Green Shoots - Signs that our Economy is on the Mend
Investors looking for signs to confirm that the economy is on the mend, often called "green shoots" have seen plenty of examples in recent weeks, giving them, and consumers, reasons to be cautiously optimistic about the rest of 2021 and beyond.
Green shoots is a term used to indicate signs of economic recovery after a downturn. It's a reference to when plants start to show signs of life again. Most recently, former Fed Chair Ben Bernanke used the metaphor to describe the economic recovery following the 2007-2008 financial crisis.
Retail sales rose 9.8% in March, the largest monthly gain since May 2020. It's important to remember that purchases at stores, restaurants, and online are among the biggest drivers of overall economic activity. The gain coincides with the government distributing hundreds of billions of dollars in stimulus funds to households.
Consumers are continuing to spend on goods - think boats and bikes - versus services despite most states progressing with reopenings and vaccinations. With that comes the return to the office for many, which has caused consumers to refresh their wardrobes, and it should also help promote spending more in the service sectors.
Employment, Income and Consumer Confidence
New jobless claims came in at 576,000 for the week ended April 10 - the lowest level since March 14, 2020, and continuing unemployment claims were at their lowest four-week moving average since March 28, 2020. Leisure and hospitality added 331,000 jobs in April, while other sectors remained flat or had slight reductions.
Nominal disposable income grew 32.3% year-over-year in March. Government stimulus checks and other pandemic-related assistance roughly doubled from the previous month, boosting income by 21.1% month-over-month. The savings rate spiked to 27.6% and is almost triple the long-run average.
Consumer confidence rose for the 4th consecutive month to 121.7 in April, the highest since the beginning of the pandemic. It is very close to fully recovering in the New England, Mid Atlantic and Pacific regions.
According to an April 16, 2021 Reuters' report, housing starts rose 19.4% to 1.7 million units in March, the highest level since June 2006.
What Lies Ahead
While all this data points to continued economic expansion and recovery, there is no doubt that the economy may face several challenges in the months ahead. Interest rates, taxes, and inflation are three issues that make take over the headlines at any time.
No matter what the economic future holds, First South Financial stands ready to help you face it. We are independently ranked among the top 1% of financial institutions nationwide for fiscal strength and stability.
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