Weekly Economic Update

In the local economic news, even as analysts have reduced their estimates for FY22 economic growth by as much as 1 to 3 per cent points in the last few weeks, owing to concerns related to the impact of the second wave of Coronavirus, the economy, as per a recent SBI report may have grown by 1.3 per cent in January to March 2021 period.  

This compares favourably with National Statistics Office (NSO), which is expecting a negative growth of 1 per cent in the recently completed quarter. If the estimates of SBI are correct for the entire year, the economy may have contracted by 7.3 per cent.   

In other news, RBI, in its annual report has noted that the economy during the second wave of COVID has not moderated to the extent that it did during the first wave last year. According to the central bank, "The recovery of the economy from the COVID-19 will critically depend on the robust revival of private demand that may be led by the consumption in the short run but will require acceleration of investment to sustain the recovery".   

In the global economic and market news, markets in Europe continued their advance this week on stronger-than-expected PMI readings from Europe, While the UK’s initial PMI reading was at 62, the highest level since the survey began in 1998, the Eurozone’s flash PMI came in with a reading of 56.9 compared to 53.8 in April thereby, indicating a robust economic recovery. In another positive development, UK retail sales increased 9.2 per cent in April, signalling a pent-up demand.   

In the US, job data continues to point to a recovery, with US initial jobless claims falling to 4.06 lakh, a post-pandemic low. The speculation regarding the US infrastructure spending plan also continued with the Republicans presenting a counter-offer of the US $928 billion to President Joe Biden’s US $1.7 trillion infrastructure spending plan.