Europe has now reported to have fully vaccinated 7% of its population, a bigger proportion than the number of Covid cases so far. In France, president Macron outlined a tentative four-stage lockdown easing, starting this week and ending on June 30th. In the US, NYC Mayor is planning to fully reopen the city by 1st of July. New York State will allow people to sit indoors at bars from today. According to the CDC, 54.5% of the adult population has received a first dose of a vaccine (82% for those aged 65+). Meanwhile, a CDC survey found that full vaccination reduced the risk of hospitalization by 94% for those aged 65 and above. According to a Fox News Poll, 22% of Americans still do not plan to get vaccinated. India has reached a new record high in daily infections of 386k and number of deaths reaching 3,500.
During the regular Fed policy meeting, parameters were left unchanged with fed funds target rate at 0-0.25% and bond purchases running at $120bn per month. The delivery was as expected (dovish) as the Fed noted in its statement the recent strengthening of the US economy, but hinted it was too early to consider tapering bond purchases. Chairman Powell highlighted the need to see more data on vaccination as well as jobs. Powell insisted on the employment hole of 8.4m (rather than the market expectation of another near -1m print next Friday). On inflation, Powell warned to ignore the coming big inflation prints which he said would mostly reflect “base effects” and “bottlenecks” in the economy. He alluded to an internal Fed measure of inflation expectations which show that expectations remain well anchored.
US Q1 GDP
US GDP rose at a 6.4% q-o-q in Q1 which represents an acceleration from 4.3% in Q4 2020. The solid growth was powered by a sharp rise in consumption as households received two sets of cheques from the federal government (one of $600 per adult following December’s spending package, and another worth $1,400 in the wake of the ‘American Rescue Plan’ voted in March). Consumption rose a solid 10.7% q-o-q while inventories subtracted 2.6% from headline growth.
In the US, March household income surged 21.1% and Consumer spending grew 4.2%. In Europe, Q1 GDP fell by 0.6% q-o-q after a decline of 0.7% in Q4. April headline inflation came in at 1.6% y-o-y (from 1.3% in March) while core inflation dipped slightly to 0.8%. In China, official and private April Caixin/Markit PMIs pointed in different directions, although both indicated activity picking up. The Caixin index rose to 51.9 from 50.6 in March, while the official index slowed to 51.1.