Last week saw data on US housing starts show a +37% surge year-on-year (YoY) in March, a rise of more than +19% month-on-month (MoM). This was the biggest MoM jump for this metric since June 2006 and was much better than expected. US retail sales also soared by +9.8% MoM in March with April likely to show another very strong rise. The latest round of stimulus checks and the payment of annual tax refunds is likely now feeding through into more buoyant spending activity. But it is also a strong signal that consumers are ready to spend when restrictions (like restaurant capacities) are relaxed further. All consumer product and services categories are benefiting from this spending surge, with total US consumer spending having now surpassed pre-pandemic levels, with the exception of department stores and restaurant spending, and these categories are likely to catch up in the coming months.
In China, the situation is looking even more positive. Official data show the Chinese economy recovered to its pre-pandemic size this quarter. China GDP grew at a record pace of +18.3% YoY in Q1 2021, a significant acceleration from the previous quarter and lapping the lows of the pandemic in 2020. Retail sales jumped +33.9% YoY in Q1 too, with online sales increasing +25.8% – an incredibly strong rate of recovery in activity, even when you take into account the effect of last year’s weak comparable figure.
In Europe, things continue to move more slowly, with slow vaccine rollouts and delays to stimulus spending slowing the economic bounce back. A German court has now dismissed the legal challenge against the EU’s pandemic recovery fund as of 21st April, so this should open the door to the considerable EU stimulus spending plans… provided EU member states can work together effectively to deliver it.
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