With more businesses reopening and bringing employees back to work, the U.S. economy is on firm footing and could see its fastest growth in more than three decades, according to National Retail Federation (NRF) Chief Economist Jack Kleinhenz.
“While there is a great deal of uncertainty about how fast and far this economy will grow in 2021, surveys show an increase in individuals being vaccinated, more willingness to receive a vaccination, increased spending intentions and comfort with resuming pre-pandemic behaviors like shopping, travel and family gatherings,” said Kleinhenz. “This feel-better situation will likely translate into higher levels of household spending, especially around upcoming holidays like the Fourth of July and spending associated with back-to-work and back-to-school.”
“The consumer is nearly always the key driver in the economy, and with the consumer in good financial health, a sharp demand is expected to unfold over the coming months,” Kleinhenz said. Kleinhenz’s remarks came in the May issue of NRF’s Monthly Economic Review, which said NRF expects the economy to grow 6.6 percent this year, the highest level since 7.2 percent in 1984.
The report said the latest edition of the Federal Reserve’s Beige Book “affirms what the economic data has been signaling: U.S. growth is beginning to accelerate.” The Fed assessment and other data show unemployment benefits, government stimulus checks and tax refunds have provided a substantial increase in personal income and purchasing power. Consumers are “sitting on a stockpile of cash” that could become “a spring-loaded spending mechanism,” Kleinhenz said.
Among other favorable indicators, the $2.4 trillion saved by households during February alone was approximate twice the average monthly savings during pre-pandemic 2019 and comes on top of savings accumulated over the past year as consumers stayed home rather than dining out, traveling or attending sports and entertainment events.
In addition, the use of consumer credit is up, with outstanding credit surging in February to its highest level since late 2017. The increase in borrowing “highlights a consumer who is growing more confident as the economy accelerates, job growth picks up and more states lift burdensome restrictions,” Kleinhenz said.
Kleinhenz cautioned that 2020’s “outsize swings” in economic data caused by the pandemic, hurricanes, wildfires, and other events will make year-over-year comparisons difficult during 2021. Federal agencies have “tried their best with the information available” to make seasonal adjustments account for the swings, he said.