Following a disappointing month of February where most of economic indicators came below expectations (retail sales, industrial production, existing home sales, etc.), high frequency indicators are now pointing to a sharp economic rebound that should materialize in March figures. The slowdown in U.S. economic activity observed in February was transitory and reflected a pullback from January (boosted by the $900bn stimulus voted in December), refund delays from IRS and adverse weather conditions.
As a result, weather normalization, an easing of Covid-19 restrictions in several states and the $1.9 trillion fiscal boost signed in March should translate into a massive economic rebound.
1. Oil production rebounded strongly amid weather normalization
In February, weather conditions were particularly advserse in some parts of the U.S. According to the EIA, “The cold snap that affected much of the central part of the country in mid-February disrupted energy systems, particularly in and around Texas. In the U.S. Gulf Coast, where the petroleum infrastructure has rarely operated in sub-zero temperatures, several refineries fully or partially shut down, leading to the largest reduction in Gulf Coast refinery operations in several years.” The move contributed to a significant decline in national mining production in February (-5.4% MoM). On the positive side, latest data show that oil production recovered in early March with no “permanent” production lost.
Our real-time US oil production tracking shows we are at ~10.8 to ~11 mb/d following the full recovery from the freeze-off.— HFI Research (@HFI_Research) March 17, 2021
No "permanent" production was lost from this.#OOTT pic.twitter.com/DXpdKyFtbA
2. Easing restrictions has boosted mobility
In the meantime, the improvement of the health situation since mid-January has pushed several states (California, Texas, etc.) to loosen Covid-19 restrictions. The easing of restrictions has translated into a bounce of mobility based on Apple data. Other data also show the same pattern with gasoline demand returning to pre-crisis level in March.
OOPS- UPDATED GRAPHIC. pic.twitter.com/jyZcUxa56M— Patrick De Haan ⛽️📊 (@GasBuddyGuy) March 22, 2021
In this context, Bloomberg reported that “Occupancy rates at U.S. hotels reached 52% last week, the highest since lockdowns began, according to lodging-data provider STR.”
3. March credit card data point to a rebound in consumer spending
Bank of America Chief Executive Officer Brian Moynihan said recently that “consumer spending and credit-card use are rebounding strongly“. In the meantime, JPM national credit and debit card spending data showed that the trend clearly improved in early March — before the new checks hit bank accounts.
🇺🇸 *BOFA CEO: CONSUMER SPENDING UP 10% SO FAR VERSUS MARCH 2020 - BBG— Christophe Barraud🛢 (@C_Barraud) March 15, 2021
*BOFA: MARCH SMALL-BUSINESS CREDIT TO EXCEED PRE-COVID LEVELS
*BOFA CEO: CONSUMER DELINQUENCIES BACK TO PRE-CRISIS LEVELS
*BOFA CEO: STIMULUS COMING INTO ACCOUNTS TODAY, TOMORROW
4. Labor market conditions improved significantly in March
Metrics linked to the labour market also posted robust results in early March. According to Indeed.com, “US job postings on March 12 were 8.6% above February 1, 2020, the pre-pandemic baseline“. In the meantime, JPMorgan’s alternative-data job-tracker suggests employment growth skyrocketed. It means that March NFP (release schudeled for April, 2) should increase sharply following a print of +379k in February.
JPMorgan’s alternative-data job-tracker suggests employment growth is kicking into a new gear.— Carl Quintanilla (@carlquintanilla) March 18, 2021
All in all, high frequency indicators point to a massive economic rebound as soon as March. The latter should boost 1Q21 GDP and offer a strong base effect for 2021. Moreover, the large amount of excess savings accumulated since March 2020 could partly flood the economy from 2Q21 amid improving confidence linked to the labour market and easing restrictions that would unlock spending related to travel, leisure and hospitality sectors.