NAM: Monday Economic Report
Weekly initial unemployment claims jumped from 211,000 to 281,000, the highest level since September 2017. This figure will spike dramatically this week, likely approaching 1 million, with more businesses being forced to close or reduce activity and both firms and consumers pulling back on spending outside of the home. The data released last week foreshadowed the economic damage that will likely emerge over the coming weeks.
Manufacturing activity in the New York and Philadelphia Federal Reserve Bank districts both pulled back sharply in March, quickly ending the signs of stabilization in the sector seen in February’s surveys. In both reports, more than 30% of respondents in March reported that sales had fallen relative to February, nearly double the rate in the previous survey.
Manufacturing production edged up 0.1% in February after falling 0.2% in January. Prior to the COVID-19 outbreak, the manufacturing sector had stabilized in recent months, albeit with ongoing weaknesses in the United States and globally. Along those lines, manufacturing production has declined 0.4% over the past 12 months, up from being down 1.0% year-over-year in January but with negative year-over-year readings for the eighth straight month.
Total industrial production increased 0.6% in February, growing for the first time since November. Mining production fell 1.5%, but utilities output rose 7.1% as colder temperatures increased overall usage. Overall, industrial production was flat over the past 12 months, an improvement after declining on a year-over-year basis in the previous five months.
Retail sales decreased 0.5% in February, pulling back after rising 0.6% in January. While the COVID-19 outbreak likely fueled the decline in sales, it is also clear that March spending figures will reflect an acceleration in that decline. Yet, consumer purchases of goods and services have grown modestly over the past 12 months, up 4.3% since February 2019, but down from 5.0% year-over-year in the previous release.
Some of the data points released last week likely serve as a more positive snapshot of what the U.S. economy looked like before the COVID-19 outbreak, with every expectation that things have changed materially since then. This includes the following:
In the most recent NAM Manufacturers’ Outlook Survey, 75.6% of respondents felt positive about their own company’s outlook, up from 67.6% in December, consistent with some improvements in the sector seen earlier in the year. The inability to find talent remained the top challenge for the 10th consecutive quarter.
Job openings in the manufacturing sector rebounded, up from 360,000 in December to 402,000 in January. There continued to be more job openings nationally than there were people looking for them. Nonetheless, net hiring in manufacturing was negative for the fourth time in the past five months.
For now, the housing market remains a bright spot, boosted by warmer-than-normal winter temperatures and low mortgage rates.
New residential construction pulled back 1.5% in February, but at 1,599,000 annualized units, housing starts have soared 39.2% year-over-year. New single-family housing starts jumped from 1,005,000 units to 1,072,000 units, the best reading since June 2007.
Permits data have also been solid, with builders continuing to be upbeat about sales prospects for the next six months, at least for now.
Existing home sales rose 6.5%, jumping from an annualized 5.42 million units in January to 5.77 million units in February, with all of that gain from single-family activity. Sales have risen a solid 7.2% over the past 12 months, up from 5.38 million units in February 2019.