Three-minute macro – February 2021

Speed of vaccinations is a factor in the reopening, but we’re also closely watching manufacturing activity in China.


There's a wide divergence in the speed of vaccine administration among the G7 countries. The timing of the reopening depends on the virus and vaccines but with limited information and no historical precedent, it’s challenging to gauge when the reopening will hit the United States. However, the relative path of current vaccinations is certainly investable as several central banks, including the Bank of Canada and the Federal Reserve, have tied the pace of vaccinations specifically to the path of near-term monetary policy. Slow vaccines imply a later relative recovery and monetary policy staying easier on a relative basis in the near-term.

Line chart of cumulative Covid-19 vaccines since December 2020 for various countries. The chart shows the U.K. and U.S. significantly ahead of other countries.

Eye on China

Strength from China’s manufacturing economy has rolled over since peaking in November of 2020 and there is growing evidence that China’s cyclical boom is peaking. We’ve written in the past that China’s credit impulse is rolling over, and its impact on the manufacturing sector is being manifested in the form of weaker PMIs. This development has global and cross-asset implications since these indicators tend to lead China’s own business cycle, and more broadly demand for industrial commodities. COVID-19 lockdowns have created uneven economic recoveries, with the services sector having been shuttered while goods have had the opportunity to rebound strongly. We expect that the services sector will take relative leadership later on in the year, and that China’s credit impulse rolling over, combined with weaker business surveys, could be an early signal that we’re getting there.

Line chart of Chinese manufacturing PMI since 2018. It shows the PMI rising from May to January 20201 then turning downward.

U.S. savings, service and stocks

At 13.7%, the U.S. personal savings rate as a percent of disposable income remains elevated relative to pre-pandemic levels. Although the savings rate has dropped from its peak of 33.7% in April of 2020, it remains higher than any other recessionary period on record. These accumulated savings are fueling the pent-up demand in the economy, which has propelled equity market valuations. While the current rate has been distorted by the nature of the job losses, it's nevertheless still high and we believe that these savings will drive marked improvement in the services sector as the economy reopens in the second half of 2021.

Line chart showing U.S. personal savings rate since 1990. The savings rate spiked from under 10% to over 30% early in 2021 and has dropped down but still to a level higher than it was before.

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Erica Camilleri, CFA

Erica Camilleri, CFA, 

Senior Global Macro Analyst, Multi-Asset Solutions Team

Manulife Investment Management

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Frances Donald

Frances Donald, 

Global Chief Economist and Strategist

Manulife Investment Management

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