- U.S. retail sales expected to soar on stimulus checks and higher employment
- U.S. initial unemployment claims expected to start falling again
- U.S. manufacturing production expected to recoverÂ
- U.S. NAHB housing market index expected to remain strong
- China’s GDP expected to remain solid in Q1
U.S. retail sales expected to soar on stimulus checks and higher employment — The consensus is for today’s March retail sales report to soar by +5.8% m/m and +5.0% m/m ex-autos.
Retail sales have been on a roller-coaster in recent months, mainly because of stimulus checks. Retail sales in January soared by +7.6% m/m because of the $600 stimulus checks that were authorized by the $900 billion pandemic aid bill that was signed into law in late December. Retail sales in February then fell by -3.0% m/m as the January stimulus effect faded.
However, retail sales are now set to show another big increase of +5.8% m/m because of the new $1400 stimulus checks that started going out in the latter half of March. President Biden signed the $1.9 trillion pandemic aid bill into law on March 11, and stimulus checks starting going out about a week later.
Consumers also have saved an extra $1.7 trillion saved up from the pandemic when they had reduced opportunities to spend their money. Consumers, therefore, have a huge piggybank to draw upon when they decide to start spending again.
Retail sales are expected to get a boost from the improved pandemic outlook, which is causing people to go out and shop, go to restaurants, and start to travel. Covid infection levels plunged from early January through February and remained near a 6-month low during March, causing some states to lift restrictions.
The big +916,000 increase in payroll jobs in March is also expected to boost the spending outlook since more people became gainfully employed with a regular income. Payroll rose by a strong monthly average of +692,000 during the 3-month period of January-March.
U.S. consumer sentiment rose sharply in March due to the fading pandemic, higher income, and the improved job outlook. In March, the University of Michigan’s U.S. consumer sentiment index rose by +8.1 to a 1-year high of 84.9. The Conference Board’s U.S. consumer confidence index in March rose by +19.3 points to a 1-year high of 109.7.
U.S. initial unemployment claims expected to start falling again – Initial unemployment claims have been going backwards in the past two weeks with a back-to-back gain totaling +86,000, which reversed most of the previous week’s sharp -107,000 decline. However, the consensus is for initial claims to start falling again, with a -44,000 decline today to 700,000. Meanwhile, the consensus is for today’s continuing claims report to show a decline of -34,000 to 3.700 million, adding to last week’s -16,000 decline to 3.734 million.
Unemployment claims remain elevated relative to pre-pandemic levels by +528,000 for initial claims and +2.026 million for continuing claims. That means that 2.026 million more people are still on the unemployment rolls due to the pandemic. However, that understates the fact that the economy needs to produce another 8.4 million jobs to get the payroll job level back to the pre-pandemic level.
U.S. manufacturing production expected to recover — The consensus is for today’s March manufacturing production report to show a sharp increase of +3.6% m/m, which would more than reverse February’s -3.1% decline. The broader March industrial production report is expected to show an increase of +2.5% m/m, more than reversing February’s -2.2% decline.
Despite the volatility in February and March, manufacturing production in the coming months should show strength as GDP soars from fiscal stimulus. The consensus is for U.S. GDP to show strength of +5.4% in Q1 and then to soar by +8.1% in Q2 and +7.0% in Q3. The consensus is for very strong GDP growth of +6.2% for calendar-year 2021, easily overcoming the -3.5% decline seen in 2020. The consensus is then for GDP growth to remain strong at +4.0% in 2022 before tailing off to a more normal +2.4% in 2023.
Manufacturing confidence is at near-euphoric levels with the ISM manufacturing index in March rising by +3.9 points to a 37-year high of 64.7, the highest level since 1984.
U.S. NAHB housing market index expected to remain strong — The consensus is for today’s April NAHB housing market index to show a +2 point increase to 84, reversing March’s -2 point decline to 82. Today’s expected level of 84 would be only 6 points below November’s record high of 90 (history since 1985). U.S. homebuilders remain very bullish due to strong demand for new homes.
China’s GDP expected to remain solid in Q1 — The consensus is for tonight’s Chinese Q1 GDP to show a solid increase of +1.4% q/q (+5.6% annualized), although that would be down from Q4’s increase of +2.6% q/q. The Chinese economy is returning to more normal GDP growth rates after the post-pandemic surge seen in the latter half of 2020.
On a year-on-year basis, today’s Chinese Q1 GDP is expected to show a sharp increase of +18.5% because of the year-earlier base effect from the pandemic that closed down much of the Chinese economy in Q1-2020.
On a calendar year basis, the consensus is for Chinese GDP in 2021 to rise by +8.5%, making up ground after the weak +2.3% pace seen in 2020 during the pandemic. However, Chinese GDP is then expected to stabilize at +5.5% in 2022 and 2023.
