During 2020 the U.S. economy was on a roller coaster. GDP plunged 5.0% and 31.4% in the first and second quarters, respectively, and then almost climbed out of the hole by growing 33.4% and 4.3% in the third and fourth quarters, respectively. Total economic output decreased 3.5% for the year.
U.S. GDP growth by quarter
Bureau of Economic Analysis
However, with the availability of multiple Covid-19 vaccines and a growing vaccination rate, the economy is poised to deliver strong growth in 2021 as indicators show increasing economic activity.
New York Fed “Weekly Economic Index” up sharply
The New York Federal Reserve publishes a “Weekly Economic Index” whose latest report shows a sharp upturn in March. It depicts an estimate for yearly GDP growth and it wasn’t until two weeks ago that its outlook showed year-over-year growth.
Weekly economic index coming out of the coronavirus lockdowns.
New York Federal Reserve, Haver Analytics, Redbook Research, Rasmussen Reports, the American Association of Railroads, and Booth Financial Consulting
Economic activity highest since March last year
On a weekly basis Aneta Markowska, Jefferies Chief Economist, and Thomas Simons, Jefferies Money Market Economist, publish a report titled “Tracking the Reopening of the U.S. Economy with Real-Time Data.” It is a compilation of various economic indicators showing how the economy is performing long before many official U.S. government reports are generated. Its latest report has the economy at its highest level since March 14 last year but still 6.5% below the beginning of 2020.
U.S. economic activity
Aneta Markowska and Thomas Simons at Jefferies
Jefferies foot traffic data is from retailers, restaurants, shopping, fitness and entertainment establishments. It comprises about 1,900 brands and 170,000 locations. It isn’t a surprise to see a sharp uptick recently as some states have loosened, if not totally removed, any restrictions.
U.S. consumer foot traffic
Aneta Markowska and Thomas Simons at Jefferies, SafeGraph
Jefferies uses OpenTable data from approximately 20,000 restaurants in cities representing 57% of the U.S. population. While Jefferies has foot traffic back to pre-Covid-19 levels, in-door dining restrictions are still impacting restaurants.
U.S. restaurant bookings
Aneta Markowska and Thomas Simons at OpenTable
Flight activity is picking up. There have been 20 consecutive days of TSA screening more than 1 million passengers, with a peak of 1.57 million this past Sunday. Passenger traffic is still down around 40% from a year ago but is definitely on an uptrend. Jefferies flight data comes from Vertical Knowledge, which uses public data to deliver insights.
U.S. flight activity
Aneta Markowska and Thomas Simons at Jefferies, Vertical Knowledge
Consumer confidence surged in March
The Conference Board’s latest consumer confidence survey showed a surge from 90.4 in February to 109.7 in March. Lynn Franco, Senior Director of Economic Indicators said, “Consumer Confidence increased to its highest level since the onset of the pandemic in March 2020. Consumers’ assessment of current conditions and their short-term outlook improved significantly, an indication that economic growth is likely to strengthen further in the coming months. Consumers’ renewed optimism boosted their purchasing intentions for homes, autos and several big-ticket items. However, concerns of inflation in the short-term rose, most likely due to rising prices at the pump, and may temper spending intentions in the months ahead.”
Consumer confidence
Gregory Daco at Oxford Economics, Haver Analytics, The Conference Board
Manufacturing surveys showing strength
Bill McBride from the CalculatedRisk blog has compiled a chart of the regional Federal Reserves manufacturing surveys and ISM. The New York and Philly Fed surveys are averaged together (yellow, through March), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management PMI (red) is through February (right axis). The Fed surveys show a sharp upturn and with ISM releasing its March report tomorrow it should also show an increase.
Fed and ISM manufacturing surveys
CalculatedRiskBlog.com, Philadelphia and New York Federal Reserves, ISM
Friday’s job report will give an indication on how strong job growth is
ADP’s estimate for March employment is 517,000, which is actually below economist’s estimates, which range from 650,000 to 750,000. Last month had a 379,000 jobs increase. ADP has the Leisure and Hospitality segment gaining 169,000, which is critical since this industry has been decimated by Covid-19 lockdowns. However, it does seem poised to come back as more people are vaccinated and are booking trips.
There are still about 9.5 million more people unemployed than a year ago. It would take 19 months of 500,000 job gains to get back to the previous level of employment and then more months to take into account what would have been normal job growth since March 2020.
Projected U.S. job gains in March
ADP
Hours worked showing an upturn
Daniel Zhao, Lead Data Scientist on Glassdoor’s Economic Research team, created a graph using the Real-Time Population Survey data, which shows a nice increase in the number of hours worked per person with ages from 18 to 64. After being flat for three months it is now back to March levels a year ago.
Hours worked for people between the ages of 18 to 64
Daniel Zhao, Glassdoor, Dallas Fed Real Time Population Survey
But unemployment claims are still at record levels
However, unemployment claims are still at record levels. Claims, both initial and especially continuing, will have to trend downwards significantly to get employment back to pre-Covid-19 levels.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
