Skip navigation Scroll to top
Scroll to top

LGT Navigator: Industrial sector drives economic recovery, but also inflation concerns

June 2, 2021

After the long weekend, the indices on Wall Street initially gained, but then lost momentum during the trading day. Among other things, positive economic data from the US and Europe gave a boost, but then also the latent inflation concerns again moved to the fore. An insight into the general economic development and the assessment of the US Federal Reserve could be provided by the “Beige Book” of the Fed, which is published this evening.

Industrial sector drives economic recovery, but also inflation concerns

The Dow Jones Industrial after the opening of the stock market initially gained almost +1%, but then closed at 34'575.31 points with only a moderate daily gain of +0.13%. The broad S&P 500 was virtually unchanged at 4'202.04 points (-0.05%) and on the Nasdaq, the technology indices slipped slightly by the closing bell. The Nasdaq 100 lost -0.23% and the Nasdaq Composite -0.09%. In Asia, the picture was similar, and the stock indices trended inconsistently and without a clear trend on Wednesday; on the one hand supported by the hope of a fulminant recovery of the global economy thanks to a containment of the corona pandemic, and on the other hand held back by the fear of a withdrawal of monetary stimulus due to excessive inflation. Now, the regular economic report of the Federal Reserve, the so-called Beige Book, is eagerly awaited this evening (20:00 CET).

US manufacturing enters the summer with plenty of momentum

In American industry, growth accelerated more than expected in May. The Purchasing Managers' Index of the Institute for Supply Management (ISM) rose from 60.7 to 61.2 points, while analysts had expected a slight slowdown to 60.5. The order situation of the companies surveyed was particularly strong. The positive outlook was also confirmed by IHS Markit's Purchasing Managers' Index, published virtually at the same time, which showed a reading of 62.1 points for US manufacturing in May, a strong increase from 60.5 points the month before. According to IHS Markit, new orders increased at the fastest pace in 14 years thanks to revived domestic demand and record exports.

Europe's industry in record mood, but supply problems cause problems

The Purchasing Managers' Index (PMI) for the industrial sector in the eurozone, which is published twice a month by IHS Markit, improved from 62.9 points in April to 63.1 points in May, thus reaching the best value since the start of the data series in mid-1997. As a result, the sentiment barometer has also been above the growth threshold of 50 points for eleven months. According to the London-based institute, a “huge increase in new orders” was observed and all PMIs in all euro countries covered signaled an expansion of the industrial sector. However, supply bottlenecks are increasingly leading to a significant rise in input costs. Record supply delays are limiting output growth and leaving companies unable to meet demand at full capacity, IHS Markit commented.

In the UK, IHS Markit also noted a marked improvement in the industrial sector, and here too the PMI climbed to a record level. Compared with the previous month, the indicator rose by 4.7 points to 65.6 – the highest level since the survey began almost 30 years ago. The successful containment of the pandemic and the ongoing vaccination campaign had significantly brightened the outlook for British industry, the institute explained.

The Purchasing Managers' Index for the Swiss industry rose by 0.4 points to 69.9 in May, also the highest level since the beginning of 1995. According to the industry association, the recovery of Swiss industry is broad-based and likely to continue for the time being in view of the good order situation, although production momentum has slowed somewhat.

Euro-area inflation rate reaches the two percent mark

In the eurozone, consumer prices rose by +2.0% year-on-year in May, which was a stronger increase from the previous month's level (+1.6%) than the +1.9% forecast by economists on average. The price trend is mainly driven by the base effect of significantly higher energy prices over the year. So far, the European Central Bank (ECB) has been relaxed about the rising inflationary pressure and considers it to be only temporary and not sustainable. Core inflation, excluding the often-volatile prices for energy, food, alcohol, and tobacco, also increased in May, but at +0.9% (previous month: +0.7%) it was much more moderate.

Declining unemployment rate in the eurozone

Unemployment in the euro countries declined slightly in April. According to Eurostat, the unemployment rate fell from 8.1% in March to 8.0%. This means that 13.03 million people were out of work in the currency area. Unemployment is lowest in the Netherlands at 3.4% and highest in Greece and Spain at 15.8% and 15.4%, respectively.

Economic Indicators June 2

MEZ Country Indicator Last period
08:00 GE Retail Sales (April, y/y) +11.0%
11:00 EZ Producer Prices (April, y/y) +4.3%
20:00 US Fed Beige Book


Earnings Calender June 7

Country Company Period
US Apple Developer Conference WWDC
US Pharma Conference ASCO


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

You can also follow us on Facebook or LinkedIn – or visit MAG/NET and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Source: LGT Bank (Switzerland) Ltd.

Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.