Monthly Analysis: March

Domestic:

Numbers providing an insight into the US economy’s performance in March came out last week and reflected a wealth of positive news. Retail sales far exceeded what analysts had predicted; new claims for unemployment fell to their lowest level since the start of the pandemic, and industrial production is continuing to growing at a strong upward trajectory. 

Retail sales were up 9.8% from February, the biggest increase since May of 2020 when the US economy first reopened following its collapse in April. This increase also represents the second biggest ever. Sales are even up 27.7% from exactly a year ago, proving they are not just beginning to reach but rather exceeding pre-pandemic levels. Many categories within the retail industry experienced big monthly increases including the automotive industry (up 15.1%), clothing stores (up 18.3%), electronics stores (up 10.5%), home improvement products (up 12.1%), department stores (up 13.0%), and restaurants (up 13.4%). With more individuals getting vaccinated and therefore becoming more comfortable with going out, it is no surprise that these numbers have grown to such an extent. The question now is whether this upward trend will continue into the summer months or if we will see a plateau.

The week of April 11th, there were 576,000 initial claims for unemployment insurance made in the United States compared to the 769,000 made the week prior. This substantial decrease indicates a development within the job market. However, while the number of claims is right now the lowest it has been in 13 months, there are still a significant amount of Americans receiving unemployment benefits. So while the job market seems to be recovering from the effects of the pandemic, it still has a long way to go.

Industrial production in the United States in March 2021 increased 1.4% from February 2021 and 1.0% from March 2020. When looking into industrial production and analyzing the growth rate, it is also important to split up its various components to explore each of them individually. The manufacturing component of industrial production increased 2.7% from February to March and 31% from a year earlier. The automotive component in March was up 2.8% from February and a whopping 29.7% from March the year prior. And, argued by many financial professionals to be the most indicative of the market’s health, the output of business equipment was up 2.7% from February to March, making the growth between one year ago to today 5.7%. This number is said to stipulate increased business investment in the coming months.  

On the whole, March represents a hopeful look forward past what has been a full year in which the economy has been deeply affected by the Covid-19 pandemic. And while the long-term impacts that the pandemic may have on domestic and international economies are still unknown, we are currently seeing the positive impact of increased vaccinations, decreased economic restrictions, and higher morale among Americans. With what seems to be a recovering economy, the Federal Reserve Chair Jerome Powell has stated that the Fed is currently in discussion surrounding their approach to reduce the monetary stimulus being provided to Americans. Only time will tell the effect that this withdrawal will have on economic activity as this extra source of income has so far played a crucial role in American’s return to spending. 

International:

While Europe has been recently experiencing a continued decline in economic activity, this past month brought a decrease to the rate at which that occurred. The prolonged weakness of European nations’ economies can be attributed, almost entirely, to the governmental restrictions related to recent spikes in the number of new cases of Covid-19. Of the four primary “Eurozone” economies, Germany was the only nation that experienced a growth in service activity. While the Purchasing Managers’ Index (an index that measures the dominant direction of economic trends in both the manufacturing and service sectors¹) increased for both France and Spain, they still saw a decline in services. Italy, largely due to its economic restrictions, saw no improvement in any sectors. However, with lockdowns appearing to be lifted in the upcoming months, European economies are likely to experience positive growth. This optimism is reflected in many of the nation’s performances in March as the service activity recovered from the sharp decline it experienced in February. 

China experienced relatively strong economic growth in the past month. The supply and demand for domestic goods experienced strong growth this past month as the decrease in new outbreaks, and the consequent government-enforced restrictions contributed to an increase in consumer interaction. However, China continues to struggle with its export orders (orders for Chinese products placed by other nations). In addition, increased prices of raw materials, labor, and energy contributed to an increase in inflation. The government reported that factory gate prices were up 4.4% from a year earlier, a growth that exceeded that of the past two years. Even in the past month, producer prices in China reported a growth of 1.7%. So far, this increase has not yet been reflected in consumer prices, however, the Financial Stability and Development Commission, headed by Vice Premier Liu He, declared that the Chinese government would need to keep a close watch on the trends of commodity prices. They stated the importance of making sure that they repress the rising inflation rates while also maintaining a steady growth in employment, a balance that will not be easy to achieve. 

^{By: Natalie Martin}