Earlier this week, I highlighted that high frequency indicators pointed to a sharp economic rebound (even before the new stimulus checks hit bank accounts). It seems that economic activity could be stronger than expected in March based on latest credit card data. As a result, real GDP could accelerate sharply in 1Q21 and potentially fully recover from Covid-19.

StreetInsider reported that latest aggregated credit and debit card spending data from Bofa showed a remarkable gain in consumer activity. It noted “In the week ending March 20, total card spending was up 45% over a 1-year period and 23% over a 2-year period“. It added that “Total card spending for the lowest income cohort (<$50K) was up a staggering 69% over a 2-year period for stimulus recipients as compared to 16% for non-recipients.”

Therefore, March retail sales (that should be released on April 15th) should rebound strongly after contracting by 3% MoM in February due to transitory factors such as refund delays from IRS and adverse weather conditions. It should boost 1Q21 GDP after 4Q20 GDP was revised upward to +4.3% QoQ annualized (up from the previous reading of +4.1%). In this context, if real 1Q21 GDP rises 10.2% on a QoQ annualized basis, it should exceed pre-pandemic level (4Q19).

In addition, the large amount of excess savings accumulated since March 2020 (more than $1.750 trillion at the end of February 2021) could partly flood the economy from 2Q21 amid improving confidence linked to the labour market and easing restrictions that would unlock spending related to travel, leisure and hospitality sectors. As a consequence, U.S. economic growth should easily top 6% in 2021.