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LGT Navigator: US economy is growing faster than before the crisis

July 30, 2021

The US economy grew strongly in the second quarter, benefiting from robust private consumer spending. The outlook remains favorable, but the spread of the delta variant is causing uncertainty. In the eurozone, the economic sentiment is at a record high.

US economy

The record hunt on Wall Street continued on Thursday. The S&P 500 gained +0.4% to 4419.15 points and The Dow Jones Industrial also advanced +0.4% to 35’084.53 points. Both indices recorded new intraday highs. The Nasdaq Composite lagged the broad market and gained +0.1% to 14’778.26 points. The tech index was slowed down by Facebook, among others. The shares of the social network lost around -4% after the company announced weaker growth prospects for the rest of the year.

The breather on the Asian markets lasted only briefly. In Tokyo, the Nikkei loses -1.8% on Friday. The Shanghai Composite trades -1.1% weaker and the Hang Seng in Hong Kong declines even -2.5%. Once again, tech stocks were under pressure after narrowing the losses of the beginning of the week on Thursday. Thus, the shares of Alibaba trade -5.5% lower in the afternoon and Tencent loses -4%.

US economy grows beyond pre-pandemic level

The US economy continued its rapid recovery in the second quarter. Gross domestic product (GDP) grew by +6.5% on an annualized basis from April to June, according to a preliminary estimate by the Commerce Department. Economists had expected a plus of +8.5%. Although GDP growth was slightly below expectations, the US economy gained further momentum compared to the beginning of the year (Q1: +6.3%). Moreover, the growth rate is above the values measured before the outbreak of the pandemic, thus underlining the rapid economic recovery. The easing measures, vaccinations and government aid packages have all contributed to the upturn: the combination of these factors has led to American consumers going on shopping sprees again, thus boosting the economic engine. Private consumption was one of the most important growth drivers in the second quarter. Construction investments, which shrank, proved to be a drag. This was also reflected in the number of pending home sales, which fell surprisingly in June. Analysts expect the economy to remain strong in the coming months. Rising prices, scarce raw materials or the spread of the delta variant of the coronavirus could cause a slowdown. 

Economic sentiment in the eurozone reaches record high

The economic sentiment in the euro zone is better than ever before, as the Economic Sentiment Indicator (ESI) shows. It rose by 1.1 points in July compared with the previous month to 119.0 points and is thus at a record level, as the European Commission announced on Thursday. Analysts had only expected an increase to 118.2 points. The index thus rose for the sixth time in a row, but growth has slowed. The individual sub-indices have developed unevenly. Sentiment in the industrial and service sectors, for example, improved. By contrast, consumer confidence has declined and the retail trade and construction sectors are also less optimistic than in June.

Profit for the SNB

The Swiss National Bank (SNB) posted a large profit in the first half of the year, thanks to exchange rate developments. For the period from January to June 2021, the SNB reports a surplus of CHF 43.5 billion, as it announced on Friday. Already in the first quarter, there was a profit of CHF 37.7 billion, and in the second quarter, CHF 5.8 billion was added. Broken down by positions, foreign currencies posted a profit of CHF 44.5 billion in the first half of the year, while gold holdings, which remained unchanged in terms of volume, posted a small valuation loss of CHF 1.4 billion. On the Swiss franc positions, the SNB achieved a plus of CHF 0.6 billion.



Economic Indicators July 30

MEZ Country Indicator Last period
01:50 JP Industrial production (m/m, June) -6.5%
11:00 EZ Gross domestic product Q2 (y/y) -1.3%
11:00 EZ Consumer confidence  (y/y, July) +1.9%
15:45 US Consumer price index PCE (y/y, June) +3.9%
14:30 US Chicago PMI (July) 66.1
16:00 US Uni Michigan consumer confidence (July) 85.5


Earnings Calender July 30

Country Company Period
FR BNP Paribas Q2
CH Holcim Q2
DE Linde Q2
US Procter & Gamble Q4
FR Schneider Electric  Q2
CH Swiss Re Q2
IT Uni Credit Q2


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Source: LGT Bank (Switzerland) Ltd.

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