U.S. High Frequency Indicators Point To A Sharp Economic Rebound

Following a disappointing month of February where most of the economic indicators came below expectations (retail sales, industrial production, existing home sales, etc.), high-frequency indicators are now pointing to a sharp economic rebound that should materialize in March figures. The slowdown in U.S. economic activity observed in February was transitory and reflected a pullback from January (boosted by the $900bn stimulus voted in December), refund delays from IRS, and adverse weather conditions. As a result, weather normalization, an easing of Covid-19 restrictions in several states, and the $1.9 trillion fiscal boosts signed in March should translate into a massive economic rebound.

1. Oil production rebounded strongly amid weather normalization

In February, weather conditions were particularly adverse in some parts of the U.S. According to the EIA, “The cold snap that affected much of the central part of the country in mid-February disrupted energy systems, particularly in and around Texas. In the U.S. Gulf Coast, where the petroleum infrastructure has rarely operated in sub-zero temperatures, several refineries fully or partially shut down, leading to the largest reduction in Gulf Coast refinery operations in several years.” The move contributed to a significant decline in national mining production in February (-5.4% MoM). On the positive side, latest data show that oil production recovered in early March with no “permanent” production lost.

2. Easing restrictions has boosted mobility

In the meantime, the improvement of the health situation since mid-January has pushed several states (California, Texas, etc.) to loosen Covid-19 restrictions. The easing of restrictions has translated into a bounce of mobility based on Apple data. Other data also show the same pattern with gasoline demand returning to pre-crisis level in March.

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