05/14/2021 | Press release | Distributed by Public on 05/14/2021 13:51
Key Takeaways:
Retail sales in April, less autos, slowed as expected, as the stimulus check-supported strength in March began to wane. While many categories of spending either declined or remained relatively unchanged, spending at food services continued to increase, highlighting the ongoing reopening effort as restrictions continue to be lifted. Going forward, as many cities and states move to lessen or completely remove capacity restrictions on restaurants/other establishments, we believe spending will likely increase further. Consumer spending in the second quarter is likely to be supported by a transition back into services. However, while one would expect the reopening effort to buoy consumer sentiment, inflation concerns are outweighing the positive signs of reopening, with consumers now expecting significant inflation. The CPI report appears to support these concerns, though the April report exaggerates the underlying trend as much of the rise was driven by used car prices due to shortages in auto manufacturing, and likely one-time price-level adjustments in sectors that are now experiencing a recovery in demand, such as hotels and airfares. While the Federal Reserve has remains steadfast in its current accommodative stance, sustained increases in consumer inflation run the risk of an un-anchoring of inflation expectations from the Fed's target. While the reopening effort is driving inflation concerns, there are also concerns over a shortage of labor. The April NFIB survey showed a continual rise in the share of firms reporting difficulties filling positions, while the recent JOLTS survey shows a similar trend as job openings climbed to a record high. Some of these pressures may be mitigated as COVID-19 worries wane, schools continue to reopen, and extended unemployment benefits expire. However, if labor market tightness persists, it would likely result in a drag on further economic growth while supporting further inflationary pressure. Turning to the industrial sector, output continues to climb, though it remains 2.7 percent below the level seen in February 2020.
Ricky Goyette
Economic and Strategic Research Group
May 14, 2021
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.