Economic Analysis and Policy Outlook of the U.S. in June 2021
Conclusions
The latest data showed that with the orderly arrangement of vaccinations in the United States, the overall economy continued to recover in May. Among them, personal consumption became the main driving force for GDP growth in the first quarter, especially with the opening-up of different states, the catering and hotel industries have further recovered. Although the manufacturing and service industries continue to expand, the delivery speed has not increased. Due to increased demand and limited supply capacity, prices have risen rapidly in the short term. The U.S. consumer price index in May grew at a rate of nearly 5% year-on-year. In addition to supply chain bottlenecks and short-term demand surges, the low base of the same period was another important factor that contributed to the high year-on-year inflation rate. The impact of these factors on U.S. inflation is temporary, so it is unlikely to change the current policy direction of the Federal Reserve (the Fed), especially when the recent job market data is lower than expected. The Fed is expected to keep the federal funds rate unchanged at the conference in June.
World Economy
The global economy continued to recover in May. As orders and international trade grew at a faster rate, global economic growth accelerated, and the manufacturing PMI of major economies remained above the watershed 50. Specifically, Japan manufacturing PMI was 53 and the service PMI was 46.5; the Germany manufacturing PMI was 64.4, and the service PMI was 52.8; the France manufacturing PMI was 59.4, and the service PMI was 56.6; the U.K. manufacturing PMI was recorded at 65.6, and the service PMI was recorded at 62.9.
Policy Outlook
Judging from the current data, the U.S. vaccinations were arranged in an orderly way and the overall economy continued to recover in May. Personal consumption drove the growth of GDP in the first quarter; with the opening-up of the states, the catering and hotel industries will further recover after the pandemic. Although the manufacturing and service industries continue to expand, due to bottlenecks in raw materials, transportation and labor, the delivery speed is relatively slow and the order pledge is severe. This phenomenon has caused inflation in the U.S. to continue to rise. In May, the consumer price index approached 5%, exceeding market expectations. However, the above-mentioned reasons for affecting inflation are considered to be temporary. In particular, the consumer confidence index fell slightly in May, and the job market has not recovered as expected. Therefore, the Fed’s policy will not change significantly in the short term. We expect the federal funds rate on the Federal Reserve remains unchanged in the open market meeting in June.
