By David DiMolfetta
In the early months of 2021, economic indicators ranging from home sales and retail sales have signaled recovery, with figures from this week suggesting America’s comeback is set to accelerate.
Retail sales advanced 9.8% to $619 billion for March, up from $563.7 billion in February and 27.7% from the prior-year period when lockdown protocols began. Also, the Labor Department reported on April 15 a record low of 576,000 weekly initial jobless claims since March 14 of last year. California published a drop of more than 75,000 new claims, while new claims in Virginia and Ohio fell by more than 20,000.
On the supply side, industrial production reported by the Federal Reserve rose 1.4% in March, up from its 2.6% drop In February. Manufacturing production and mining output increased by 2.7% and 5.7%, respectively.
“This is a good story about the American economy’s resilience,” Joseph Brusuelas, chief economist at RSM, told the Wall Street Journal on April 15.
In other areas of the economy, bar and restaurant sales totaled $62.2 billion on a seasonally adjusted basis in March, a figure up 13.4% from February sales of $54.8 billion.
“Warmer temperatures will likely add to the number of al fresco dining options available to consumers in the weeks ahead, particularly in jurisdictions that allow for expanded outdoor seating,” an April research note from the National Restaurant Association said.
The Conference Board reported on April 13 that consumer confidence rose to its highest figure in a year, sitting at 109.7, up from 90.4 in February.
“Consumers’ assessment of current conditions and their short-term outlook improved significantly, an indication that economic growth is likely to strengthen further in the coming months,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
Markets responded well to the week’s news. Credit Suisse upgraded its price target on the S&P 500 to 4,200 from 4,050 on April 15. They now see earnings per share of the major stock market index growing to $175 in 2021, up from $168 seen before raising its target.
Many have pointed to stimulus payments as the major factor aiding in recovery. Since the middle of last month, the federal government has distributed nearly 160 million stimulus payments of more than $376 billion to households through the latest aid package. Of the 48% of respondents reporting a loss of income to the Labor Department since March 13, 81% reported using their stimulus payments mostly for expenses instead of paying off debt or adding to savings.
The Federal Reserve forecasts an economic expansion of 6.5% for this year and an unemployment rate declining to 4.5%. Fed Chairman Jerome Powell, on April 14 reaffirmed the central bank’s commitment to ongoing monetary policies for bolstering the U.S. economy and added that the Federal Open Market Committee (FOMC) would taper bond purchases once economic conditions of inflation slightly above 2% and robust recovery in the labor markets onset.
ING Economics revised its U.S. GDP projection to 6.9% for 2021 at the beginning of April.
“Consumer spending is supported by stimulus, investment is buoyed by strong order books, and jobs growth is set to soar as the economy reopens in the second quarter,” said Chief International Economist James Knightley in a research note backing the GDP forecast.
Still, inflation remains a “nagging issue” and may prompt policy tightening from the Fed sooner rather than later, Knightley said. In a separate note, he said a more meaningful change in the Fed’s language would be presented in the FOMC’s June meeting.
In an April 14 virtual event at Rutgers University, New York Fed President John Williams said the Federal Reserve knows how to act if inflation gets too high.
“There’s a lot of things that are uncertain, but I think the economy will be able to get back to full strength,” he said.
