People wearing protective masks shop at Macy’s Herald Square after the outbreak of coronavirus disease (COVID-19) in the Manhattan district of New York City, New York, USA, on December 26, 2020. REUTERS / Jeenah Moon / Photo File
Retail sales in the United States peaked in ten months in March, as Americans received additional pandemic relief controls from the government, and increased COVID-19 vaccinations allowed a broader economic commitment, consolidating expectations of strong growth in the first quarter.
The brightest economic outlook was highlighted by other data this Thursday showing claims for the first time for unemployment benefits that fell last week to the lowest level since March 2020, when mandatory closures were applied. of non-essential companies to curb the spread of the first wave COVID-19.
While production at factories rose modestly last month amid a global shortage of semiconductor chips that hurt car plants, manufacturing remains the basis of strong domestic demand. Optimistic data, which followed the heels of recent reports showing inflation heating up, is unlikely to change the Federal Reserve’s ultra-light monetary policy stance.
“Demand is booming right now. So far Fed officials have said they expect this increase in demand to be ephemeral and that they will not consider policy changes until the labor market is in full employment and price levels increase at a steady pace, ”he said. Chris Low, chief economist at FHN Financial in New York. “Its resolution will be put to the test in the next two months.”
Retail sales rose 9.8% last month, the largest increase since May 2020, the commerce department said. February data was revised upwards to show that sales fell 2.7% instead of 3.0%, as previously reported. The increase in March pushed the level of sales 17.1% above its pre-pandemic level and to a record high.
Economists surveyed by Reuters had predicted that retail sales would increase by 5.9% in March. Retail sales recorded a record 27.7% year-on-year.
The large-scale rebound was led by motor vehicles, with revenue at car dealerships accelerating by 15.1%. Sales at clothing stores increased 18.3%.
Consumers also increased spending on restaurants and bars, leading to a 13.4% jump in revenue. However, sales in restaurants and bars are 1.8% lower compared to March 2020.
Receipts at electronics and home appliance stores rose 10.5% and sales at furniture stores rose 5.9%. There were also significant gains in sales of sporting goods, hobbies, musical instruments and bookstores. Sales in building material stores increased by 12.1%. Online retail sales increased 6.0%.
Many qualified households have received an additional $ 1,400, which was part of the massive stimulus package approved in early March. The package also extended a $ 300 weekly government-funded unemployment supplement through Sept. 6.
At the same time, temperatures have warmed and the public health situation has improved rapidly, allowing more restaurants to offer dining services.
The data, along with optimistic 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 steady against a basket of currencies. US Treasury prices were higher.
WIDE STRENGTH
Excluding automobiles, gasoline, building materials and food services, retail sales rose 6.9% last month after a revised 3.4% decline in February. These so-called basic retail sales are more in line with the consumer spending component of gross domestic product. Previously, it was estimated that they had decreased by 3.5% in February.
Morgan Stanley economists raised their first-quarter GDP growth estimate by 100 basis points to an annualized 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 at a moderate pace from late February to early April.”
Growth is expected to exceed 7.0% this year, which would be the fastest since 1984. It would follow a 3.5% contraction last year, the worst performance in 74 years.
A second Fed report on Thursday showed factory production rose 2.7% in March after falling 3.7% in February. While the rebound did not recover all of the February decline, it was offset by surveys that showed strong manufacturing activity in New York State and the Mid-Atlantic region this month.
Manufacturers in both regions were also optimistic about the outlook for the next six months, especially new orders.
“We believe manufacturing activity will continue to recover over time,” said Daniel Silver, an economist at JPMorgan in New York.
In fact, households have amassed about $ 1.9 trillion in excess of savings. This, along with the recovery in the labor market, is expected to boost consumer spending this year.
In a fifth report Thursday, the Department of Labor said initial demands for state unemployment benefits fell from 193,000 to 576,000 seasonally adjusted for the week ended April 10, the lowest level since mid-March 2020. Economists had forecast 700,000 applications for the past week.
Despite the huge decline, claims remain well above their pre-pandemic level. Part of the elevation of claims is due to fraud. Improving unemployment benefit programs, including the weekly grant, could also encourage some people to seek help and others not to look for work.
Claims have fallen from a record 6.14 billion in early April 2020. In a healthy labor market, claims are typically between 200,000 and 250,000.
“While you can’t read too much in a week’s reading of unemployment claims, the degree of drop in initial applications hints at a strong job market in early April, as restrictions eased related to Covid in several states, ”said Conrad DeQuadros senior economic adviser at Brean Capital in New York.
The economy created 916,000 jobs in March, most in seven months. Employment remains 8.4 million jobs below its peak in February 2020.
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