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February Economic Review: A slower start to 2021, but better days are ahead

February 16, 2021

Economic Review: More mixed economic data (Page 3)

This year picked up where last year left off, as waning momentum from the recovery leveled off in January. Job growth was up only barely after a decline in December and downward revisions for November and December, suggesting that the fourth quarter’s solid growth in real GDP was mostly driven by robust numbers from October. Positively, ISM surveys for January show continued strong growth for both services and manufacturing despite the disappointing rollout of COVID vaccines and continued government shutdown mandates. But expectations for a significant increase in vaccine availability (improved distribution and more vaccines on the horizon) provide hope for a boom in growth as early as this spring.

Financial Markets Review: A Wild Ride (Page 4)

Optimism about the recovery early in the month and a jump in market volatility later fueled a rollercoaster ride for financial markets in January. New fiscal stimulus approved at the end of 2020 raised expectations for consumer spending and corporate earnings, leading to an early new-year rally. Sentiment reversed at the end of the month, however, as a wild conflict between a group of retail investors and certain short-selling hedge funds outweighed positive earnings surprises and encouraging COVID-19 data. When the dust settled, the S&P 500 index was slightly lower, with smaller-cap averages higher.

The Outlook: A look back at our forecasts for 2020 (Page 5)

While it would be nice if all our economic and financial forecasts were perfectly accurate each year, or even relatively close to the mark, the reality is that most forecasters miss their targets more often than they hit. And the 2020 COVID pandemic made mincemeat out of everyone’s forecasts. Rather than grading our usual February 2020 projections, given the COVID shock, we look at those projections as a reasonable view of where the economy would have gone but for COVID. We also look at our projections made in June, a near mid-year view as the severe economic shutdowns were abating.

Go deeper with the full February report linked below.

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