People wearing protective masks at Macy’s Herald Square after outbreak of coronavirus (COVID-19) in New York City, New York, USA, on December 26, 2020. REUTERS / Jeenah Moon / File Photo
U.S. retail sales rose the most in ten months in March as Americans received additional pandemic relief tests from the government and increased COVID-19 vaccinations allowed for broader economic involvement, raising expectations for strong growth in the first quarter confirm.
The brightening economic outlook was underlined on Thursday by other data showing that unemployment benefits fell for the first time last week to their lowest level since March 2020, when mandatory closures of non-essential enterprises were forced to spread the first COVID-19 wave to slow down.
Although production at factories declined modestly last month amid a worldwide shortage of semiconductor chips affecting automotive plants, production remains supported by strong domestic demand. The optimistic data, which followed on the heels of recent reports showing that inflation is heating up, is unlikely to shift the Federal Reserve’s ultra-easy monetary policy stance.
“Demand is currently flourishing. Fed officials have so far said they expect this increase in demand to be volatile, and that they will not consider policy changes until the labor market is fully employed and price levels in a sustained manner. Pace will not rise, “he said. Chris Low, chief economist at FHN Financial in New York. “Their decision-making will be tested in the next few months.”
Retail sales recovered 9.8% last month, the largest increase since May 2020, the Department of Commerce said. The data for February were revised higher and show that sales fell by 2.7% instead of 3.0% as previously reported. The March rise pushed the selling price 17.1% above the pre-pandemic level and reached a record high.
Economists polled by Reuters predicted retail sales would rise 5.9% in March. Retail sales increased by 27.7% year-on-year.
The broad jump was led by motor vehicles, with receipts at car dealers accelerating 15.1%. Sales at clothing stores increased by 18.3%.
Consumers also increased spending at restaurants and pubs, leading to a 13.4% increase in revenue. Still, sales at restaurants and bars are 1.8% lower compared to March 2020.
Revenues at electronics and appliance stores increased by 10.5% and sales at furniture stores increased by 5.9%. There was also a solid increase in sales of sporting goods, hobby, musical instrument and bookstores. Sales at building materials stores increased by 12.1%. Online retail sales increased by 6.0%.
Many qualified households received additional checks of $ 1,400, which were part of the massive stimulus package approved in early March. The package also extended a weekly unemployment supplement of $ 300 per week until September 6th.
At the same time, the temperature warmed up and the health situation improved rapidly, enabling more restaurants to offer food.
The data, coupled with earnings reports from several companies, pushed the S&P 500 Index (.SPX) and the Dow Jones Industrial Average (.DJI) to a record high. The dollar (.DXY) was stable against a basket of currencies. U.S. treasury prices were higher.
WIDE STRENGTH
With the exception of cars, petrol, building materials and food services, retail sales rose 6.9% last month after a revised decline of 3.4% in February. These so-called core retail sales best correspond to the consumer spending component of the gross domestic product. It is estimated that they decreased by 3.5% in February.
Morgan Stanley economists increased their GDP growth by 100 basis points in the first quarter to an annual rate of 9.7%. The economy grew at a rate of 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 be 7.0% higher this year, the fastest since 1984. It will follow a contraction of 3.5% last year, the worst performance in 74 years.
A second Fed report on Thursday showed that manufacturing at factories rose 2.7% in March after falling 3.7% in February. Although the setback did not reverse the February decline, it was offset by surveys showing strong manufacturing activity in New York State and the Mid-Atlantic region this month.
Producers in the two regions were also excited about the outlook over the next six months, especially new orders.
“We think manufacturing activity will continue to increase over time,” said Daniel Silver, an economist at JPMorgan in New York.
Indeed, households have raised about $ 1.9 billion in savings. This, coupled with a recovery market, is expected to support consumer spending this year.
In a fifth report Thursday, the Labor Department said initial claims for state unemployment benefits had declined by 193,000 to a seasonally adjusted 576,000 for the week ended April 10, the lowest level since mid-March 2020. Economists have 700,000 applications for the latest week predict.
Despite the sharp drop, claims remain significantly higher than their pre-pandemic level. Part of the increase in claims is due to fraud. Improving unemployment benefit programs, including the weekly subsidy, can also encourage people to seek help and others not to look for work.
Claims fell from a record high of 6.149 million in early April 2020. In a healthy labor market, demands are usually between 200,000 and 250,000.
“While one can not read too much into one week’s reading on unemployed claims, the degree of decline in initial filing indicates a strong labor market in early April because Covid – related restrictions have been eased in various states, says 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 peak in February 2020.
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