Five economic charts to watch in H2 2021: United States

As the United States sees an increase in the number of new COVID-19 cases due to the highly contagious Delta variant, concerns grow about the resilience of the ongoing economic recovery. As events continue to shape the economic outlook, let’s take a look at some of the data that will guide us in monitoring the U.S. economy in the second half of 2021.

Strong GDP growth is expected to continue through the end of the year

The US economy grew strongly in the first half, growing 6.3% (annualized quarterly growth) in the first quarter and 6.6% in the second quarter. The economy has now recouped all of the losses of 2020 and is 0.8% larger than it was at the end of 2019. Consumer spending has been the main driver of growth in the first two quarters , but economists fear activity may stagnate as COVID-19 cases continue to rise. July’s readings of monthly personal consumption expenditure and retail sales disappointed, both being below estimates. Still, analysts polled by FactSet expect growth to remain strong in the second half, with median estimates of 6.3% and 5.8% expansions in the third and fourth quarters, respectively. For the year, the economy is expected to grow 6.2% after the 3.4% contraction in 2020.

Transient inflation?

Soaring prices continue to be a major concern for consumers, producers of goods and financial markets. Consumer price inflation is driven by the two largest categories of goods in the United States Bureau of Labor Statistics (BLS) Consumer Price Index (CPI): food and transportation products, excluding fuel. Together, these two components represent more than a fifth of the total CPI (21.7%). In July, food prices jumped 0.7% from June, while non-fuel transportation goods, which include new and used vehicles as well as parts and equipment, jumped 1.0% for the month. The total CPI rose 0.5% month over month while basic prices (excluding volatile food and energy components) rose 0.3%.

Producers are also faced with rising prices. The producer price index (PPI) of final demand rose 1.0% in July, while the PPI of processed products for intermediate demand rose 1.7% and the index of products unprocessed rose 1.4%. Markets continue to monitor all of these inflation numbers for signs that the Federal Reserve will tighten monetary policy. At the Fed’s closely watched Jackson Hole symposium in August, Fed Chairman Jerome Powell said a cut to the Fed’s asset purchase program could begin as early as this year but would not be tied. to rate increases.

Employment figures are mixed

Initial unemployment insurance claims fell at the end of August to their lowest level since March 2020. Initial unemployment claims totaled 340,000 for the week ended August 28; analysts polled by FactSet had expected a figure of 350,000. However, the August jobs report disappointed. The non-farm payroll in the United States rose 235,000 in August from FactSet estimates for an increase of 750,000. On the positive side, due to the revisions, employment in June and July combined is 134,000 more high than previously reported. In 2021, the wage bill saw an average monthly increase of 586,000, but there are still 5.3 million fewer jobs than before the start of the pandemic. Meanwhile, the number of job postings rose to a high of 10.1 million in June, according to the BLS release on job postings and workforce turnover (JOLTS) .

The imbalance of supply and demand continues to stimulate the housing market

The US real estate market appears to have cooled somewhat, but consumers still face tense market conditions. According to the US Census Bureau, 708,000 new homes were sold in July, up slightly from June but down 28.7% from January’s high of 993,000. Data from the National Association of Realtors (NAR) showed an increase in existing home sales in July, but the 5.99 million number was down 10% from the January reading. Prices remain high as the lack of supply continues to restrict the market. NAR data shows the median price of an existing home was $ 359,900 in July, up 17.8% from a year ago. The total building stock at the end of July stood at 1.32 million units, up 7.3% from June and down 12.0% from a year ago. With inventories edging up, the monthly supply of existing homes for sale has recovered from all-time lows at the start of the year, but the United States continues to face a housing supply shortfall.

Automotive market supply issues drive up prices

Consumers continue to be affected by soaring prices for new and used cars and trucks. Several supply and demand factors are fueling this situation. New vehicle prices are rising largely due to a global semiconductor chip shortage that has developed due to early COVID-19 lockdowns that shifted production to chips used in consumer electronics . As production began to increase again for automotive-grade chips, new waves of COVID-19 hit Asian countries where chips are produced and shipped, once again limiting supplies. General Motors has just announced production cuts at factories across North America due to the continued shortage of chips. The United States Bureau of Economic Analysis produces monthly vehicle sales data that shows the rise in average retail prices paid by consumers for cars (up 13.3% year-over-year ) and trucks (up 11.7% year over year) in July. There is evidence that sales in the high end of the market are growing faster than at the low end of the automotive market, which distorts the average retail price. Yet the quality-adjusted CPI for new cars showed a year-over-year increase in July of 5.7% for cars and 6.8% for trucks; these increases are smaller than the increases in retail prices but remain significant nonetheless.

Meanwhile, the used cars and trucks CPI rose 41.7% in July compared to a year ago. Prices in this segment of the auto market fell last year as car rental companies sold their fleets as demand fell. This base effect could be partly responsible for the high inflation rate. But at the same time, the demand for used cars is increasing, as many consumers are excluded from the new vehicle market. As car rental companies try to replenish their fleets as travel resumes this summer, they compete with consumers for new cars, exacerbating the supply crunch. Consumers are also facing an explosion in rental prices, with car and truck rental prices rising 73.5% year-over-year in July.

The information in this article is not investment advice. FactSet does not endorse or recommend any investment and assumes no responsibility for any consequences related directly or indirectly to any action or inaction taken on the basis of the information contained in this article.