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LGT Navigator: Biden's infrastructure program to make the US fit for the future

April 1, 2021

US President Joe Biden announced the eagerly awaited infrastructure program yesterday after the stock market closed. The US government plans to spend more than two trillion US dollars to renew the country's infrastructure, some of which is in a state of disrepair, to combat climate change and, above all, to create millions of jobs.

Biden's infrastructure program to make the US fit for the future

US President Joe Biden wants to create “the strongest, most resilient and most innovative economy in the world” with a historic infrastructure program. This is to be achieved by spending around 10% of the United States’ annual economic output over the next eight years, financed in part by tax increases. With the program, the White House not only wants to modernize the infrastructure, which is outdated in many places, but also to create incentives for a more environmentally friendly economy and pollution-reducing technologies, but above all to create millions of jobs. The Democratic president's project naturally meets with resistance from Republicans. Republicans are likely to fight the planned tax increases on corporations and the wealthy. On Capitol Hill, the Democrats have a majority in the House of Representatives and a razor-thin margin in the Senate, but the plan is likely to be controversial. Senate Republican Minority Leader Mitch McConnell already immediately rejected Biden's plan. “The proposed spending is too high, and the economy is recovering on its own from the crisis caused by the corona pandemic,” McConnell said.

On Wall Street, the US president's announcement was anticipated, but closing prices are unlikely to be indicative of how investors view Biden's infrastructure program. The Dow Jones Industrial ended March at 32'981.55 points, a moderate daily loss of -0.26%. In contrast, the S&P 500 gained +0.36% to 3'972.89 points, posting a gain of nearly six percent in the first quarter. The Nasdaq 100 rose +1.51% to 13'091.44 points at midweek. Support was also provided yesterday by friendly US economic data ahead of the US labor market report expected tomorrow.

Accelerated job growth in the US private sector

Against a backdrop of loosened corona restrictions in many places and impressive progress in corona vaccinations, 517'000 new private sector jobs (excluding government jobs) were created in March. This represents a significant acceleration in job growth, according to the latest data from labor market services provider ADP. The month before, growth was 176'000 jobs. On the other hand, however, analysts had forecast an even stronger job growth of 550'000 in March. The data from ADP is considered an indicator for the eagerly awaited official labor market report from Washington, which will be published tomorrow on Good Friday.

The Purchasing Managers' Index (PMI) from the economic metropolis of Chicago also sent a positive signal for the US economy. The PMI improved in March from 59.5 points in the previous month to 66.3 points and thus reached the highest level since July 2018. The Chicago PMI is again considered an indicator for the nationwide survey of the industry association ISM (Institute for Supply Management).

Inflation in the eurozone picks up noticeably, but core inflation remains moderate

The cost of living in the euro area increased noticeably in March. According to Eurostat, the statistics office, consumer prices rose by +1.3% on an annual basis, compared with an inflation rate of +0.9% in February. On average, however, analysts had expected an even stronger increase to +1.4%. On a month-on-month basis, consumer prices rose by +0.9%. The price increase in March was mainly due to higher energy prices (+4.3% year-on-year). On the other hand, inflation in other areas was only moderate, which is why the core inflation rate, i.e. excluding energy and food prices, declined from +1.1% in the previous month to +0.9%. Economists expect the ECB's inflation target of around 2% to be reached and probably exceeded in the coming months. However, the ECB already made it clear that it considers the anticipated increase in inflationary pressure to be only temporary and would not react in terms of monetary policy.

The inflation trend in the euro area is also mixed, as the latest data from France and Italy showed. For example, French consumer price inflation picked up sharply from +0.8% to +1.4% in March, while in Italy inflation moderated from +1.0% to +0.6% in March.

UK economy grew more strongly than expected at the end of 2020

Economic output in the United Kingdom increased by +1.3% quarter-on-quarter in the final quarter of last year, according to revised data. A preliminary estimate had still assumed a growth rate of +1.0%. The UK GDP decreased by -9.8% in the corona year 2020.


Economic Indicators Arpil 1

MEZ Country Indicator Last
08:00 SZ Consumer Prives (March, y/y) -0.5%
09:00 SP IHS Markit PMI Manufacturing (March)  52.9
09:30 SZ PMI Manufacturing (March)  61.3
09:45 IT IHS Markit PMI Manufacturing (March)  56.9
09:50 FR IHS Markit PMI Manufacturing (March)  56.1
09:55 GE IHS Markit PMI Manufacturing (March)  60.7
10:00 EZ IHS Markit PMI Manufacturing (March)  57.9
10:30 UK IHS Markit PMI Manufacturing (March)  55.1
14:30 US Initial Jobless Claims (weekly) 684,000
15:45 US IHS Markit PMI Manufacturing (March)  58.6
16:00 US ISM PMI Manufacturing (March)  60.8

Earnings Calender April 1

Country Corporate Period
UK Next Q4


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US employment growth remains dynamic at the beginning of the year