More than 25 million unemployed in the USA (Afternoon analysis 21.05.2020)

The data on economic activity in US industry and services exceed expectations. Although disastrous, they indicate that the worst of the US economy is behind us. The zloty is gradually getting stronger.

Initial jobless claims still in millions

The US Department of Labor published data on last week's jobless claims this afternoon. 2,438 million is more or less as many claims as the market expected (exactly 2,400 million). This is still a huge number, but it shows a downward trend from week to week. A slightly less positive is the constantly increasing number of people already receiving the claims. According to the latest report, it amounted to 25.073 million, although this figure is delayed by one week (in relation to the aforementioned reading), so now it is probably closer to 30 million.

These data show how big structural problems can potentially await economies in the process of returning to pre-pandemic levels. However, they do not affect the positive sentiment prevailing on the market, which is associated with the opening of economies and reports on vaccines (including AstraZeneca's announcements that it could potentially have them ready in September-October).

Services and industry - sparks of optimism

In the afternoon, slightly higher than expected were also the readings of activity in the US industrial and service sectors in May. PMI for industry rose to 39.8 pts, and in the case of services to 36.9 pts - by 0.3 pts and 4.6 pts above expectations, respectively. These are still disastrous readings, and far from the borderline separating recession from growth (50 points), but significantly lower slowdown in services (the index for this sector rose significantly from 26.7 points a month earlier) can be seen with cautious optimism.

As the next months pass, the wave of readings showing declines should expire if we do not observe a second wave of the disease. Nevertheless, in a commentary to the IHS Markit report, it indicates that the US economy may contract this year at a rate of 37%. It will take two years to return to pre-pandemic levels. This is more or less in line with what Jerome Powell, the Chair of the Fed, has recently indicated, although in the current situation all macroeconomic forecasts are burdened with much greater uncertainty than usual.

Zloty pares losses through small steps

Positive sentiment, despite the growing tension between the US and China, maintains a relatively (for the last two weeks) weaker dollar. The EUR/USD exchange rate rose to 1.10, and remains at this level, although it fell in the afternoon to around 1.0940. This is good news for the zloty, which has been gradually strengthening every day since the beginning of the week. Today, the USD/PLN quotations fell even below 4.11 (in the afternoon it rose to 4.13), and EUR/PLN below 4.53.

However, these are still levels far away from those before the pandemic, and the worsening US-China relations and macro data pointing to a long path of economic recovery may suggest that a return to a stronger zloty will not be so rapid and will be postponed until next year.