By Joe Higgins, Quest 4 Quality
It has been a cavalcade of good news this past week as March brought in some of the best numbers we have seen in a long time.
In my last YSN article I reported consumer confidence rose 20 points, unemployment fell to 6.0 percent, and we had some very strong gains in manufacturing.
Not to be outdone, retail sales increased 9.8 percent in March after a 2.7 percent drop in February, which Wall Street analysts concluded was due to a major snowstorm and a three-day power outage in Texas.
After a year of stimulus in 2020 and another round of cash to consumers in the American Rescue Plan Act that Congress passed in March, people rushed out and spent with abandon. I have said many times in presentations that the economy is surprisingly active when stimulus money is surging through the hands of American consumers. In March, those eligible based on means testing received $1,400 stimulus checks. Some put it into savings and others were out spending it in the stores.
In our business, furniture sales were up 5.9 percent and electronics and appliances were up 10.5 percent in March. This is an indication that consumers are still spending on goods for the home as Americans have become comfortable during the pandemic with staying local and enjoying their kitchens, their entertainment spaces and their bedrooms. In a period where home equity and housing prices are moving up at the fastest pace in ten years, this trend is likely to continue.
All the other categories of retail sales pushed to new highs in March: automobiles gained 15.3 percent, hardware stores were up 12.2 percent and service stations had sales rise 10.9 percent on the backs of increased gasoline prices, while surprisingly, food and beverage store sales rose a modest 0.7 percent. Increased spending occurred across a broad swath of the economy, boosting sales by more than 28 percent from March 2020, when the pandemic raged out of control.
It was interesting because these numbers indicate that Americans are ready to get out of the house and go camping, shopping, dine in restaurants or even go to a ball game.
It is a clear sign that when consumer confidence rises over 20 points on the index, people will spend their cash and when they do, our economy begins to heal. A return to full employment will probably happen within the next 12 to 18 months. I believe that spending won’t be as robust in April due to less stimulus money, but with over 100 million Americans getting the vaccine, and consumers with cash in savings accounts, I expect consumption to continue to expand in Q2.
A report from the New York Fed this past month indicated that those who received checks from the ARPA plan to save 42 percent of their checks. Currently personal savings in America is at an all-time high. It seems only logical that this money will be put to use in the second and third quarters of 2021.
A bit of caution came as the consumer price index rose 2.6 percent in March, giving us the strongest signs yet of inflationary pressures building. This year-over-year gain was the largest since August 2018.
For the week ending April 10, workers’ claims for unemployment insurance fell by 193,000 and hit a post-pandemic low of 576,000. These numbers realistically indicate that layoffs have finally subsided and the recovery is returning at a much faster pace than we expected.
Anecdotally, we are hearing that wages are going up in some industries to entice working back to jobs and that some employers are giving out hiring bonuses to attract talent. Next month unemployment should fall below 6 percent, and as the system tightens, we will see pay gains across the markets.
The Bottom Line
The reports out this week on retail sales and jobless claims are pointing to a strong economic recovery after last year’s recession. Consumers have as much cash on hand as I have ever seen and by all indications, they are willing to get out and spend it on an entire range of goods. I believe that the home goods industry will continue to outperform the total economy over the next 12 months.
The one concern all economists have is the virus. As America races to vaccinate our citizens faster than the variants are spreading, the rest of the world is losing this race.
Recent data indicates that the U.S. numbers are increasing at a slow rate, and while a fourth wave is a possibility, worldwide cases and deaths are far more ominous. Infections and deaths are on a precipitous rise, the data show, and will lengthen the life of the virus. This is a pandemic that stretches internationally and as such the current situation is very concerning.
Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YourSource News contributor. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.