Easing the coronavirus lockdown associated with the rapid rollout of Covid-19 vaccinations in the US has contributed to a surge in US consumer spending and the lowest new jobless claims since the start of the pandemic.
U.S. retail sales rose the most in 10 months in March, while the number of Americans claiming new unemployment benefits fell by 193,000 to 576,000 in the week ending April 10, according to data released Thursday. That exceeded economists’ expectations for 700,000 new claims.
Retail sales grew 9.8 percent in March, seasonally adjusted, compared to the previous month, the US Census Bureau reported, more than the 5.9 percent increase economists had expected. That spending was bolstered by the arrival of a new round of federal stimulus resources.
Sales were down 2.7 percent in February, driven by severe winter weather in the US and the diminishing impact of payments to Americans in an earlier round of stimulus.
In mid-March, new stimulus controls began to flow to Americans, after President Joe Biden signed a $ 1.9 trillion spending plan that included payments of up to $ 1,400 per person and extensive federal unemployment assistance.
The jump in retail sales last month was the second-largest increase on record, after rising 18.3 percent in May 2020, as strict stay-at-home orders were relaxed in many parts of the US.
“With consumers still sitting on a lot of accumulated savings coupled with the expected reopening of the service economy this summer, our forecast is for a rise in consumer spending this year that will match most Americans,” said Tim Quinlan, senior economist at Wells Fargo.
Rising retail sales will boost real consumption in the first quarter, “meaning GDP will almost certainly push north of 10 percent,” said Aneta Markowska, an economist at Jefferies. “It is also creating very strong momentum” for the second quarter, Markowska said, adding another 10 percent or more.
The report found that in March, spending increased across all categories, including vehicles, electronics and appliances, home improvement products, and apparel.
Catering establishments posted a 13 percent increase in turnover. Spending in bars and restaurants is now within 5 percent of pre-pandemic levels, according to Capital Economics.
A separate weekly report from the US Labor Department found that California and Virginia were in the lead of the decline in the number of new jobless claims for the state’s mainstream unemployment programs, dropping 75,645 and 23,119, respectively.
The report revealed a drop from 20,444 in claims for federal pandemic unemployment aid, which benefits the self-employed and handyman, to 131,975.
The number of recruitments has risen significantly: 916,000 jobs were added to the labor market in March. Still, the number of long-term unemployed – people without a job for six months or more – remains stubbornly high.
Economists are optimistic about the outlook for the US recovery, as vaccinations are more widely distributed and massive stimulus measures are taken.
According to the Centers for Disease Control and Prevention, the US has administered nearly 195 million doses of Covid-19 vaccines, fully vaccinating 30 percent of the adult population and 63 percent of seniors.
Despite recent progress, nearly 17 million Americans continue to seek unemployment benefits more than a year after the pandemic starts.
“With initial unemployment claims falling sharply and retail sales well above expectations, both recruitment and confidence should continue to boost consumer confidence. These are the latest signs that the recovery is accelerating, ”said Brad McMillan, chief investment officer at Commonwealth Financial Network.
Production data added to the happy picture. The Federal Reserve’s industrial production report found that factory output grew the most in eight months. Two Fed regional production surveys in New York and Philadelphia also exceeded expectations, with the latter reaching the highest since 1973.
“Foam will begin to disappear as the economy reopens, but the hot streak of industrial production will not end once herd immunity is achieved,” said Oren Klachkin, an economist at Oxford Economics. “Rising business investment, strengthening global demand and fiscal stimulus will lead to healthy profits in the industrial sector.”
According to the data, the yield on the US 10-year Treasury fell 0.06 percentage point to 1.57 percent, while the S&P 500 rose 0.8 percent.