China’s first quarter GDP report issued last week highlighted just how different the global economic vista looks now versus last year. The report showed that the second largest global economy grew by a whopping 18% year on year, reflecting a massive rebound across consumer spending and industry compared to its lockdown low 12 months ago.
Although the recovery narrative from the US last week wasn’t as dramatic as that of China, it continued to build which kept investors in good spirits over the week. The Beige Book, the US Federal Reserve’s (Fed’s) regular commentary on economic conditions, was published last week. The tone of this update was positive with the Fed commenting that the economy was helped by further progress on vaccinations as well as stimulus payments to US households.
The regular flow of US economic data last week also helped investors sentiment; March retail sales for example showed a big jump while business and housing market sentiment picked up as seen in improved readings from the March Philly Fed and National Homebuilder sentiment indicators.
In Ireland, the CSO reported that Irish property prices inched higher again in February with prices up 3% over the past year. We’ve regularly noted lack of supply as a key issue here, something which hasn’t been helped by construction lockdowns. While the sector is only emerging from another lockdown now, it was interesting to see that in the March Construction Purchasing Managers Index published last week, that the index of future activity came in at a two and a half year high with 60% of firms expecting strong activity over the next 12 months.
On the whole global equities again pushed higher last week although the asset class’s progress was temporarily checked by pauses in the use of the Johnson and Johnson and Astra Zeneca COVID vaccines due to concerns related to blood clots in recipients. The economic news last week supported prices pushing higher and has generally been a big factor in the equity rally so far this year. If this rally is to continue we think corporate fundamentals will have to play their part in showing investors that company profits and cashflows are climbing as the global economy recovers. Our chart of the week shows that the Q1 earnings are forecast to rise strongly this quarter – in our view this will have to continue in forthcoming quarters to keep the equity market’s momentum going.