Overstimulation on the Way

February 22, 2021

Things are looking up for the US economy. Later this week we’ll get an update on real GDP growth for the 4th quarter of 2020. We estimate that’ll be revised up to a 4.3% annual rate of growth from a prior estimate of 4.0%. Meanwhile, 2021 got off to a roaring start. Retail sales soared 5.3% in January and are now up 7.4% from a year ago (pre-COVID). All major categories of sales rose in January, reflecting stimulus spending approved in late December and less onerous lockdowns of business.

But it wasn’t just the demand side of the economy picking up in January. Industrial production increased 0.9% and was revised up for prior months. More importantly, the gain in industrial production was led by manufacturing excluding the auto sector, which is what we think of as “core” industrial production – it increased 1.1% in January. That measure of production has now increased nine months in a row.

Other positive news on the manufacturing front was…

Click here to read more…