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Weekly Economic & Financial Commentary: Supply-Side Challenges Continue to Bedevil the Recovery

Summary

United States: Supply-Side Challenges Continue to Bedevil the Recovery

  • After coming in below consensus for two months in a row, nonfarm employment surprised to the upside in June, with employers adding 850,000 jobs. The unemployment rate rose to 5.9%.
  • The ISM manufacturing index fell to 60.6 in June. Manufacturers continue to report a litany of supply-chain challenges: lengthening delivery times, persistent component shortages, staffing difficulties and rising prices. The prices paid series rose 4.1 points to 92.1, its highest reading since 1979.
  • Consumer confidence and buying plans both rebounded in June, but shortages of automobiles, new and existing homes, household appliances and a whole host of other items continue to weigh on the recovery. Pending home sales surged 8% in May, pointing to an end to the recent slide in existing home sales.
  • Next week: ISM Services Index (Tuesday), JOLTS Job Openings (Wednesday), FOMC Minutes (Wednesday)

International: Eurozone Economy Looks Forward to Brighter Days Ahead

  • Firming confidence surveys and rising retail sales point to better days ahead for the Eurozone economy. Canada’s GDP declined in April but may be close to bottoming out, while in Japan, the economic recovery looks to be struggling to gain any momentum.
  • Next week: Australia monetary policy announcement (Tuesday), Brazil CPI (Thursday), U.K. GDP (Friday)

Credit Market Insights: C&I Lending Declines: Not Worth Losing Sleep Over

  • After experiencing double-digit growth in three out of four quarters in 2020, the year-over-year declines seen in commercial & industrial (C&I) lending in April and May may look disappointing, but there is no reason to worry yet.

Topic of the Week: Fourth of July Means Elevated Spirits…and Prices

  • This Independence Day marks the first large gathering for many families and friends after more than a year of social distancing. Continuing with the theme of 2021, it will not come cheap.