Economic recovery gains momentum

<p>Kia ora,</p><p>Welcome to Friday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with generally positive economic news that is apparently gaining momentum.</p><p>In the US, <a href="https://www.bea.gov/news/2021/gross-domestic-product-first-quarter-2021-advance-estimate" target="_blank"><strong>economic activity rebounded</strong></a> better than expected in the first quarter on 2021, up +6.4% on an annualised basis. It built as the quarter progressed so the expectation is that Q2 is off to <a href="https://www.atlantafed.org/cqer/research/gdpnow" target="_blank"><strong>a flying start</strong></a>. And activity is probably back at pre-pandemic levels now. This rebound from the 2020 recession is very much faster than for the GFC. Whatever you think of the enormous stimulus support, it has seemed to provide a sharp V-shaped recovery and something that seemed optimistically unlikely a year ago.</p><p>American spending on services is rebounding, but it is not growing as rapidly as spending on goods, which is very sharp. And PCE prices were up at a +3.5% pa rate in the quarter. Given that PCE (personal consumption expenditure) prices are the Fed's preferred measure of inflation, and the Fed said yesterday that it will let inflation run hotter than it previously tolerated, this bolsters the view that a a period of financial repression may be ahead (inflating away the QE debt).</p><p>US <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20210772.pdf" target="_blank"><strong>initial jobless claims</strong></a> were marginally lower last week at 575,000, with now 3.8 mln on these benefits. Recall that 17.8 mln were on them a year ago.</p><p><a href="https://www.nar.realtor/newsroom/pending-home-sales-grow-1-9-in-march" target="_blank"><strong>Pending home sales</strong></a> rose in March, snapping two consecutive months of declines, but the bounce-back o