• AIM Team

NAM: Monday Economic Report

  • The U.S. economy grew 4.3% at the annual rate in the fourth quarter. Overall, real GDP was boosted by business investment, but consumer spending, particularly for goods, was held back by rising COVID-19 cases and renewed restrictions in many areas.

  • The U.S. economy is expected to rebound in 2021, especially as more Americans get vaccinated and market participants resume some semblance of normalcy in their actions. The current forecast is for 6.8% annual growth in 2021.

  • Real value-added output in the manufacturing sector rose to an annualized $2.234 trillion in the fourth quarter (expressed in chained 2012 dollars), the best reading since the all-time high seen one year earlier. In nominal terms, manufacturing value-added output increased to $2.348 trillion in the fourth quarter, with value-added output in the durable goods sector reaching an all-time high ($1.333 trillion). Manufacturing accounted for 10.9% of real GDP in the quarter.

  • The IHS Markit Flash U.S. Manufacturing PMI strengthened from 58.6 in February to 59.0 in March, buoyed by growth in new orders, which expanded at the best pace since June 2014. Yet, extreme weather conditions and supply chain disruptions dampened output growth to a five-month low, and raw material costs soared once again.

  • There were similar manufacturing trends in the Kansas City and Richmond Federal Reserve Bank reports for March, with activity in the Kansas City Fed district expanding at the fastest pace in the survey’s history. Respondents remained upbeat about growth over the next six months.

  • New orders for durable goods fell 1.1% in February. Despite the weaker data in the latest report, the durable goods sector continues to reflect strong rebounds since declining sharply last spring due to the COVID-19 pandemic. Indeed, new durable goods orders have risen 3.2% over the past 12 months, with core capital goods orders—a proxy for capital spending in the U.S. economy— soaring 8.3% year-over-year. This speaks to the brighter economic outlook.

  • After jumping by 10.1% in January, buoyed by stimulus checks and increased unemployment insurance from legislation enacted at year’s end, personal income fell 7.1% in February. It was the largest monthly decline in the history of the series, which dates to January 1959. These data will continue their rollercoaster ride, with a very large increase expected in March after passage of the American Rescue Plan. Overall, personal income has risen 4.3% over the past 12 months.

  • Meanwhile, personal consumption expenditures fell 1.0% in February. Yet, over the past 12 months, the trendline is more encouraging for goods purchases. Durable and nondurable goods spending has jumped 17.2% and 6.1% since February 2020, respectively, with service sector purchases down 5.2%. Over the past 12 months, personal consumption expenditures declined 0.6%, pulled lower by the reductions in service-sector spending.

  • According to the University of Michigan and Thomson Reuters, consumer sentiment rose to a 12-month high in March, buoyed by increased vaccinations, stimulus checks and improved assessments about the economy overall.

  • Existing and new home sales were both lower in February, with poor weather and limited inventories hindering activity. Nonetheless, the housing market remains a bright spot, with strong growth year-over-year and an encouraging outlook despite rising costs and affordability issues. The average 30-year fixed rate mortgage rate rose last week to the highest reading since June 2020, according to Freddie Mac, at 3.17%.