Uneven consumer recovery slowing down

Consumer spending jumped during the first two months of the year as virus disruptions faded. The March retail sales data won’t be published for another couple of weeks. But the data we have so far suggest that the consumer recovery remained uneven last month and may have lost some momentum. Admittedly, the official services PMI continued to climb in March, reaching a decade high and implying, on paper at least, that the recovery gathered pace. But the survey can be distorted by swings in sentiment. Other early indicators show smaller improvements last month or even a partial reversal of previous gains. Sector-specific factors are partially to blame – car sales have been hit by the withdrawal of subsidies for electric vehicles, for example. But the general picture seems to be that while consumers have been quick to return to the streets and public transit, they have been slower to step up discretionary spending on big ticket items or long-distance travel. We think the consumer recovery will gradually even out over the coming quarters. But now that the initial boost from lifting virus restrictions has passed, the recovery will be slower from here onwards.