Tuesday, June 1, 2021

The Boom Goes On

 

By Matthew Klein |  Friday, May 28

Unstoppable. The news out of the U.S. economy keeps coming in strong, with the latest figures from the Bureau of Economic Analysis and the Census Bureau showing robust growth in April as we head into the long Memorial Day weekend. The good news pushed up the IHS Markit forecast for second-quarter GDP growth by 0.6 percentage points at a yearly rate, to 11.6%. 

First, the total amount of money earned by Americans as wages, salaries, and employee benefits jumped 1% for the second month in a row. Total worker pay is now more than 4% higher than before the pandemic, even with roughly 10 million still underemployed. Small business and self-employment income is also continuing to recover. Even excluding the government’s support for farmers and the forgivable Paycheck Protection Program loans, so-called “proprietors’ income” has already returned to where it was at the end of 2019.

Meanwhile, consumer spending is continuing to rise. Demand for durable goods such as cars, appliances, furniture, and electronics is up almost 40% from pre-pandemic levels, and the beleaguered services sector is less than 2% away from where it was. Spending at restaurants and fast food outlets in April was nearly 5% higher than before the pandemic on a seasonally-adjusted basis.

I wrote more about the latest numbers on personal income and consumer spending, with plenty of charts, at Barrons.com.

The biggest surprise came from the encouraging news in the preliminary trade data for April. Despite the strong numbers on consumer spending and manufacturing orders, U.S. imports were down slightly, while exports were up. That implies rising U.S. production, improving global demand, and a smaller trade deficit.

Yet investors in American stocks were unimpressed, with the benchmark S&P 500 index up less than 0.1% and the Russell 2000 index of small-cap shares down 0.2%. The best-performing sectors within the S&P were real estate, utilities, and health care, which tend to be more defensive, while communication services, consumer discretionary, and materials stocks did the worst.

U.S. Treasury yields and the price of West Texas Intermediate crude oil were down slightly, while the gold price was up. But investors in foreign stocks were more bullish, with the STOXX 600 Europe index, Canada’s TSX, and Australia’s ASX all jumping to hit new record highs. The Nikkei 225 remains depressed relative to its bubble-era peak, but it nevertheless jumped 2.1% on Friday.

Within the S&P, the biggest winner was Salesforce.com, which jumped nearly 6%, while chipmakers Nvidia, AMD, and Xilinx also saw notable gains. A few food and beverage companies were also big winners, including potato producer Lamb Weston Holdings, and Kroger, Campbell Soup, and Molson Coors Brewing. On the down side were a few of America’s industrial stalwarts, including Ford, General Electric, and Whirlpool, as well as big-name retailers Gap, Dollar Tree, and Costco.

Watch our TV show on Fox Business Fridays at 10 p.m. or 11:30 p.m. ET; Saturdays at 10 a.m. or 11:30 a.m. ET, or Sundays at 7 a.m., 10 a.m. or 11:30 a.m. ET. This week, get insights on the housing outlook and the future of retail.

 

 


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