By Amara Omeokwe
The U.S. economic recovery is accelerating as stimulus money,
Covid-19 vaccinations and business re-openings spur a spring surge
in consumer spending, a sharp pullback in layoffs and a bounceback
in factory output.
Retail sales -- a measure of purchases at stores, at restaurants
and online -- jumped 9.8% in March, the Commerce Department
reported Thursday. The gain in consumer spending -- the biggest
driver of economic activity -- came as the government began
distributing hundreds of billions of dollars of stimulus funds to
households. It was the largest monthly gain since last May, during
the initial recovery from lockdowns early in the Covid-19
pandemic.
Separately, nearly 200,000 fewer workers filed for initial
unemployment benefits last week. Jobless claims, a proxy for
layoffs, fell to 576,000 last week from 769,000 a week earlier, the
Labor Department said. While claims are still above levels that
prevailed early last year, last week's figure was the lowest since
March 2020. The total number of people receiving benefits also fell
across a range of state and federal pandemic-related programs.
The government also reported Thursday that industrial production
-- a measure of factory, mining and utility output -- rebounded in
March after a decline in February. Factory output, which rose 2.7%
over the month, helped drive the gain.
The economic readings taken together reflect "people going back
to work, people seeing more income, people spending. This is a good
story about the American economy's resilience," said Joseph
Brusuelas, chief economist at RSM.
Stocks rose on the economic news and strong earnings from
blue-chip companies.
The gains in retail sales last month were broad-based, and
showed a robust spending pickup in some categories that suffered
early in the pandemic as people stayed at home to avoid the
coronavirus.
Sales at restaurants and bars, for example, jumped 13.4% last
month from February and 36% from March 2020, at the beginning of
the pandemic.
Retail sales also jumped at clothing and department stores last
month, which could reflect Americans seeking to refresh their
wardrobes as they resume activities outside the home, said Michelle
Meyer, head of U.S. economics at Bank of America.
"The reopening progressed throughout March, with more and more
states easing restrictions, more and more people becoming
vaccinated and feeling comfortable re-engaging in the economy and
activities that they did previously," Ms. Meyer said.
Meanwhile, sales at grocery stores -- which surged at the
pandemic's onset amid state and local government lockdown orders --
increased just 0.5% on the month and fell sharply over the year, by
13.8%.
PepsiCo Inc., for instance, expects sales growth of oatmeal,
pancakes and other packaged foods to slow in the second quarter as
more people become vaccinated and consumers cook less at home. The
company's Quaker Foods North America unit, which sells Rice-A-Roni
and Cheetos Mac 'n Cheese, benefited more from the pandemic than
the company's chips and beverage businesses, CFO Hugh Johnston said
in an interview.
An average of roughly 2.9 million vaccine doses were
administered daily across the U.S. in the seven days ended April 9,
compared with about two million at the beginning of March,
according to data from the Centers for Disease Control and
Prevention. A pause this week in the use of the Johnson &
Johnson shot is expected to have a limited impact.
Meanwhile, U.S. consumer confidence is at its highest levels
since the pandemic began, buoyed by signs of momentum in the
economic recovery and federal aid.
The federal government has since mid-March disbursed about 159
million stimulus payments of more than $376 billion to households
from the latest virus-aid package, the Treasury Department said
this week.
The U.S. labor market is also showing signs of healing. The
four-week moving average for jobless claims, which smooths out
weekly volatility, declined last week to a pandemic low of
683,000.
The total number of people receiving unemployment assistance
also fell. About 16.9 million people were collecting unemployment
benefits through state and federal programs in the week ended March
27, down from 18.2 million a week earlier.
Still, the economy in March had 8.4 million fewer jobs than just
before the pandemic hit, underscoring how government aid has
boosted consumers' ability to spend, said Richard Moody, chief
economist at Regions Financial Corp.
"The story is that there's a lot of financial support in the
household sector, even though the level of employment is still so
far below where it was prior to the pandemic," Mr. Moody said.
Research from the Federal Reserve Bank of New York found that
Americans planned to use or were using nearly a quarter of the
latest federal stimulus payments for spending on essential and
nonessential items, while directing the remainder of the funds
toward savings or paying down debt. The Fed survey also showed
people intended to spend less of the most recent stimulus money
than in two earlier rounds.
Bank of America data tracking credit- and debit-card spending
showed consumers in March sharply increased spending on clothing
and furniture and at department stores and restaurants.
Similarly, figures from Earnest Research, a data analytics
company that tracks card spending, showed that consumer spending
was up 29% in March compared with February and up 24% last month
compared with the same period last year.
With increased vaccine circulation and Covid-19 cases retreating
from recent peaks at the end of 2020 and into early 2021, many
states have eased restrictions on businesses by, for example,
reversing bans or loosening limits on indoor dining.
Scott Allen Frost, president of Las Vegas-based Titan Brands
Hospitality Group, said the rollout of stimulus funds to households
last month coincided with a relaxing of state mandates that allowed
restaurants, including the three he oversees, to operate at
increased capacity.
"You couldn't have timed March better," Mr. Frost said. "All
this pent-up demand came roaring back."
He said sales more than doubled last month compared with March
2019 at Slice of Vegas Pizza Kitchen & Bar and at Titan Brands'
two other restaurants, which serve Mexican fare.
Mr. Brusuelas, of RSM, said spending in the service-sector,
which makes up the majority of U.S. consumer spending and where
employment gains and outlays have lagged, could further accelerate
as additional stimulus efforts, such as the expanded child tax
credit, make their way through the economy later this year.
Economists broadly expect consumer spending, which accounts for
roughly two-thirds of U.S. economic output, will help propel U.S.
economic growth this year at its best rate in decades.
Economists surveyed by The Wall Street Journal in April on
average forecast U.S. economic output will grow 6.4% in 2021, up
from an average forecast of 5.95% expansion in March.
Still, concerns over the pandemic's trajectory remain, with U.S.
cases edging up recently and vaccination efforts complicated by
reports of rare but severe blood clots among a few recipients of
the Johnson & Johnson vaccine. Federal Reserve officials and
many economists have said any sustained resurgence in cases could
threaten the economic recovery.
Mr. Frost, of Titan Brands Hospitality Group, said he had a
cautiously optimistic outlook for the months ahead. He is worried
that business could be constrained by factors such as rising prices
and the difficulty he has encountered recently trying to hire new
workers.
--Sarah Chaney and Jennifer Maloney contributed to this
article.
Write to Amara Omeokwe at amara.omeokwe@wsj.com
(END) Dow Jones Newswires
April 15, 2021 12:02 ET (16:02 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.