Confidence: Overall, confidence in the economic recovery is quite strong, led by the CEO Outlook, which has fully recovered. Consumer confidence is well on its way to returning to pre-pandemic levels and only small business optimism continues to lag. The challenge ahead will be filling the record 8.1 million vacant employment positions. The inability to find qualified employees was cited by small businesses as a primary headwind to their growth.
Spending: The three rounds of stimulus delivered an unprecedented $5.7 trillion injection into the economy. Retail sales surged as each of the three separate stimulus checks reached consumers, and today retail sales are 15% above pre-recession levels. Home sales have also surged, although the pace of growth has tapered in recent months due to the lack of inventory. Air travel is also well on its way toward revival but remains 33% below pre-pandemic levels. That said, it appears air travel will quickly accelerate this summer as business travel resumes and more families travel for vacation. The pandemic lockdown created significant pent-up demand for consumer goods as well as quality-of-life experiences that will drive all sectors of the economy, but shortages and inflation could stall the momentum.
Economic Growth: Pent-up demand and a significant increase in savings will fuel accelerated growth in the second half of 2021. Over the course of the pandemic, $4.6 trillion was added to U.S. bank accounts and money market mutual funds. As more of the population become vaccinated, this pool of cash will likely be unleashed in the economy in the form of consumption, investment and business expansion. Taking into consideration this unique situation, many economists are forecasting explosive growth in 2021 reaching as high as 8%, which would be the strongest annual growth rate since the 1950s.
Inflation: Record-level economic growth does bring challenges with it, most notably the potential of surging inflation….