How to Start the Week: Analytics and Forecasts — 28.06.2021

Fundamental analysis and forecasts for the future

Consumer spending is slowing as inflation is rising and the Fed is cautious.


Must know

U.S. consumer spending paused in May as shortages weighed on motor vehicle purchases, but the supply constraints and increased demand for services helped to boost inflation, with the Federal Reserve’s main inflation measure posting its biggest annual increase since 1992. The Commerce Department said on Friday that the unchanged reading in consumer spending, which accounts for more than two-thirds of U.S. economic activity, followed an upwardly revised 0.9% jump in April. Consumer spending was previously reported to have increased 0.5% in April. Economists polled by Reuters had forecast consumer spending would rise 0.4% in May.

The European Central Bank could lift a restriction on bank dividend payments in the coming months thanks to an improved macroeconomic scenario in the eurozone, ECB policymaker Pablo de Hernandez de Cos said on Friday. The ECB has asked banks to limit dividends and buy-backs until the end of September but has already indicated that the restrictions would be lifted unless the economic outlook deteriorates.

U.S. Federal Reserve Chairman Jerome Powell vowed on Tuesday not to raise interest rates too quickly based only on the fear of coming inflation. On Friday, the BofA (Bank of America) expected U.S. inflation to remain elevated for two to four years, against a rising perception of it being transitory, and said that only a financial market crash would prevent central banks from tightening policy in the next six months. The investment bank’s top strategist Michael Hartnett thinks inflation will remain in the 2%-4% range over the next 2-4 years. U.S. inflation has averaged 3% in the past 100 years, 2% in the 2010s, and 1% in 2020, but it has been annualizing at 8% so far in 2021, Bofa said in the note.

Hours after President Joe Biden declared “We have a deal” to renew the infrastructure of the United States, the Senate’s top Republican lashed out at plans to follow the $1.2 trillion bipartisan bill with another measure funding what Democrats call “human infrastructure.” Biden and top congressional Democrats – House of Representatives Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer – had long signaled their plan to link the bipartisan deal with another bill including spending on home health care and child care.

Last week’s European Union summit agreed on the need to accelerate work towards a possible European banking union, said French President Emmanuel Macron on Friday. Completion of the banking union, which would mean setting up a controversial common deposit insurance scheme, would sharply reduce the possibility of a major banking crisis in the 19 countries sharing the euro and in this way boost market confidence in the euro and demand for the currency.


Fundamental breakdown


Britain’s competition regulator started a formal investigation on Friday into whether Amazon and Google may not have done enough to prevent or remove fake reviews. The British regulator said it will gather more information to decide if the firms may have broken consumer law by taking insufficient action to protect shoppers. Both Google and Amazon said they were continuing to assist the CMA.


More than a year after a global pandemic that shut down stores and likely changed shopping habits at retail for good, Nike has clearly found its way back to connecting with consumers. The brand recently delivered its largest revenue total ever in a quarter — led by its e-commerce division and full-price sales in North America — and forecast that the first half of fiscal 2022 will continue the upswing seen in the latest quarter.


Tesla recently launched a solar-powered super-charging station in the Tibetan capital of Lhasa, being the first such facility in China. Capitalizing on Lhasa’s abundant sunlight, the charging station can convert solar energy into electric energy to meet the energy requirements of Tesla cars in Tibet.
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