Thursday, April 15, 2021
It has been a volatile year in 2021 for the retail industry, but improving COVID-19 trends and fiscal stimulus have improved the outlook. Weather-related disruptions and a high January watermark led to a soft patch in February, but retail sales rebounded in a big fashion in March, rising 9.8% month over month, the highest since May 2020, as vaccination rates have improved, consumers received additional direct stimulus payments, and more of the economy opened up.
The goal of fiscal stimulus during the COVID-19 pandemic has primarily been to bridge the gap for the economy until we were able to get the virus under control, and the surge in retail activity in March is a direct reflection of that:
The $1.9 trillion aid package passed in February issued payments that were two and a half times bigger than those in January, so it may not be as much of a surprise that retail sales growth outpaced Bloomberg consensus forecasts in March. Further, payments were made from mid-March onward, so there may be additional fuel left in the tank for April. As several states expand their reopening plans against the backdrop of improving COVID-19 trends, we expect the economy will continue to grow.
“Stimulus has clearly mattered for the U.S. economy and has helped put us at the front of the pack in the recovery,” added LPL Chief Market Strategist Ryan Detrick. “We’re averaging around 3 million vaccine doses administered per day, and this has fast-tracked our emergence from the shadow of the pandemic.”
Looking under the hood of the March retail sales data, spending on clothing has returned to pre-pandemic levels—perhaps gearing up for a return to the office or summer activities—while spending on eating and drinking categories rose 13% month over month as dining restrictions have been lifted.
We still think it’s too early to sound the “all clear” for the U.S. economy, but it appears we have avoided the soft-patch that many expected in the first quarter, and more pent-up demand should be unleashed as COVID-19 trends continue to improve. In our Weekly Market Commentary on April 5, we upgraded our growth forecasts for the U.S. economy from 5–5.5% to 6.25–6.75% in anticipation of the full reopening of the economy over the next several months, and we believe the March retail sales print further justifies our view.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data from FactSet and Bloomberg.
This Research material was prepared by LPL Financial, LLC.
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use – Tracking # 1-05134139