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April Economic Review: The boom is beginning

April 13, 2021

Economic Review: Economic activity surged in March (Page 3)

Activity surged in March as government-mandated restrictions continued to be loosened or eliminated, and the much of the country (Texas in particular) recovered from February winter storms and cold which left many without power for an extended period. Nonfarm payrolls had their largest increase since August, the Institute for Supply Management (ISM) services index had its highest reading ever, and consumer mobility data showed a strong rebound from February.

Financial Markets Review: From the depths to the peaks in only 12 months (Page 4)

Broad U.S. equity market indices hit record highs in February 2020, only to collapse in the wake of the COVID recession. In a little over one month, the S&P 500 index plummeted by nearly 34 percent. But the financial market recovery over the past year was unusually rapid and strong. For example, the S&P 500 index rose by 56.34 percent (small-and mid-cap indices did even better) while the EAFE moved higher by 41.60 percent. Commodities were also up, rising by 38.87 percent over the past 12 months. But not everything rose, as the dollar fell modestly, and longer-term Treasury security prices dropped sharply as growth and inflation expectations rebounded.

The Outlook: What could go wrong? (Page 5)

The U.S. economy has gotten off to a strong start in 2021 and, given the fading pandemic, the rapidly improving labor market, and aggressive monetary and fiscal stimulus, the outlook for the remainder of the year continues to brighten. Should our real GDP forecast for this year come to fruition, in fact, it would mark the fastest annual pace of expansion in nearly four decades. And only modestly stronger growth than that would result in the fastest pace of growth since 1951. With the financial markets broadly pricing in robust outcomes along these lines, it is worth considering what could derail this still-burgeoning recovery.

Go deeper with the full April report linked below.