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Will the Boom Last?

After last year's economic collapse, the prospects for a strong cyclical recovery have always been strong. And judging by a series of must-watch high-frequency indicators, the long-awaited boom has arrived and seems likely to continue building – at least in the near term.

LONDON – For much of the past year, I have argued that a cyclical economic recovery from the COVID-19 disruption would be stronger than most people expected. In offering that outlook, my emphasis was on the cyclical (rather than structural) nature of the crisis: the lockdowns were always going to be only temporary; safe and effective vaccines have been brought to market with unprecedented speed; and governments have duly responded to the shock with massive levels of monetary and fiscal stimulus.

Judging by recently reported indicators of global economic activity, this outlook is now being borne out. The March 2021 data are consistent with an outright boom, especially in manufacturing. The recovery may be stronger than even I had anticipated, and by the end of March, the S&P 500 had risen above 4,000 for the first time ever.

The question, of course, is what will happen next. Will the boom last? To answer that, we should start with the most recent evidence. Among the more eye-catching figures reported for March is the Institute for Supply Management’s purchasing managers’ index (PMI), which rose by 3.9 points from February to reach 64.7. The survey was published on April 1; assuming it wasn’t a prank, that is the highest level since 1983.

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