2021 Is The Year Of The Consumer

2021 is going to be an amazing year for the consumer. The leisure and hospitality industry might have a better summer than it did in 2019 because of all the pent-up demand for travel. Low and middle-class consumers will get transfer payments in the $1.9 trillion stimulus. Then, they will see a sharp improvement in hiring. The increase in demand the restaurant and travel industries receive will cause them to hire more people. That should recoup a lot of the job losses the bottom 50% saw in 2020. The upper class will simply spend their cash hoard. Remember, we mentioned in a previous article that the top quintile on average has saved $50,000 since the pandemic started. They can still work from home, but their spending options have been limited.

The January retail sales report was a blowout. Economists keep getting surprised by the fact that the poor and middle class spend more when they are given cash. This basic common sense is lost on them. Specifically, monthly headline retail sales growth rose from -1% to 5.3% which beat the consensus of 1.1% and the highest estimate of 2.4%. Trump’s last-minute delay, which lasted a few days, shifted almost all the stimulus-related spending into January. February should be good too because the vaccines are allowing the economy to partially reopen. Control group monthly sales growth rose from -2% to 6.1% which beat estimates for 0.9% and the highest estimate which was 3.0%. This was an expected good report that economists badly whiffed on. That’s why the stock market didn’t react to it at all. Goldman raised its Q1 GDP growth estimate from 5% to 6%, while investors yawned. They already priced this in weeks ago. It’s worth noting that 5.7 million Californians will receive $600 stimulus checks. That should modestly help the February retail sales report.

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