We concluded last month’s report saying, “Over the next few months, economic data will be compared to the depressionary data we saw from March to May 2020, says Landon Whaley of Whaley Global Research.

This year-over-year comparison will pave the way for some historic-level growth rates across many economic data sets.” The data reports for March 2021 did not disappoint.

On the survey front, the ISM Manufacturing PMI came in at 64.7, a four-point monthly jump (which is "yuge") and the highest reading since December 1983. Confirming the continued improvement in manufacturing was Markit’s PMI reading, which also accelerated to 59.1.

From the service side of the economy, the ISM Non-manufacturing PMI ripped to 63.7, the highest reading ever. This number was followed by the Markit US Services PMI (60.4), which accelerated for the ninth time in the previous 12 months. Except for Kansas City, the critical regional surveys (New York, Chicago, Philadelphia, Richmond) provided evidence the recovery is widespread.

Outside of the “soft” data, industrial production saw the first positive annual growth rate in well over a year. Underneath the IP hood, manufacturing production and mining output increased +2.7% and +5.7%, respectively. During March, utilities’ output contracted -11.4% due to the erratic swing from unseasonably cold temperatures in February to an unseasonably warm March.

The gritty data is great but let’s not forget about the all-important US consumer. Retail sales scorched previous records coming in at a red hot +27.7% annual pace during March, thanks to the depressionary contraction in retail sales a year ago. The hard data is telling us the consumer is recovering, and so is the University of Michigan. According to the latest reading in all three UofM consumer gauges (Consumer Sentiment, Current Economic Conditions, and Consumer Expectations), the consumer is on an uptick.

No deluge of data would be complete without a heat check on inflation. We’ve watched as the pace of consumer price inflation (CPI), and producer prices accelerated for months. The March reading of both measures was no different. Consumer inflation hit the highest reading (2.6%) in three years, and producer prices set the world on fire (4.2%) at a ten-year high. The lone hold-out in 2021 has been core inflation, but no longer. The pace of core inflation accelerated for the first time in two months and now sits at the highest reading since December.  

The bottom line is economic data is improving at a historic pace, the US recovery is solidly underway, and both growth and inflation data confirm the US Summer Fundamental Gravity. But what’s going on somewhere out there?

International Econ and Market Data Say What?

Internationally, we continue to see economic growth and inflation accelerating across the vast majority of economies, both developed and emerging. Within this list of economies boasting a Summer Fundamental Gravity are our favorites: Taiwan, Australia, South Korea, and South Africa.

Evaluating the latest Composite PMI readings for G20 economies to gauge economic growth, we see an acceleration in every country, except Brazil and India. As a reminder, the Composite PMI is a combo platter of the manufacturing and service sector surveys for that specific country. From an inflationary perspective, we see the same confirmation of a Summer FG in the March consumer inflation data from those same 20 economies. Every country, minus Saudi Arabia, saw a ramp up in inflationary pressures.  

Here again, both growth and inflation confirm the Global Summer Fundamental Gravity.

The Bottom Line

We like seeing data confirm our Fundamental Gravity perspective, but the investing game is played in front of us, not behind. Our models indicate a 73% chance of either a Fall or Winter Fundamental Gravity in Q3 2021. As we know, markets often front-run a shift in the underlying Fundamental Gravity by as much as six weeks. We must monitor the relationship between incoming economic data and what markets tell us in real-time to make high-quality investing decisions. More importantly, understanding this interplay between economic and financial market data is how you sidestep dangers no one else sees coming and position for opportunities most investors miss.

We are currently bullish on US agricultural commodities (corn, soybeans, sugar, wheat, coffee), crude oil, and metals & mining companies. We continue to like individual stocks that align with our “2020’s trash is 2021’s treasure” sub-theme, such as Spirit Airlines (SAVE), Texas Roadhouse (TXRH), Dave & Buster’s (PLAY), and Six Flags (SIX). Outside the US, we are bullish on equities in Taiwan, Australia, South Korea, and South Africa. We will continue to follow our process, waiting for The Mongoose to give us a clear signal to put capital at risk.

To learn more about Landon Whaley, please visit WhaleyGlobalResearch.com.