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Stepping Up the Pace of Relief

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The Conference Board said its Consumer Confidence Index rose to a one-year high of 109.7 from a revised 90.4 in February.

A key indicator of consumer confidence surged in March, and the country added 916,000 jobs as the U.S. economy continued its efforts to recover from the Covid-19 pandemic.

“Consumer confidence increased to its highest level since the onset of the pandemic in March 2020,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement. “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.”

Another important measure of consumer confidence made a similar gain in March. The University of Michigan said its Consumer Sentiment Index rose to 84.9 from 76.8 in February.

“Consumer sentiment continued to rise in late March, reaching its highest level in a year due to the third disbursement of relief checks and better than anticipated vaccination progress,” Richard Curtin, chief economist of the university’s Surveys of Consumers, said in a statement.

“As prospects for obtaining vaccination have grown, so too has people’s impatience with isolation, as those concerns were voiced by nearly one-third of consumers in March, the highest level in the past year,” Curtin added. “The majority of consumers reported hearing of recent gains in the national economy, mainly net job gains. The data clearly point toward robust increases in consumer spending.

“The ultimate strength and duration of the spending surge will depend on the rate of drawdowns in savings since consumers anticipate a slower pace of income growth. Despite the vast decline in precautionary motives sparked by the easing of pandemic fears, those precautionary motives will not completely disappear.”

The 916,000 jobs gain beat economists’ expectations and raised hopes that the economy may be on its way to recovering the millions of jobs that were lost during the pandemic. The unemployment rate fell to 6.0 percent from 6.2 percent the previous month.

“This is a wonderful report. Hopefully we have many more months like it ahead,” Nick Bunker, economic research director at the jobs-listing service Indeed, told the Washington Post. “It’s fantastic to see the big bounce back in job gains.”

“It shows that the economy is healing, that those who lost their jobs are coming back into the workforce as the recovery continues and restrictions are lifted,” Quincy Krosby, chief market strategist at Prudential Financial, told CNBC. “The only concern here is if we have another wave of Covid that leads to another round of closures.”

The Labor Department said the March job growth was widespread. Companies in the leisure and hospitality industries added 280,000 jobs. Construction employment rose by 110,000, and manufacturers hired 53,000 people. Government employment rose by 136,000.

Additionally, the Labor Department revised its job numbers upward for the previous two months, adding 67,000 for January and 89,000 for February.

Neal Trombley, president of Gulf Atlantic Marketing, a manufacturers’ rep agency based in North Fort Myers, Fla., said that “where I work and live in the Southeast, the economy is strong, especially in the construction sector. Of course, boating has not been any better. Tourism in my area seems to be booming, as well.”

Trombley said the coronavirus has affected his company’s travel because its staff works in several Southeast states. “We constantly monitor CDC guidelines and the rules and regulations for each state for travel and restrictions,” he said. “Safety is always our first concern.”

The virus has also affected the way Gulf Atlantic Marketing operates its business. “Like others, we have utilized Zoom and Teams online meetings,” Trombley said. “Also, our manufacturers have set up virtual showrooms.”

Trombley said Gulf Atlantic has always worked from home offices, “so we adapted easily.” The company specializes in the marine and industrial markets.

The indicators Trombley most closely watches in assessing his company’s chances for success are taxes and fuel prices. “If we can keep both in check, boating should be fine,” he said.

The housing market is another key indicator for Trombley. “The housing market and recreational spending seem to go hand in hand,” he added. “When housing is booming, we see our segment grow.”

Trombley said 2020 was a “great year” for Gulf Atlantic. “We were nervous through the first and early into the second quarter, but boating took off, as did manufacturing,” he said. “And 2021 is keeping pace. Supply chains are hurting but, so far, keeping up. Our U.S. sales have been very solid.”

Trombley said former President Donald Trump’s tariffs “really affected our manufacturers with increased costs and paperwork.”

The Commerce Department said consumer spending fell 1 percent in February during a lull in federal stimulus payments. The decline was the largest in 10 months. Personal income fell 7.1 percent.

Inflation growth was moderate. The Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred measure of inflation, was up 0.2 percent in February. In the year through February, the index is up just 1.6 percent.

Fed chairman Jerome Powell remained cautious about the economy’s pace of recovery. “The recovery is far from complete,” Powell said at a House Financial Services Committee hearing in late March. “As we have emphasized throughout the pandemic, the path of the economy continues to depend on the course of the virus.”

The Conference Board said its Leading Economic Index rose 0.2 percent in February, to 110.5, after increases of 0.5 percent in January and 0.4 percent in December. The index attempts to predict future economic activity.

“The U.S. LEI continued rising in February, suggesting economic growth should continue well into this year,” Ataman Ozyildirim, senior director of economic research at The Conference Board, said in a statement. “Indeed, the acceleration of the vaccination campaign and a new round of large fiscal supports are not yet fully reflected in the LEI. With those developments, The Conference Board now expects the pace of growth to improve even further this year, with the U.S. economy expanding by 5.5 percent in 2021.”

The mood among the nation’s small businesses improved a bit in February. The Small Business Optimism Index of the National Federation of Independent Business rose to 95.8, but it remained below the 47-year average of 98.

“Small business owners worked hard in February to overcome unexpected weather conditions, along with the ongoing Covid-19 pandemic,” NFIB chief economist Bill Dunkelberg said in a statement. “Capital spending has been strong, but not on Main Street. The economic recovery remains uneven for small businesses, especially those still managing state and local regulations and restrictions. Congress and the Biden administration must keep small businesses a priority as they plan future policy legislation.”

Confidence among the nation’s home builders slipped in March. The National Association of Home Builders says its NAHB/Wells Fargo Housing Market Index fell two points, to 82.

“Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment [in March],” NAHB chairman Chuck Fowke said in a statement. “Supply shortages and high demand have caused lumber prices to jump more than 200 percent since last April. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”

“Builder confidence peaked at a level of 90 last November and has trended lower as supply-side and demand-side factors have trimmed housing affordability,” NAHB chief economist Robert Dietz said in a statement. “While single-family home building should grow this year, the elevated price of lumber is adding approximately $24,000 to the price of a new home. And mortgage interest rates, while historically low, have increased about 30 basis points over the last month. Nonetheless, the lack of resale inventory means new construction is the only option for some prospective home buyers.”

The HMI index that gauges current sales conditions fell three points, to 87, in March; the component that measures sales expectations in the next six months increased three points, to 83; and the gauge that charts the traffic of prospective buyers was steady at 72.

Any number above 50 indicates that more builders see conditions as good rather than poor.

The Commerce Department said new-home sales totaled 775,000 in February at a seasonally adjusted annual rate, down 18.2 percent from an upwardly revised pace of 948,000 in January.

“Sales of new homes took a step back in February as severe winter storms blanketed most of the country in snow,” Realtor.com senior economist George Ratiu told U.S News & World Report. “As builders faced rising costs for materials, the median price of a new home reached $349,400, a 5.3 percent gain from a year ago. The supply of new homes remains limited — there were only 4.8 months of inventory. Sales of entry-level homes — priced below $200,000 — accounted for only 4.0 percent of total sales, reflecting the continuing shift upmarket in the new home space.”

Home resales were also lower in February. The National Association of Realtors said sales fell 6.6 percent from January to a seasonally adjusted annual rate of 6.22 million.

“Despite the drop in home sales for February, which I would attribute to historically low inventory, the market is still outperforming prepandemic levels,” Lawrence Yun, the NAR’s chief economist, said in a statement.

“I still expect this year’s sales to be ahead of last year’s, and with more Covid-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy,” Yun added. “Many Americans have been saving money, and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”

The median existing-home price in February was $313,000, up 15.8 percent from the same month last year, as prices rose in every region of the country. The national price increase in February marks 108 straight months of year-over-year gains.

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