March 20, 2021
The Conference Board reported that consumer confidence jumped 19.3 points in March after having risen1.5 points in February. The slowdown in the rate of spread of the virus combined with a rapid pace of vaccine distribution, as well as the $1,200 tax refund checks bolstered consumer spirits in that month.
Senior Director of Economic Indicators at the Conference Board, Lynn Franco, said: “Consumer Confidence increased to its highest level since the onset of the pandemic in March 2020. Consumers’ assessment of current conditions and their short-term outlook improved significantly, an indication that economic growth is likely to strengthen further in the coming months. Consumers’ renewed optimism boosted their purchasing intentions for homes, autos and several big-ticket items. However, concerns of inflation in the short-term rose, most likely due to rising prices at the pump, and may temper spending intentions in the months ahead.”
We envision a vibrant economy in 2021. First of all, the stock market is close to a record high level. Thus far, we have seen the recovery create 12.6 million jobs in the past ten months (after having lost 22.0 million jobs in March and April). The unemployment rate has shrunk from a peak of 14.7% in April to 6.2% in February — much faster than anyone expected. It started at about 3.5%. Home sales — both new and existing — are at the highest levels since 2006. In the past 12 months — despite a recession and a pandemic — retail sales have grown at almost exactly the same rate that they did on average during the past 10 years The end of the pandemic is in sight with some epidemiologists anticipating herd immunity as early as April. The $1,200 checks being distributed as part of the recent $1.9 trillion package are boosting income. The bottom line is that the economy is recovering nicely and likely to gather momentum as the year progresses. We expecat GDP growth of 6.0% in the first quarter, 9.0% growth in Q2, and 7.5% GDP growth for the year.
Confidence data reported by the Conference Board are roughly matched by the University of Michigan’s series on consumer sentiment. As shown in the chart below, trends in the two series are identical but there can be month-to-month deviations. Both series experienced very sharp declines in March and April and have registered only a moderate rebound.