Global outlook  The IMF raised its global economic outlook this week, largely driven by a brighter picture ahead for the US economy. The IMF is expecting the US economy to grow 6.4% this year, followed by a slight decline (though still healthy) 4.4% growth rate in 2022 (this compares to the Fed’s expectations for 6.5% and 3.3%, respectively). Globally the IMF is expecting growth to be 6% this year followed by 4.4% next year. Moral of the story: The losses expected from the pandemic are not expected to be as severe as the IMF’s prior estimates, but there will be a bigger dispersion between emerging markets versus larger developed markets.…

The train has left the station  We added 916k new jobs in March, coming in well above expectations for 675k new jobs. Plus, the numbers for the last two months were revised upward by 156k. The leisure and hospitality sector saw the most job gains last month, adding 280k new jobs as improving weather and increasing vaccination rates have allowed cities to start easing restrictions and consumers to become more willing to venture out. Job gains were also strong in the government, construction, and health and education sectors. Moral of the story: This report indicates a nice little labor market recovery is in the works, and expectations are for this…

Gimme more stimmy Let me introduce you to a recurring theme for February economic data – the winter weather typical in the northeast made an appearance in the sunbelt during the month and the whole system went bananas. The weather impacted retail sales, which fell 3% for February after jumping 7.6% in January. Online shopping continued to boom and is up nearly 26% compared to last year while spending at restaurants and bars is still down about 17% compared to last year.  Moral of the story: The second round of stimmy made its way into checking accounts over the last week and retail sales are expected to rebound in March. Not…

Under control, for now February’s CPI reading indicated consumer prices (aka inflation) have increased 1.7% over the last year, which is up from the 1.4% figure reported just last month. Excluding energy and food, the core index only increased 1.3% for the year, which is actually slightly below last month’s reading at 1.4%. PPI, which measures inflation from the producer’s perspective, indicated prices were up 2.8% over the last year. This is the largest increase in the index we’ve seen since October 2018.  Moral of the story: A big part of the increase across both price indices last month was driven by the increase in gasoline prices (you’ve likely noticed gasoline prices increasing…

Waiting for the roaring twenties The manufacturing industry posted its ninth straight month of expansion in February as the ISM Manufacturing Index came in at 60.8, which is 2.1 points higher than January. Optimism across business leaders in the industry is increasing overall as demand is expanding. The services industries, which make up a much bigger part of the US economy today, hasn’t seen quite as smooth a recovery (you don’t need me to remind you that it’s been over a year since you’ve gone out for an appropriate celebration of brunch with friends on a Sunday). The ISM services index actually fell to its nine-month low in February. The…

Stimulating the economy Consumer spending increased 2.4% in January, which was the first increase in three months and the largest increase since last June. This was largely driven by the $600 stimulus checks and federal unemployment benefit extension from the last stimulus package. The PCE Index, which is the Fed’s preferred measure of inflation, indicates prices have increased 1.5% compared to last year and inflation is slowly creeping toward the Fed’s 2% target. Moral of the story: The average American family earns about $69k annually, so a $600 check is about 10% of their monthly income – the $1.4k stimulus checks and extended unemployment benefits in Biden’s $1.9T stimulus plan (which…

Off to the races The big economic print of the week came in the form of the January retail sales report. Retail sales increased 5.3% for the month, which was 1.2% ahead of expectations. The rise in retail sales following the stimulus package’s $600 checks was quite broad-based across all categories – electronics and applications (+14.7%), furniture and home improvement (+12%), online spending (+11%), and even food and drinks (+6.9%). Despite these monthly gains, spending is still well below pre-COVID levels.  Moral of the story: This was a much stronger start to consumer spending than we had expected. At the same time, new jobless claims for last week came in…

Keeping a weather eye on the horizon Even though consumer inflation is still very low at 1.4% (ideally should be near 2%), it rose at the fastest pace in five months for January. Pretty much all of this was driven by a 7.4% increase in the price of gasoline. Prices for food from grocery stores and restaurants has increased by about 4% since the pandemic and indicates shortages of some types of foods and, importantly, the costs associated with dealing with the pandemic for sellers. Taking out food and energy (which tend to be pretty volatile), core inflation was flat.  Moral of the story: The worry is that inflation will really ramp…

Slow starts   The January jobs report and it was…underwhelming. We only created 49k new jobs in January and the numbers reported for December and November were revised downward by 159k in total. The job gains in January were mainly in the professional services and local government education industries while the hospitality sector remains challenged and lost another 61k jobs after losing 536k jobs in December amid new waves of government-mandated shutdowns.  Moral of the story: This year is off to the slow start we had seen coming, which is why the market didn’t react negatively to this disappointing report. The market also appeared to put a greater chance of…

New kid on the block New unemployment claims increased 847k last week, coming in well below expectations for 875k, but this remains significantly higher than the 100k-200k range we were seeing pre-COVID. The total number of Americans receiving some form of unemployment benefits increased 2.29m to 18.28m (most of that’s related to people rolling onto the unemployment funds included in the stimulus package passed in December).  Moral of the story: Unemployment continues to be an issue as government-mandated shutdowns keep fluctuating in different parts of the country. In positive news, Johnson & Johnson announced a successful single-shot vaccine (vs Moderna and Pfizer’s double shots). The US Government is expected to…