Weekly Economic Update

In the local economic news, the Indian economy showcased stronger-than-expected growth of 1.6 per cent in the fourth quarter, putting full-year FY 20-21 growth at a contraction of 7.3 per cent. While this full-year growth appears to be the lowest in four decades, RBI in its policy announcement held on Friday expects growth to be at 9.5 per cent during FY 21-22 as it revised its estimate lower for the year due to the second wave of COVID-19. RBI also expects inflation to be at 5.1 per cent during FY21-22 thereby, providing room for continued monetary & fiscal accommodation.  

In other news, May economic survey data pointed towards a slowing economic growth scenario. While Manufacturing PMI suggested stagnation during the month with a reading of 50.8 compared to a strong expansion reading of 55.5 in April, Services PMI entered contraction during the month with a reading of 46.4, compared to 54 in April. The drop in growth was driven by the second wave of COVID-19, which caused localised lockdowns that further impeded economic activity. The Composite PMI, which considers both manufacturing & services activity, entered the contractionary territory with a reading of 48.1 compared to 55.4 in April.  

In the global economy as well as market news, bond yields in the US moved higher soon after the news of improving jobs outlook surfaced there. In a report by ADP, weekly jobless claims continued their downward trend with the country reporting jobless claims of 3.85 lakh, the lowest since March 2020.  Meanwhile, the central bank of the US has noted that US businesses are finding it harder to hire enough workers and are forced to pay higher salaries to get workers.  

In the oil market, even as energy prices hit a two-year high, OPEC and non-OPEC countries have agreed to increase supply gradually by easing production cuts. The producers have agreed to bring back about 2.1 million barrels a day between the months of May and July.