NAM: Monday Economic Report
Economic data released last week provided continued signs that economic growth has ground to an abrupt and unprecedented halt, both in the United States and globally.
The IHS Markit Flash U.S. Manufacturing PMI declined in April at the fastest rate since March 2009 as the sector struggles with the COVID-19 outbreak and significant demand and production disruptions. At the same time, with many consumer-facing businesses closed and more Americans staying closer to home, the IHS Markit Flash U.S. Services Business Activity Index declined from 39.8 to 27.0, a record low.
Similarly, Eurozone manufacturing activity also fell at the fastest rate since early 2009, with the IHS Flash Eurozone Services PMI Activity Index plummeting from 26.4 to 11.7, a new jaw-dropping record low.
In the Kansas City Federal Reserve Bank’s district, manufacturers reported the strongest decline in activity in the survey’s history, which dates to 1994, mirroring dismal releases from the New York and Philadelphia Federal Reserve Banks in the prior week. (Regional surveys from the Dallas and Richmond Federal Reserve Banks will be released this week.)
Existing and new home sales fell 8.5% and 15.4% in March, respectively. Indeed, the housing market—a bright spot in the economy just two months ago—has slowed materially due to the COVID-19 outbreak, just like other segments of the economy.
The Index of Consumer Sentiment plummeted to the lowest level since December 2011, falling from 89.1 in March to 71.8 in April, according to the University of Michigan and Thomson Reuters.
New durable goods orders also reflected weaknesses due to COVID-19, but the declines were not as deep as feared, particularly with transportation (and defense) goods excluded.
Durable goods orders fell 14.4% in March, the largest monthly decline since August 2014. Sharp drops in motor vehicles and parts and nondefense aircraft and parts orders pulled the data lower. Excluding transportation equipment, new orders declined 0.2% in March. Over the past 12 months, new orders for durable goods have dropped 16.0%, or with transportation equipment excluded, sales have fallen 0.7% since March 2019.
Nondefense capital goods excluding aircraft—a proxy for capital spending in the U.S. economy—edged up 0.1% in March. That surprising result would likely foretell weaker data in April, with manufacturers challenged by the COVID-19 outbreak and this report possibly capturing just the beginning of the declines in activity. Still, core capital goods orders have also declined 0.7% year-over-year.
There were 4,427,000 initial unemployment claims for the week ending April 18, with 26.45 million Americans filing for unemployment insurance in the past five weeks as the economic toll of the COVID-19 crisis takes hold. Meanwhile, there were 15,976,000 continuing unemployment claims for the week ending April 11 in this report, a new all-time high. The latest figure suggests that 11% of the workforce received unemployment insurance that week, a rate that will continue to increase substantially given the initial claims data.
With that said, the unemployment rate could easily exceed 20% if all who filed for unemployment insurance over the past few weeks were to receive it. That makes for a shocking turn of events in the labor market following February’s 50-year low, which registered 3.5%.
There were 56,550 applications for new businesses for week 16 of this year, down from 58,900 for week 15. More importantly, applications were down 20.1% relative to the same week in 2019, reflecting the weaker current economic environment. The data, which are part of a new experimental series developed by the Census Bureau, are quite choppy from week to week, as can be seen in the attached graph. Yet, the recent trend is clear: applications averaged 76,527 per week for the first 10 weeks of 2020 but have averaged 61,210 each week since then.