Weekly Economic Update
In the local economic news, Asian Development Bank (ADB), even as it stated that the Indian economy will grow by 11 per cent in FY22, has warned that the recent uptick in cases poses a threat to economic growth. While the bank’s positive forecast is based on the containment of the second wave of Coronavirus and a solid rollout of the vaccination programme in the short-term, it has also cautioned regarding the tightening of global financial conditions, leading to higher interest rates in the country.
In the US, the economy grew by an annualised rate of 6.4 per cent during the quarter ending March 31, led by strong fiscal stimulus. This was the strongest first-quarter growth since 1984. The economic boom comes on the back of a 4.3 per cent increase in GDP during the quarter ending December 31. Growth was well ahead of expectations of a 6.1 per cent increase for the quarter. Consumer spending, which accounts for 67 per cent of the economy, grew at a high 10.7 per cent during the quarter as consumers spent a part of the US$ 1,400 in stimulus cheques that some received. Some economists are forecasting the growth of 7 per cent in 2021.
High-frequency indicators suggest that there is a cooling down of economic activity underway in China. The official government non-manufacturing PMI decreased to a level of 54.9 in April, down from a level of 56.3 in March. A level above 50 denotes expansion while a level above 55 denotes strong expansion. The composite PMI, which includes both manufacturing & services decreased to a level of 53.8 in April from a level of 55.3 in March.