Optimism Over Economic Outlook Grows

Optimism about the prospects for a continued economic recovery has grown in recent weeks in tandem with increased vaccine distributions. The improving public health situation has sped up the reopening of the economy and, helped by the latest round of fiscal stimulus and faster job creation, has supercharged consumer spending.

Retail sales grew nearly 10% in March compared to the previous month, with sales rising at all major types of retailers. Sales at bars and restaurants, as well as clothing stores, rose at double-digit rates from February, after being hit the hardest early on in the containment efforts. Total retail sales are now 17% above their pre-pandemic level.

Robust spending by the U.S. consumer is expected to drive both economic growth and job creation in the next few quarters. Internal data suggests 7.5 million jobs to be added this year, bringing the labor market closer to a complete recovery, which is now expected at some point next year.

A surge in consumer demand in recent weeks has also given businesses the opportunity to regain some of the pricing power lost during the pandemic. The consumer price index jumped 2.6% in March compared to a year earlier, the largest annual increase since 2018. Still, big price increases are not expected to be sustained for more than a few months.