13 July 2021
Free to View Different lanes Economics - Global
The key charts on economic reopening, labour markets, and inflation
The US continues to lead the global recovery and the Henry Ward Analyst European outlook is improving too … HSBC Bank plc
…India looks to have contained its second wave, but variants James Pomeroy are spreading through ASEAN Economist HSBC Bank plc
While some central banks are tightening, others are Vipul Jindal* signalling their desire to keep policy loose Associate Bangalore
The two track recovery across the world is continuing as developed markets with * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations impressive vaccine rollouts are removing restrictions and reopening their economies. Consumers appear ready to get out of the house and start spending on services – evident in the US data and this trend is likely to spread into Europe in the coming months. On the other hand, in parts of the world, notably in Asia, with surging case numbers and lower vaccine numbers, restrictions are tightening.
Encouragingly, India has seen new cases and deaths from COVID-19 plummet and our economic recovery tracker is back to near pre-pandemic levels. But different variants are continuing to advance through ASEAN, LatAm, as well as the UK. However, the UK is set to continue on its reopening timeline as nearly 50% of people are now fully vaccinated and hospitalisations are thankfully still relatively low.
As parts of the developed world emerge from restrictions, attention turns to labour markets, where worker shortages are causing havoc for employers, particularly within leisure and hospitality. Wages in the sector are rising quickly as a result. In the US, we are seeing the number of people quitting jobs rising, suggesting that workers are feeling more confident in their prospects. Many office workers, particularly young people, want to work from home either full time or at least part time and with a large surplus of job openings, employees are exploring their options. A big question mark still hangs over how labour markets will evolve as job support schemes are withdrawn.
Inflation is elevated around the world as supply bottlenecks, shipping disruptions and surging demand drive up prices. Higher commodity prices and base effects are also lifting headline inflation prints. We still expect this to prove transitory and look for inflation to moderate in 2022. However, heightened prices and post lockdown booms have forced some central banks to act. Central banks in Brazil, Mexico, Russia and parts of CEE have already started tightening, but others across the world are willing to wait. The Fed may have begun discussions on how and when tapering might begin, but a rate rise is still set to be two years away, while many other G10 central banks show little sign of raising rates any time soon, even though house prices keep going up.
This is an abridged version of a report of the same title published on 13 July 2021. Please contact your HSBC representative or email AskResearch@hsbc.com for more information.
Disclosures & Disclaimer Issuer of report: HSBC Bank plc This report must be read with the disclosures and the analyst certifications in View HSBC Global Research at: the Disclosure appendix, and with the Disclaimer, which forms part of it. https://www.research.hsbc.com
Free to View ● Economics - Global 13 July 2021
The pandemic is evolving differently across the world
Variants remain troublesome 1. Spain and the UK have seen a spike in cases despite impressive vaccine rollouts … even for those with highly Cases/mn Latest number of daily COVID-19 cases per million population (7dma) Cases/mn vaccinated populations 700 700 600 600 500 500 400 400 300 300 200 200 100 100
0 0
UK US
Italy
India
Chile
Brazil Qatar
Spain
Korea
Japan
Russia
Turkey
France
Poland
Mexico
Norway
Canada
Sweden
Thailand
Australia
Malaysia
Germany
Colombia
Argentina
Indonesia
Singapore
Philippines
Hong Kong Hong
Switzerland
South Africa South
Saudi Arabia Saudi
New Zealand New Mainland China Mainland Latest 1m ago Source: Refinitiv Datastream
Some economies are going 2. In the UK, COVID-19 is now 3. …and on a global level, things are to try to live with COVID-19 responsible for a smaller number of looking slightly better again… all deaths …
000s Number of deaths registered by week, 000s 000s World new COVID-19 cases and deaths, 7dma 000s England and Wales 900 27 25 25 800 24 20 20 700 21
600 18 Thousands Thousands Thousands 15 15 500 15 10 10 400 12 300 9 5 5 200 6 100 3 0 0 0 0 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 COVID-19 deaths Non-COVID-19 deaths COVID-19 cases (LHS) All deaths - 5year ave. COVID-19 deaths (RHS) Source: ONS. Note: Includes data whereby Bank Holidays affected registrations. Source: Refinitiv Datastream
The pandemic is still 4. …as India’s devastating recent wave 5. … but cases are rising sharply in challenging for economies has subsided in recent weeks … much of ASEAN with low vaccination rates COVID-19 situation in India ASEAN COVID-19 Situation 7 dma 7 dma 7 dma 7 dma 450000 4500 30000 12000 400000 4000 25000 10000 350000 3500 20000 8000 300000 3000 250000 2500 15000 6000 200000 2000 10000 4000 150000 1500 100000 1000 5000 2000 50000 500 0 0 0 0 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Indonesia Malaysia (RHS) New cases New deaths (RHS) Philippines (RHS) Thailand (RHS) Source: OWID Source: OWID
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Vaccines: Haves and have nots
EU rollout continues to 6. With the exception of mainland China, Asia is still lagging behind the west strengthen and LatAm also Number Number of v accine doses administered per 100 people Number picks up the pace
180 161 180
160 160
118.3 124.0
140 111.9 140
126.2
105.4
99.7 99.7
97.1
95.5
94.6 90.0
120 87.5 120
85.2 82.6
100 68.3 100
56.3 54.3
80 53.1 80
45.3
39.7
38.7
35.4
34.2 32.4
60 27.3 60
26.4
18.7 17.7
40 11.8 40 7.1 20 4.5 20
0 0
UK(9 Jul)
US(10 Jul)
Chile Jul) (7
Italy(10 Jul)
Brazil(9 Jul)
Spain (8 Jul) Egypt (8 Jul)
UAE(10 Jul)
Japan(8 Jul) India(10 Jul)
Israel(10 Jul)
France(8 Jul) Poland(9 Jul)
Mexico(8 Jul)
Korea (10Jul)
Norway(8 Jul)
Russia (10Jul) Sweden(9 Jul) Turkey (10Jul)
Thailand(9 Jul)
Canada(10 Jul)
Germany (9 Jul)
Australia(10 Jul)
Malaysia(10 Jul)
Singapore(9 Jul)
Argentina(10 Jul)
Indonesia(10 Jul)
Philippines(10 Jul)
SouthAfrica (9 Jul)
NewZealand (6 Jul) SaudiArabia (10 Jul)
MainlandChina (10 Jul) Source: OWID
Trust in non-western 7. The second dose of vaccines may be 8. … but we could see hesitancy from vaccines is low which could vital in fighting new variants … countries reliant on Russia and China prove problematic in Asia No. of people fully v accinated per 100 people % Which COVID-19 vaccine do you trust the most? % Number Number 100 100 60 60 51.2 47.6 80 80 43.2 50 38.9 38.8 50 40 40 60 60 30 30 14.4 40 40 20 9.0 20 10 5.3 10 20 20 0 0
0 0
UK
ITA
ISR
JPN
ESP FRA
AUS USA
CAN DEU DNK SGP
KOR NOR
Pfizer AstrazenecaSWE / Oxford
UK(11 Jul) UK(11 Jul) US(11 Jul) EU(11
Brazil(9 Jul) Brazil(9 Jul) Asia(10
India(11 Jul) India(11 Moderna Don't Know
None of the above Any of the above Canada(11 Jul) Canada(11
Singapore(11 Jul) Singapore(11 Sputnik V Sinopharm
Source: OWID Source: YouGov, Imperial College London. Note: Data as of April 2021
The pace of rollouts is 9. Vaccination pace is increasing across the world and mainland China has seen the strongly linked to the speed strongest pick up in pace in recent months … of economic re-opening Number Latest daily pace of v accine doses administered per 100 people - most recent data Number 1.6 1.6 1.4 1.4 1.2 1.2 1.0 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2
0.0 0.0
UK (9 Jul) UK (9
US (10 Jul) (10 US
Chile (7 (7 Jul) Chile
Italy (10 Jul) Italy
Brazil (9 (9 Jul) Brazil
Spain Jul) (8 Spain Egypt Jul) (8 Egypt
UAE (10 Jul) (10 UAE
Japan (8 Jul) (8 Japan Jul) (10 India
Israel (10 Jul) (10 Israel
France (8 Jul) (8 France Jul) (9 Poland
Mexico (8 Jul) (8 Mexico
Korea (10 Jul) (10 Korea
Norway (8 Jul) (8 Norway
Sweden (9 Jul) (9 Sweden Jul) (10 Turkey Russia (10 Jul) (10 Russia
Thailand (9 Jul) (9 Thailand
Canada (10 Jul) (10 Canada
Germany (9 (9 Jul) Germany
Australia (10 (10 Jul) Australia
Malaysia (10 Jul) (10 Malaysia
Singapore (9 (9 Jul) Singapore
Argentina Jul) (10 Argentina
Indonesia (10 Jul)(10 Indonesia
Philippines (10 Jul) (10 Philippines
South Africa (9 Jul) (9 Africa South
Mainland China (10… China Mainland
New Zealand (6 Jul) (6 Zealand New Saudi Arabia (10 Jul) (10 Arabia Saudi
Source: OWID
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Activity data is looking up in some parts of the world
Europeans seem eager not 10. European mobility data has seen 11. …and India’s recovery tracker has only to get out the house but meaningful pick-ups … seen a resurgence also to start getting abroad % from Europe: mobility data - retail and recreation* % from India: Recov ery tracker baseline baseline Index , Feb 20 =100 20 20 Index , Feb 20 =100 105 105 0 0 95 92.3 95 -20 -20 85 85 -40 -40 75 75 -60 -60 65 65 -80 -80 55 55 -100 -100 45 45 Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Germany France Italy 35 35 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
Spain UK Source: Google, Note: 7 day moving average, % from baseline (March 2020) Source: CEIC, POSOCO, GSTN, HSBC. The tracker includes six variables: Google mobility (workplace, recreation), Apple mobility (driving), labour force participation, electricity consumption and e-way bills generation.
The manufacturing sector 12. Developed market manufacturing PMIs are much stronger than in EM continues its strength as Index Headline Manufacturing PMIs Index goods demand remains high 74 74 70 70 66 66 62 62 58 58 54 54 50 50 46 46 42 42
38 38
US UK
Italy
India
Brazil
Spain
Korea
Japan
Russia Ireland Turkey
Austria
Poland France
Mexico
Taiwan
Greece
Canada
Vietnam
Thailand
Malaysia
Denmark
Germany
Eurozone
Indonesia
Philippines
Netherlands
Mainland China Mainland Czech Republic Czech
June 2021 May 2021 Source: IHS Markit
Industrial output has 13. Momentum in mainland China’s PMI 14. … external demand has kept remained strong due to has turned in recent months but … industrial output high in much of Asia continued external demand Mainland China PMI Latest IP v s Q1 2019 average level Index Index % change % change 60 60 30 30 25 25 55 55 20 20 15 15 50 50 10 10 45 45 5 5 0 0 40 40 -5 -5 35 35 -10 -10
30 30 India
Japan
Taiwan Malaysia
25 25 Singapore
2016 2017 2018 2019 2020 2021 Korea South Mainland China Mainland Manufacturing - Headline Services - Headline Latest 1m ago Source: IHS Markit Source: Refinitiv Datastream. Note: IP = Industrial production, Mainland China uses the CPB series.
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Attention turns to labour markets
Will employees return to 15. Americans are slowly returning to 16. …and workers are exploring their work or seek new jobs… options opportunities? US Nonfarm pay rolls by sector, change since Jan 2020 % US job-quit rate by industry % 6 6 % % 10 10 5 5 0 0 4 4 -10 -10 3 3 -20 -20 2 2 -30 -30 -40 -40 1 1 -50 -50 0 0 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 2015 2016 2017 2018 2019 2020 2021 Leisure/hospitality Retail trade Total Leisure and Hospitality Total Education/health services Manufacturing Construction Manufacturing Financial activities Retail trade Source: St Louis Fed, US Bureau of Labor Statistics Source: Labor Department
Jobs are bouncing back for 17. More permanent jobs are available in 18. … but government support for jobs is now, but unemployment UK as more certainty returns … drawing to a close could pick up as support Index UK Staff Placements Index UK: Number of employments on furlough schemes end 70 70 000s, 7dma 000s, 7dma 60 60 2000 500 50 50 1600 400 40 40 1200 300 30 30 800 200 20 20 400 100 10 10 0 0 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 0 0 Manufacturing 2018 2018 2019 2020 2021 Accommodation and food services Transportation and storage (RHS) Permanent Temporary Arts, entertainment and recreation (RHS) Other service activities (RHS) Source: RECS Source: Orbital Insight, HMRC CJRS and PAYE Real Time Information
Companies have discovered 19. Young people want to see WFH stay 20. …but they may be careful what they that many jobs can be done in some form after the pandemic … wish for if those jobs go elsewhere remotely, which could see Home or office? 000's UK:Jobs at risk of going abroad 000's some jobs moved abroad 1400 1400 Home full-time 1200 1200 1000 1000
10% Hybrid (majority 800 800 home) 600 600 29% 400 400 18% Hybrid (split) 200 200 0 0 Hybrid (majority
21% office) Wales
22% London
Scotland
Yorkshire
North East North
South East South North West North
Office full-time West South
East Midlands East
West Midlands West
East of England of East Northern Ireland Northern
Source: Citrix, Note: Cross-country survey of 750 Gen-Z and 1250 millennial Source: Tony Blair Institute for Global Change employees in large corporations and mid-market business
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Inflation: transitory or here to stay?
Supply bottlenecks, shipping 21. We expect inflation to peak in much of the world and to moderate over the next two disruptions, low base effects, years … and surging demand are % Inflation - latest monthly and forecasted yearly average for 2021 and 2022 % inflationary factors 10 10 8 8 6 6 4 4 2 2 0 0
-2 -2
UK(May) US(May)
Italy(Jun)
Chile(Jun)
India(May)
Brazil(Jun)
Spain(Jun)
Japan(May)
Russia(Jun)
France(Jun)
Mexico(Jun)
Taiwan(Jun)
Poland(May) Norway(Jun)
Canada(May)
Thailand(Jun)
Sweden(May)
S. S. Korea(Jun)
Germany(Jun)
Malaysia(May) Colombia(Jun)
Eurozone(Jun)
Indonesia(Jun)
Philippines(Jun)
Singapore(May)
Switzerland(Jun)
Hong Kong(May) Hong
South Africa(May) South Saudi Arabia(May) Saudi
Latest Inflation 2021f 2022f China(Jun) Mainland
Source: Refinitiv Datastream, HSBC
As consumers move 22. US inflation is mirroring the return of 23. … and the UK is also seeing a shift in spending from goods to travel and transport … inflationary pressures services, travel inflation % US: CPI % Ppts UK: Change in contribution to inflation Ppts drivers are shifting betw een April and May 2021 30 30 0.3 0.3 20 20 0.2 0.2 10 10 0.1 0.1 0 0 0.0 0
-10 -10 -0.1 -0.1
-20 -20
Health
Clothing
Furniture
Transport Education
-30 -30 Recreation Food & drinks & Food
Jun-19 Oct-19 Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Miscellaneous
Communication Housing and bills and Housing CPI- All Items Used Cars and Trucks tobacco & Alcohol
Energy Airline fare hotels & Restaurants Source: Refinitiv Datastream Source: ONS
Not all the data points to 24. Fed expectations of inflation being 25. … and while inflation expectations transitory inflation transitory could be under threat … have dropped off slightly, they remain high
% US: Inflation % % 10 y ear breakeven inflation % 7 7 4.0 4.0 6 6 3.5 3.5 5 5 3.0 3.0 4 4 2.5 2.5 3 3 2.0 2.0 1.5 1.5 2 2 1.0 1.0 1 1 0.5 0.5 0 0 0.0 0.0 -1 -1 -0.5 -0.5 2007 2009 2011 2013 2015 2017 2019 2021 2018 2019 2020 2021 Trimmed-mean inflation rate (1m annualised) US UK Japan Germany
Sticky price inflation (3m annualised) Source: Refinitiv Datastream Source: Bloomberg. Note: UK data is RPI
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Some central banks are on the move
Whilst PPI-CPI pass through 26. PPI is soaring in emerging markets … 27. … and this is beginning to spill over may be limited, it looks to be into CPI too spilling over to some extent % Yr PPI Inflation % Yr % Yr CPI Inflation % Yr 20 40 10 10 8 8 15 30 6 6 10 20 4 4 5 10 2 2
0 0 0 0 -2 -2 -5 -10 Jul-18 Jul-19 Jul-20 Jul-21 Jul-18 Jul-19 Jul-20 Jul-21 Mexico Indonesia Mexico Indonesia India Mainland China India Mainland China Chile Brazil Chile (RHS) Brazil (RHS) Source: Refinitiv Datastream, CEIC Source: Refinitiv Datastream
As central banks around the 28. The Fed is beginning to look towards 29. …but the ECB appears to be in no world take different policy normalisation… rush approaches the big two Estimate of likelihood that US Fed w ill hike policy rate by EUR bn PEPP: Weekly purchases EUR bn remain dovish, for now. 50 bp or more by end 2023 35 35 No. of respondents No. of respondents 16 16 30 30 14 14 25 25 12 12 20 20 10 10 8 8 15 15 6 6 10 10 4 4 2 2 5 5 0 0 0 0 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21
0-25% Net purchases Reinvestments*
76%-85% 26%-50% 51%-75%
86%-100% Source: FT-IGM survey of 52 economists Source: HSBC calculations, ECB, Bloomberg. *Includes quarter-end adjustment.
As some begin policy 30. Central banks are taking two paths, time will tell which is right normalisation others remain cautious on rate hikes % Policy rates % 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0
-1 -1
US UK
India
Chile
Brazil
Japan
Russia
Poland
Mexico
Taiwan
Norway
Canada
Sweden
Thailand
Australia
Malaysia
Colombia
Indonesia
Philippines
South Africa South
South Korea South
New Zealand New
EMU - Deposit - EMU Mainland China Mainland Range: Q1 2010-Q2 2021 Current Q4 2022 forecast Source: Refinitiv Datastream, HSBC
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Disclosure appendix
Analyst Certification The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Henry Ward and James Pomeroy
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