People wearing protective masks shop in Macy’s Herald Square after the coronavirus disease (COVID-19) outbreak in the Manhattan borough of New York City, New York, USA, December 26, 2020. REUTERS / Jeenah Moon / File Photo
U.S. retail sales rose the most in 10 months in March as Americans received additional government pandemic controls and increased COVID-19 vaccinations allowed broader economic re-engagement, bolstering expectations for robust growth in the first quarter.
The improved economic outlook was underscored on Thursday by other data showing that first claims for unemployment benefits fell last week to their lowest level since March 2020, when mandatory closures of non-essential companies were enforced to prevent the spread of the first COVID-19. wave to slow down.
Although manufacturing production rebounded modestly last month amid a global semiconductor chip shortage hurting car factories, manufacturing continues to be supported by strong domestic demand. The positive data, which followed on the heels of recent reports showing inflation is heating up, are unlikely to change the Federal Reserve’s very easy monetary policy stance.
Demand is rising at the moment. Fed officials have so far said they expect this increase in demand to be volatile and will not consider changes in policy until the labor market is fully employed and price levels rise at a sustained pace. ”said Chris Low, chief economist at FHN Financial in New York. “Their decision will be tested in the coming months.”
Retail sales rose 9.8% last month, the largest increase since May 2020, the Department of Commerce said. The data for February was revised higher to show that sales fell 2.7% from 3.0% as previously reported. The March surge pushed sales levels 17.1% above pre-pandemic levels and to a record high.
Economists polled by Reuters had predicted retail sales would increase 5.9% in March. Retail sales were up 27.7% year on year.
The broad rebound was led by motor vehicles, with car dealers’ revenues up 15.1%. Turnover in clothing stores increased by 18.3%.
Consumers also increased their spending in restaurants and bars, leading to a 13.4% increase in revenues. Nevertheless, the turnover at restaurants and bars is 1.8% lower than in March 2020.
Revenue from electronics and appliance stores increased by 10.5% and turnover in furniture stores increased by 5.9%. There was also a significant increase in turnover at sporting goods, hobby shops, musical instruments and book stores. Sales in building material stores increased by 12.1%. Online retail trade grew by 6.0%.
Many qualified households have received an additional $ 1,400 checks, which were part of the massive stimulus package approved in early March. The package also extended a government-funded weekly unemployment benefit of $ 300 through September 6.
At the same time, temperatures have risen and the public health situation has improved rapidly, allowing more restaurants to offer restaurants.
The data, along with positive earnings reports from several companies, pushed the S&P 500 index (.SPX) and the Dow Jones Industrial Average (.DJI) to record highs. The dollar (.DXY) was stable against a basket of currencies. US Treasury bond prices were higher.
WIDE STRENGTH
Excluding automobiles, gasoline, construction materials and food services, retail sales rose 6.9% last month after a revised decline of 3.4% in February. These so-called core sales correspond most closely to the consumer spending component of the gross domestic product. They were previously estimated to have fallen 3.5% in February.
Economists at Morgan Stanley raised their estimate of GDP growth in the first quarter by 100 basis points to 9.7% year-on-year. The economy grew by 4.3% in the fourth quarter.
The Fed’s “Beige Book” report on Wednesday described economic activity as “accelerating to a moderate pace from late February to early April.”
Growth is expected to top 7.0% this year, the fastest since 1984. It would follow a 3.5% contraction last year, the worst performance in 74 years.
A second report from the Fed on Thursday showed that manufacturing production increased 2.7% in March, after falling 3.7% in February. While the recovery didn’t make up for the full decline in February, it was offset by surveys showing strong manufacturing activity in New York State and the mid-Atlantic this month.
Manufacturers in the two regions were also optimistic about the outlook for the next six months, especially new orders.
“We think manufacturing activity will continue to pick up over time,” said Daniel Silver, an economist at JPMorgan in New York.
Indeed, households have amassed about $ 1.9 trillion in excess savings. That, along with a recovering job market, is expected to support consumer spending this year.
In a fifth report on Thursday, the Department of Labor said initial claims for unemployment benefits from the state fell 193,000 to a seasonally adjusted 576,000 for the week ending April 10, the lowest level since mid-March 2020. Economists had made predictions about it. 700,000 requests for the past week.
Despite the massive drop, claims remain well above their pre-pandemic levels. Part of the increase in the number of claims is due to fraud. Strengthening unemployment benefit programs, including the weekly subsidy, could also encourage some people to apply for help and others not to look for work.
The number of claims has fallen from a record number of 6.149 million at the beginning of April 2020. In a healthy labor market, claims are normally between 200,000 and 250,000.
“While not too much can be read in a weekly study on unemployment claims, the rate of decline in initial filings indicates a strong labor market in early April as Covid-related restrictions were relaxed in several states,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.
The economy created 916,000 jobs in March, the most in seven months. Employment remains 8.4 million jobs below its February 2020 peak.
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