May 2021 ISM and Markit Services Surveys Improve And Remain Well Into Expansion
The ISM improved and remained in expansion whilst the Markit PMI improved and now is at record highs.
Analyst Opinion of the ISM and Markit Services Survey
With the economy reopening, it comes as no surprise that both of these indices are well into expansion.
From Econoday:
Stronger client demand spurs sharper output expansion
Cost burdens rise at quickest pace on record
Further steep increase in employment despite hiring
May PMI™ data indicated the fastest rise in business activity since data collection for the series began in October 2009. The unprecedented expansion in output was supported by a marked increase in new business, in turn buoyed by the quickest rise in new export orders for nine months. Greater business requirements resulted in a further sharp rise in employment. That said, the pace of job creation softened as firms reported difficulties filling vacancies. Strain on capacity was
The rotation argument, triggered by expectations of less restrictive measures, and the inflation proposition, stemming from substantial stimulus aid and growth prospects, were thus far the key themes of 2021.
Investment grade, conditioned by the moves witnessed in the U.S. Treasuries and Eurozone sovereign curves, generated total negative returns. Meanwhile, high yield corporate credit advanced. US, European, and Emerging Market high yield – the latter showing signs of weakness until Q1 2021, generated total positive returns. On a year-to-date basis, European high yield outperformed, generating a 1.56 per cent return.
An improved economic outlook - mainly driven by a resumption in activity consequent to a lower infection rate probably owing to the ongoing vaccination drive in the developed market world, fiscal stimulus, and central banks maintaining an accommodative stance, continued to drive a rotation further into the previously pandemic-battered sectors.
Fiercely burning or slowly simmering? US and Europe’s contrasting economic recoveries
US economy is recovering rapidly while Europe is taking longer, but what does that mean for investors?
In the depths of the pandemic disruption, there was plenty of discussion about the shape of the recovery: U? V? W? K? Today, it is possible to put some tangible data around that recovery as the vaccine rolls out and economies unlock. What can be said about the type of recovery that has materialised?
In the US, certainly, the recovery appears materially stronger than anyone initially anticipated. Retail sales, services and manufacturing data all point to a booming economy. The most recent set of IHS Markit US Services PMI data showed a reading of 64.7 at the start of the second quarter, up from 60.4 in March (50 indicates expansion).
Politics
“But what is government itself, but the greatest of all reflections on human nature?” –James Madison, Federalist 51
“They had one weapon left and both knew it: treachery.” –Frank Herbert, Dune “They had learned nothing, and forgotten nothing.” –Charles Maurice de Talleyrand-Périgord
Biden Administration
“The American Rescue Plan as Economic Theory” [J.W. Mason]. “The size and design of ARPA is a more consequential rejection of this [prevailing macroeconomic] catechism. Without being described as such, it’s a decisive recognition of half a dozen points that those of us on the left side of the macroeconomic debate have been making for years. 1. The official unemployment rate is an unreliable guide to the true degree of labor market slack, all the time and especially in downturns. … n… 2. The balance of macroeconomic risks is not symmetrical. We don’t live in an economy that fluctuates around a long-term growth path, but one that pe