People wearing protective masks are shopping at Macy’s Herald Square following the outbreak of coronavirus disease (COVID-19) in the Manhattan neighborhood of New York City, New York, USA, December 26, 2020. REUTERS / Jeenah Moon / File Photo
U.S. retail sales rose the most in the last 10 months of March as Americans received additional pandemic-exempt controls from the government, and increased COVID-19 vaccinations allowed for broader economic re-employment, boosting expectations for a robust growth in the first quarter.
The booming economic outlook was highlighted on Thursday by other data showing that first-time unemployment claims collapsed last week to their lowest level since March 2020, when non-essential business closures were applied to slow the spread of the first. val COVID-19.
Although factory production returned modestly last month amid a global shortage of semiconductor chips affecting car factories, production remains supported by strong domestic demand. The optimistic data that followed recent reports that inflation is heating up is unlikely to change the Federal Reserve’s extremely light monetary policy stance.
“Demand is booming right now. Fed officials have so far said they expect this increase in demand to be transient and will not consider policy changes until the labor market is fully occupied and prices rise. it is growing at a steady pace, “said Chris Low, chief economist at FHN Financial in New York. “Their solution will be tested in the next few months.”
Retail sales returned 9.8% last month, the highest increase since May 2020, the Commerce Department said. Data for February were revised higher to show that sales fell 2.7% instead of 3.0%, as previously reported. The increase in March pushed sales up 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 registered a record increase of 27.7% compared to the previous year.
The large-scale return was driven by vehicles, with car dealerships accelerating by 15.1%. Clothing store sales increased by 18.3%.
Consumers also increased spending on restaurants and bars, leading to a 13.4% increase in revenue. However, sales at restaurants and bars are 1.8% lower compared to March 2020.
Revenues at electronics and home appliances stores increased by 10.5%, and sales at furniture stores increased by 5.9%. There were also strong gains in sales of sporting goods, hobbies, musical instruments and bookstores. Sales at construction materials stores increased by 12.1%. Online retail sales increased 6.0%.
Many skilled households 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 until September 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, propelled 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 POWER
With the exception of cars, gasoline, construction materials and food services, retail sales rose 6.9% last month, after a revised 3.4% drop in February. These so-called basic retail sales correspond most closely to the consumption component of gross domestic product. Previously, they were estimated to have fallen by 3.5% in February.
Economists at Morgan Stanley raised their GDP growth estimates in the first quarter 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 showed on Thursday that factory production rose 2.7% in March, after falling 3.7% in February. Although the recovery did not recover from the full decline in February, this was offset by surveys showing strong production activity in New York State and the Mid-Atlantic region this month.
Manufacturers in the two regions were also optimistic about the outlook for the next six months, especially new orders.
“We believe manufacturing will continue to grow over time,” said Daniel Silver, an economist at JPMorgan in New York.
Indeed, households have accumulated in excess of about $ 1.9 trillion. This, together with a recovering labor market, should support consumer spending this year.
In a fifth report on Thursday, the Department of Labor said initial applications for state unemployment benefits fell by 193,000 to 576,000 seasonally adjusted for the week ended April 10, the lowest level since mid-March 2020. they forecast 700,000 requests for the last week.
Despite the huge decline, the claims remain well above their pre-pandemic level. Part of the increase in demand is due to fraud. Improving unemployment benefit programs, including the weekly allowance, could also encourage some people to apply for help and others not to look for work.
Demand fell from a record 6,149 million at the beginning of April 2020. In a healthy labor market, demand is normally between 200,000 and 250,000.
“Although you can’t read too much in a week’s reading about unemployment claims, the drop in initial deposits indicates a strong labor market in early April, as restrictions on Covid in various states have been eased,” Conrad said. DeQuadros senior economic advisor at Brean Capital in New York.
The economy created 916,000 jobs in March, the most in seven months. Employment remains below its peak with 8.4 million jobs in February 2020.
Our standards: Thomson Reuters’ principles of trust.