to a pace not seen since end of January. Net cases growth rate continues to increase in emerging economies, notably in India with a 6.6% daily growth rate, Philippines at 5.6%, Thailand at 4.0% or Colombia at 2.8%. In terms of vaccination, last week there was a marked increase in world daily inoculations to 14.4m vs 11.0m one week before. In the Euro area the pace of vaccination is accelerating. At current rhythm the number of injections corresponding to 70% of the population will be reached in August compared to November the previous week. Last week, France announced a 1-month lockdown to combat surging infections. The UK confirmed that lockdown will be eased next week with outdoor dining as well as non-essential shops all due to reopen.
On Wednesday, President Biden outlined his “American Jobs Plan” that would see $2.3tr invested over the next 8 years. There would be $650bn for Traditional infrastructure (roads, rails, transport), $650bn for housing renovations, $580bn for American manufacturing & Research and $400bn for the ‘Care’ economy. There was a strong emphasis on sustainability and the green economy with a $170bn package for Electric Vehicles. This package is set to be funded by tax hikes, mostly on corporate with the corporate tax rate moving from 21% to 28%, spread over 15 years. No details related to tax increases on wealthier individual taxpayers. In terms of the timelines, House Speaker Pelosi is aiming to have the bill voted by July 4th and presented to Senate before the August recess.
Yellen on taxes
Treasury Secretary Janet Yellen outlined the case for a harmonized corporate tax rate across the world’s major economies in her virtual remarks to the Chicago Council on Global Affairs: “Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity”. Yellen’s first major speech on international economic policy would mark the US return to years-long talks led by the Organization for Economic Cooperation and Development (OECD) with about 140 countries with the objective to develop a global agreement on minimum levies (including a potential accord on digital taxation).
March jobs report
The latest jobs report was very strong at 916k, above the consensus of 660k. Job growth was widespread, led by gains in leisure and hospitality, public and private education, and construction. Employment in leisure and hospitality rose by 280k in March and by 384k in the prior month, as pandemic-related restrictions continued to ease in many parts of the country. February job growth saw an upward revision, from 379k to 468k. Despite the recent spike in jobs, payroll employment is down by 8.4m, or 5.5%, from the pre-pandemic employment peak in February 2020. The unemployment rate dropped to 6%, down from 6.25%. The rate is down considerably from its recent high in April 2020 but is 2.5% higher than its pre-pandemic level in February 2020. The participation rate ticked up slightly to 61.5% (vs. 61.4% in Feb). Wages were soft, falling 0.1% m-o-m and rising 4.2% y-o-y. The workweek was longer at 34.9 hours.
In the US, the March ISM Manufacturing PMI came in at 64.8 from 60.8 in February, marking the highest level since 1983. In addition, the ISM services index rose to 63.7 coming well above consensus at 59.0 and higher than the previous reading at 55.3. In Europe, the March Manufacturing PMI for the Euro Area came in at 62.5 versus 57.9 in the prior month. Germany’s manufacturing PMI came in at 66.6 in what was its highest level since the series begun. In the UK, PMI reading came in at 58.9 in March versus 55.1 in February. Euro area inflation picked up in March, rising to 1.3% from 0.9% the previous month. Higher prices were driven by rising energy and fresh food costs. In Japan, Q1 business sentiment improved despite Covid-related setbacks. The Bank of Japan’s quarterly Tankan index for manufacturing rose well ahead of expectations, reaching positive territory amidst predictions for a negative reading.