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Economic Outlook Week of June 28 2021

June 28, 2021

Economic Outlook: Week of June 28, 2021

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Phil Levy

Chief Economist, Flexport

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Every week, Flexport Chief Economist Phil Levy gathers the most relevant news for the global trade community.

Track major world economies, see what the latest indices reveal, and keep up with the facts and figures that could impact your business.

Here’s the economic news you need for the week of June 28, 2021.

Let’s start with a chart. This week, it's US Personal Consumption Expenditures.

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Source: Bureau of Economic Analysis and St. Louis Fed FRED.

One hallmark of the Covid economic shock has been wild swings in personal consumption expenditure components. The chart shows levels for inflation-adjusted (real) consumption of services and goods.

Through February 2020, both levels and ratios were fairly stable. For the first 9 months depicted on the chart (June 2019 through February 2020), services averaged 64.0% of personal consumption and goods averaged 36.0%.

In the latest numbers for May 2021, announced this week, services consumption was still 3.6% below earlier average levels, while goods consumption was 16.7% above.

Though not shown in the chart, the goods figure comprises a 10.5% increase in consumption of nondurables and a 27.0% increase in the consumption of durables. The May numbers meant that the services share of consumption was 59.5%, while the goods share was 40.5%.

The latest release showed a modest move back in the direction of pre-Covid norms. Real services consumption rose by 0.4% from April to May, while real goods consumption fell by 2.1% (with a 0.5% drop in nondurables and a 4.3% drop in durables).

These changes were in line with the forecast from the new Flexport Post-Covid Indicator, released earlier this week.

Read More: How Long Will Covid Impact Last? A New Index Predicts Shifts in Goods Demand

The Indicator addresses the question of how consumption behavior has deviated from pre-Covid norms in its swing toward goods consumption. It uses Flexport data to forecast upcoming consumption shifts. The inaugural release preceded the official numbers and called for a small pullback from goods’ share in May, which is what we see confirmed here.

Economic Developments

US personal income fell 2.0% in May after a 13.1% fall in April. In each case, the decrease was more than explained by a drop in government benefits. The income movements are heavily affected by stimulus payments. In levels, personal income remains above monthly amounts from Q4 of 2020.

Signs of US inflation continue. The deflator used to translate nominal personal consumption figures (above) to real (as in the chart) showed annual inflation at a 3.9% rate. Excluding food and energy, the deflator showed 3.4% inflation. The latter figure was the highest since April 1992.

US imports rose in May by 0.8%, according to advance numbers, with the biggest increases in Foods, Feed & Beverages (5.7%) and Industrial Supplies (4.5%). Exports fell 0.3%, led by a decline in Automotive (down 4.7%)

Wholesale inventories rose in May by 1.1%, seasonally adjusted, while retail inventories fell 0.8%.

Weekly jobless claims have fallen significantly since a 904K figure in early January. But this week’s 411K number, coupled with 418K the week before, meant the 4-week moving average rose for the first time since early April.

Political Developments

US and Taiwan set trade talks. The two sides will meet this week as part of the Trade and Investment Framework Agreement (TIFA). Talks will focus on supply chain security and digital trade.

While the stated purpose of the long-standing talk series is to address irritants in the trade relationship, there have been suggestions that the current talks could be the prelude to a broader trade agreement.

For more economic insights, follow @philipilevy on Twitter or check out Flexport’s The State of Trade webinars.

Please note that the information in our publications is compiled from a variety of sources based on the information we have to date. This information is provided to our community for informational purposes only, and we do not accept any liability or responsibility for reliance on the information contained herein.

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