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Economic Commentary

We break down timely topics, centered on the major economic events around the world and their impacts to financial markets, in order to help you simplify client conversations around important investing decisions.

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Economic Commentary

Supply-side constraints are having an impact

Retail sales declined by 1.3 percent for May as topline spending was again weaker than expected. But there were significant upward revisions to March and April that point to a stronger trend pace of expenditures – and perhaps to upward revisions for the May data, as well. A pickup in spending at restaurants and clothing stores was likely influenced by the fuller reopening of in-person activities across the country. Despite May’s decease, retail sales were still up by more than 28 percent over the past year and have far surpassed pre-COVID levels on the back of the successive stimulus payments this year.  

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Economic Commentary

Economy is strong, despite supply issues

Economic data were strong for May, although mostly below expectations. Demand is robust throughout the economy, but many industries have been limited on the supply side. For example, job openings are at an all-time high, but employers are having trouble filling them; orders are rising rapidly for both manufacturing and service industries, but so are delays in supplier deliveries; and house prices are soaring in part due to record-low supply. Even very strong light vehicle sales are now being held back by computer chip shortages. While efforts are being made by employers and state governments to bring workers back into the labor market, other supply issues may take longer to resolve. 

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Economic Commentary

Inflation spike likely at its peak

The consumer price index (CPI) rose more sharply than expected for May, up by 0.6 percent, although this was down from April’s torrid pace. The May increase pushed up the year-over-year trend rate to 5.0 percent, the fastest since August 2008. The core CPI also climbed sharply, but again by less than in April, increasing by 0.7 percent to raise year-over-year core inflation to the highest rate in nearly 30 years at 3.8 percent. 

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Economic Commentary

Hiring accelerates but labor supply still a concern

Nonfarm payrolls rose by 559,000 for May, doubling the pace from April. As has been the case for several months, the sector of the economy that was hardest hit during the pandemic – leisure and hospitality – had the strongest job gains during May, up by 292,000. Other service areas, including education, health care, and information, also saw improved hiring. As an increasing number of state and local governments allow for more in-person activity, we should see a further service sector rebound in coming months.  

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Economic Commentary

Strong demand but supply constraints across the economy

High frequency economic data continue to suggest an upcoming surge in consumer activity as the economy nears a full reopening. Initial jobless claims fell sharply for the week ending May 22, the sixth decline in seven weeks. While claims are still about double the pre-COVID trend, layoffs have fallen sharply over the past month as businesses find it increasingly difficult to find qualified workers for an increasing number of open positions. Other recent data show restaurant capacity nearly at pre-pandemic levels and a sharp increase in air passenger traffic, signals that in-person activities are primed for a summer explosion.  

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Economic Commentary

Strong economic growth to continue

Following a strong opener during the first quarter, the second quarter’s annualized pace of growth could be in double-digits as the U.S. economy moves toward a full reopening. While hiring and consumer spending slowed during April, expectations remain high for a surge in activity in coming months in response to pent-up demand from the pandemic and the return of in-person events. Real GDP over 2021 is projected to expand at the second fastest pace in the past 50 years – and perhaps the fastest since 1951. 

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