The Day at a Glance | June 23 2021

The Top

*The European economy grew at its fastest rate in 15 years during June.

*Powell calms markets after reiterating that inflation is temporary and pointing out that the FED will not act hastily.

*Retail sales drop (-) 0.4% during April in Mexico (+30.1% annual).

Economic environment

PMIs for the Eurozone point towards a strong recovery in activity during June. The Composite PMI for the Eurozone set at its highest level in 15 years (59.2), a sign that accelerated economic recovery is occurring in the block as a slow spread of the virus allows it to reopen. Services expanded at a faster rate in June (58 vs 55.2 prev.) and led growth during the month, with particularly noticeable growth in Germany. However, manufacturing activities didn`t stay far behind and once again accelerated in June, exceeding estimates (63.1 vs 62.3 e.). Indicators on delays in deliveries fell slightly, which suggests that the worst in disruptions in supply chains may have already passed; even though more data is needed in order to confirm this. The data points towards solid growth in the economy during the 2Q21, around 1.2%, and led by sectors that were most affected by the pandemic such as accommodation and retail. Price indicators continue to show a record rate of acceleration among goods and services along with costs of materials and inputs, which guarantees inflation in the coming months. The ECB has reiterated that it doesn`t expect inflation to be persistent. Confidence in the economy has reached its highest levels since records exist.

Jerome Powell reiterates the FED`s patient stance. In his testimony before the House Select Subcommittee on the Coronavirus Crisis, Chair of the FED Jerome Powell assured that the rise in prices seen in recent months comes from factors directly affected by the pandemic and expects them to drop in the future. He recognized that the rises have been greater than initially expected and could be more persistent, however, it`s highly unlikely that we`ll see a scenario of uncontrolled inflation. Additionally, he calmed markets after confirming that the FED will not take any preventative decisions regarding the rise in prices, nor it will jump the gun with possible inflationary scenarios. Powell reiterated that the FED will wait to see clear evidence in data that suggests high inflation before making any monetary policy decision. Lastly, he assured that the economy has shown improvement after the pandemic triggered crisis, although it still has a long road ahead, especially regarding the labor market, which guarantees that the FED will maintain conditions for the recovery to continue.