E Economics

U.S. High Frequency Indicators Point To A Sharp Economic Rebound

24 March, 2021
Stimulus Checks

Following a disappointing month of February where most of economic indicators came below expectations (retail sales, industrial production, existing home sales, etc.), high frequency indicators are now pointing to a sharp economic rebound that should materialize in March figures. The slowdown in U.S. economic activity observed in February was transitory and reflected a pullback from January (boosted by the $900bn stimulus voted in December), refund delays from IRS and adverse weather conditions. As a result, weather normalization, an easing of Covid-19 restrictions in several states and the $1.9 trillion fiscal boost signed in March should translate into a massive economic rebound.

1. Oil production rebounded strongly amid weather normalization

In February, weather conditions were particularly advserse in some parts of the U.S. According to the EIA, “The cold snap that affected much of the central part of the country in mid-February disrupted energy systems, particularly in and around Texas. In the U.S. Gulf Coast, where the petroleum infrastructure has rarely operated in sub-zero temperatures, several refineries fully or partially shut down, leading to the largest reduction in Gulf Coast refinery operations in several years.” The move contributed to a significant decline in national mining production in February (-5.4% MoM). On the positive side, latest data show that oil production recovered in early March with no “permanent” production lost.

2. Easing restrictions has boosted mobility

In the meantime, the improvement of the health situation since mid-January has pushed several states (California, Texas, etc.) to loosen Covid-19 restrictions. The easing of restrictions has translated into a bounce of mobility based on Apple data. Other data also show the same pattern with gasoline demand returning to pre-crisis level in March.

In this context, Bloomberg reported that “Occupancy rates at U.S. hotels reached 52% last week, the highest since lockdowns began, according to lodging-data provider STR.

3. March credit card data point to a rebound in consumer spending

Bank of America Chief Executive Officer Brian Moynihan said recently that “consumer spending and credit-card use are rebounding strongly“. In the meantime, JPM national credit and debit card spending data showed that the trend clearly improved in early March — before the new checks hit bank accounts.

4. Labor market conditions improved significantly in March

Metrics linked to the labour market also posted robust results in early March. According to Indeed.com, “US job postings on March 12 were 8.6% above February 1, 2020, the pre-pandemic baseline“. In the meantime, JPMorgan’s alternative-data job-tracker suggests employment growth skyrocketed. It means that March NFP (release schudeled for April, 2) should increase sharply following a print of +379k in February.

All in all, high frequency indicators point to a massive economic rebound as soon as March. The latter should boost 1Q21 GDP and offer a strong base effect for 2021. Moreover, the large amount of excess savings accumulated since March 2020 could partly flood the economy from 2Q21 amid improving confidence linked to the labour market and easing restrictions that would unlock spending related to travel, leisure and hospitality sectors. Therefore, U.S. economic growth should easily top 6% in 2021.

excess savings