** International Communique No. 291 – 11th May 2021


US job creation for the month of April clocked in at a mere 266,000 – miles short of the 1 million that was forecast. Unemployment edged up to 6.1%. Many temporary workers, particularly in the dining industry, have not re-joined the workforce, encouraged perhaps to stay at home by lavish government handouts.

But this initial upset was quickly seen as good news by some investors as it allayed concerns about the Fed ditching its ultra-loose monetary policy any time soon, with other major central banks probably staying the course as well. Interest rates on long-term Treasuries fell and the 10-year yield stabilised around 1.57%. Gold last week rallied on the back of a weaker dollar, and equity markets continued appreciating, buoyed by generally strong corporate earnings.

Initial upset quickly seen as good news by investors.

It is estimated that nearly 10 million more jobs are needed for full employment, which Treasury Secretary Janet Yellen says could be reached by 2022. She does not see an inflationary spiral forming, projecting instead temporary price increases in the coming months for non-fundamental reasons.

China’s exports in April shot up by 32.3% year-on-year, tearing past the estimated 24.1%. This was more good news for the world’s second-largest economy. The recovery in the US combined with manufacturing slowdowns in other countries cranked up purchases of China-made goods. As economies reopen, a flood of demand for commodities such as ferrous metals, copper, wheat and semiconductors has pushed up prices, raising fears of inflation. Supply bottlenecks have also spurred a sharp rise in transport costs.

Chinese exports shot up by 32.3% year-on-year in April versus the expected 24.1%, representing a further surge by the world’s second-largest economy.

The Baltic Dry Index, a measure of ocean freight prices, is hovering at a record high because of the known container shortage. Historically, however, the correlation between commodity prices and consumer price indices is weak. All in all, this is hardly reason enough for central banks to tighten.

In Germany, industrial production in March rose by 2.5%, supporting expectations for a robust recovery in the broader economy in the second half of the year.

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