US: Data set of the day, demand and inflation effect in the economy

From the data that will reveal the growth outlook of March mathematically, we see that factory orders and sub-component durable goods orders were announced to have a positive support to growth in 1Q21. Factory orders increased by 1.1% in March, following a 0.5% contraction in February; out of this, we see a 1.7% monthly increase in core orders from which we exclude aircraft and other transportation vehicles. The increase rate in non-defense durable goods is 0.8%.

The March trade balance, another data, reached a record high as consumers demanded more imported goods with the help of government incentives. The recovery of the economy and 1400 USD checks increase the demand in the economy as well as increase the imports. The deficit with China increased 22% while the deficit with Mexico increased 23.5%.

It can be expected that the increase in demand supported by incentives will add the demand component to the cost impact in inflation in the short term. Of course, this situation is related to the coefficient of income increases into expenditure. Americans mainly used this checks to replace their savings rather than spend it during this period. Because they had spent some part of their savings in the previous period. So part of that spending effect is a thing of the past. Therefore, the inflation baseline scenario is a periodic increase. The main demand contribution will be driven by those who will return to the workforce as more businesses open up. To repeat; this will look for steady income rather than benefit money. As long as the pandemic remains under control, this is the path the economy is heading. The Fed has to look at many parameters and their attributes. Recovery should also be spread to the base. This is exactly what Powell said yesterday; There is an economic recovery, but not everyone benefits equally yet.

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