Global Economic Review: January 2021



  • Many Improvements transpired in January, with vaccinations in some countries moving forward at a good pace and lower case/hospitalization counts, though other areas lagged and new variants raised fears of a protracted illness. To summarize the positive side:
    • Per Bloomberg’s tracker, over 100 million doses have been administered worldwide by early February, with the US administering the most doses of the large countries/areas at 34 million (about 10% of its population). 5% of people have received one dose (which grants about 80% immunity after ten days) and about 1.5% with two doses (the 95% projected immunity level).  The UK at over 15% had the most dosed percentage of the large countries, though they followed a more aggressive first-dose policy.  By comparison, the EU was at 3%, Canada 2.5%. China at 1.5% and Japan, South Korea and India came in below 0.5%.  Europe caused further concerns as they fought with AstraZeneca and the UK over vaccine exports – strong-arming others undercut their credibility, which they talk so much about.  Looked like they were willing to play hardball when they saw the advantage.  Overall, while the pace may satisfy no one, key progress was made for some important countries such as the US.Percentage of Emergency Room Visits - Covid 19
    • The global case count has fallen off its high as the holiday travel season passed. Per the CDC, the US went from a seven-day average of 250,000 cases per day in mid-January to under 150,000 by the end of January.  Deaths have not fallen off yet from the 3,000-3,000 level, but there is a lag.  The graph on the right correspondingly shows the trend in COVID 19 and like illnesses in emergency room visits, falling in half during January.  Interestingly, pneumonia and influenza also continued their downtrend / low levels versus history, as discussed in previous comments.
    • In addition to Pfizer/MioNTech, Moderna and AstraZeneca/Oxford already being distributed, Novavax and Johnson & Johnson published results of their large-scale trials and are under the approval process. While J&J results were not as effective (66%), the drug’s distribution requires only standard refridgeration and a single shot.  The important takeawy would be that these different drugs offer a multipronged approach to address mutations and other concerns as they utilize a variety of immunization approaches.  It may be too soon to expect a permanent bending of the COVID curve, but the world seems a lot close to the end than the beginning.
  • Perhaps the most direct measurement of progress is that in the US there are more people vaccinated than have contracted the virus. Our thoughts and prayers go out to those taken ill and we hope that they have access to proper care and recover fully.


Macro: US


  • Q4 GDP Growth of annualized +4.0% missed expectations but certainly moved in the right direction. Q1 2021 stood at +6.0% per the Atlanta Fed which seems doable given the US’ improving COVID metrics and related economic improvements as re-openings by locked-down states began.  December existing-home sales came in at 6.76 million run-rate, beating estimates of 6.56 million.  Orders placed with U.S. factories for business equipment rose in December for an eighth straight month by +0.6% and November’s number was revised upward, underscoring steady improvement in capital investment and a bright spot for the economy.  Factory orders for December handily beat expectations (+1.1% versus +0.7%) and likewise November sawBiden Pumps Up Fiscal Policy an upward revision.  Retail sales in December dropped however by -0.7% and November was downwardly adjusted.  Headline unemployment came in lower for January at 6.3% but payrolls missed expectations.  With the extension of unemployment benefits and $600 checks as well as $100s of billions in other spending signed in late December, January income / spending should pick up.  Democrats worked on a doubly massive spending package of $1.9 trillion targeted, which seemed like it would land in March given the other business of Congress.  In terms of size, the graphic to the right scaled the US spending response to GDP… I will let you decide how desirable and sustainable this additional debt will be.  Finally, US credit card delinquencies reached record-low levels in 2020, as Americans took advantage of stimulus checks and adjusted their spending habits, according to a new report.  Delinquencies on bank-issued cards stood at 1.53% in the third quarter of 2020, almost one-third the level of the height of the pandemic.


  • The Federal Reserve said it will continue to support the economy through massive monetary stimulus until it sees “substantial further progress” in employment and inflation. At their first meeting of the year, Powell and the rest of the committee voted to maintain bond purchases of at least $120 billion and made no changes to the composition of purchases, declining to shift them toward longer-term maturities. “The Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month.” Interest rates have moved higher, with thirty-year government bonds coming close to 2% (almost pre-pandemic levels) on the perception that the Treasury will have to induce bondholders to fund the large supplemental and ongoing deficit spending.  We have not seen much of direct inflation so far as CPI rose +1.4% for calendar 2020.  However, computer chip production setbacks began to cause bottlenecks – for example, automobile production was suspended in numerous US plants due to a lack of chip supply.  Also inflationary were freight rates increases as closed driver schools and lockdowns/quarantines prompted a driver shortage.  On the other hand, office real estate is seeing very high vacancies.  Manhattan office space hit a record 14.9% vacancy rate in January with new lease signings half the rate versus a year prior and 17% lower still in 2021.  Occupancy in San Francisco is expected to drop 22% in 2021 after reaching 16.7% vacancy in 2020.  Personally, I see plenty of white walls and bare electrical outlets when in downtown SF and would estimate that only 50%-60% of the lunch places are still open or have a presence.  It will continue to be brutal for landlords.


Macro: Asia

China's YoY GDP Growth

  • China’ Recovery Continued as industrial production grew by +7.3% in December from a year earlier, pushing the annual total to the plus column for 2020 (+2.8%). 2020 GDP likewise climbed +6.5% for the 4th quarter, pushing growth to +2.3% for the full year.  The vaunted “V” recovery is obvious in the graph to the right.  Retail sales growth slowed to +4.6% in December from +5.0% in November and for the whole of 2020, shrank -3.9%.  The current economist survey has Chinese growth accelerating to +8.2%, handily beating the rest of the world.  While supplemental spending was key during the first portion of the pandemic in 2020, indications so far in 2021 are for a pullback in loans (particularly in their “shadow banking” system which fell almost $100 billion in December), which would cause a slower growth rate.  Exports rose +18.1% in December from a year earlier, slowing from a +21.1% jump in November but beating expectations for a +15% rise. Imports increased +6.5% year-on-year, topping a +5.0% forecast and picking up pace from November’s +4.5% growth.  Bad debts however, still plague the country, with China Fortune Land Development Company’s stock tumbling almost 50% as its dollar debt reached distressed levels.


  • Japanese Exports gained in December for the first time in just over two years, with shipments to China climbing even as the pandemic resurged in other key markets. The value of overseas shipments rose +2% compared with a year earlier, snapping a 24-month losing streak.  Exports to China rose +10.2% from a year earlier, while shipments to the U.S. fell -0.7% and those to the EU dropped -1.6%.  Note that these results match the relative economic performance of each country/region.  Japanese machine tool orders rose +8.7% in December from a year earlier, picking up November’s pace slightly but industrial production fell -1.6% month-on-month (but is forecasted to rise in January).  Similarly, South Korea’s exports posted its best January on record while manufacturing activity reached the strongest level in a decade.  Overseas shipments increased +11% from a year earlier, the trade ministry said, beating economists’ forecasts for a +9.8% increase. Daily export value was $2.1 billion, the highest for a January.


Macro: Europe


  • Europe’s Economy Fell into a double-dip contraction in the final quarter of last year, shrinking -0.7% from the previous three months but outperforming economists’ expectations. The drop reversed some of the previous quarter’s strong growth, leaving gross domestic product down -6.8% over the full year after the bloc’s historic recession in the first half of 2020.  Germany, the largest country, squeaked out a +0.1% gain in Q4 and -2.9% for 2020.  German factory orders fell for the first time in eight months as lockdowns bit, dropping demand -1.9% for the month though orders were still up more than +6.0% from the previous year.  The euro area seasonally adjusted jobless rate declined to 8.3% in November 2020 from 8.4% in the prior month, but remained higher than 7.4% recorded in November 2019.  ECB President Lagarde held the pandemic bond-buying program at €1.85 trillion ($2.25 trillion), after a 500 billion-euro boost in December, and reiterated that it will run until at least March 2022.  They left the deposit rate at -0.5%, and said they’ll continue providing “ample” liquidity through long-term bank loans.  In short, nothing to see, just the usual financial repression.  Finally, Italy’s government collapsed and former ECB President Draghi was selected to form a new government.  Given the country’s massive and increasing debt load, he probably felt in familiar territory.


David Burkart, CFA

Coloma Capital Futures®, LLC
Special contributor to aiSource