This article is part of Wellesley Hills Financial’s Market Movements series, found in our weekly newsletter.
March turned out to be a gangbuster month for consumer spending, according to advanced research published by the U.S Census Bureau last week. As the impact of stimulus checks, vaccinations, and warmer weather collided, overall retail and food service spending increased 27.3% month-over-month (February 2021) and 30.4% year-over-year (March 2020). Majority of the uptick was seen in the Automotive Segment, which was up 40.5% and 75.7% month-over-month and year-over-year, respectively, and within the Restaurants and Bars Segment, which was up 28.2% and 37.3% month-over-month and year-over-year, respectively. In fact, all categories advanced month-over-month and year-over-year with the exception of the Supermarkets and Liquor Stores Segment.
Fortunately for business owners across the country, this recent uptick in spending is poised to continue throughout 2021 with Wells Fargo’s CEO predicting that the next two quarters of the year will see the strongest level of consumer spending since the 1950’s. Given that U.S Consumers are currently holding an additional $1.7 trillion in their bank accounts from pandemic driven savings and have been in-and-out of lockdown for the past 12-months, it is hard to imagine a scenario where Wells Fargo is wrong.
It has yet to be seen if this uptick in spending will produce the meaningful inflation feared by investors, or just reflects a transitory bump as consumers stretch their legs post-covid; however, CPI data from March indicated prices were up 0.6% and 2.6% month-over-month and year-over-year, respectively. For now, it appears that the U.S Economy is temporarily on solid footing – equities are hovering around all-time highs and bond yields have remained subdued after the March scare. With the worst of it behind us, the coming months will provide meaningful insight into how robust post-covid markets are, or if markets will abandon ship with the first indication of bad news.
(All numbers discussed on unadjusted basis)