NAM: Monday Economic Report
While the economic data continue to reflect ongoing, sharp disruptions in demand and operations for manufacturers, there were also signs that the worst of those decreases occurred in late March and in April, with the rate of declines in May improving somewhat.
After declining in April at the fastest rates since March 2009, the IHS Markit Flash U.S. Manufacturing PMI continued to contract sharply in May, albeit at a somewhat slower rate of decline. The headline index rose from 36.1 in April to 39.8 in May, with some easing in the contractions for new orders, production, exports and employment.
In a similar way, the IHS Markit Flash Eurozone Manufacturing PMI rebounded in May after dropping in April at the quickest rate since February 2009.
Mirroring the New York Federal Reserve release, manufacturing activity in the Philadelphia Fed’s survey continued to reflect deteriorating conditions due to the COVID-19 pandemic even as the headline index bounced back in April from its worst reading since July 1980. Encouragingly, respondents were cautiously optimistic about a strong rebound over the next six months.
There were 2,438,000 initial unemployment claims for the week ending May 16, down from the 2,687,000 claims added for the week ending May 9. Since peaking at 6,867,000 for the week ending March 28, initial claims have decelerated, which is encouraging. However, these levels continue to be heartbreaking and unprecedented. Over the past seven weeks, 38,636,000 Americans filed for unemployment insurance.
The housing market had historic declines in activity in April, but builders were somewhat less pessimistic in their outlook for the coming months. Low mortgage rates should help boost demand once stay-at-home orders are lifted and economic activity can start to resume, even in a more limited way.
New residential construction fell 30.2% in April, extending the 18.6% slide seen in March. New housing starts have declined from an annualized 1,567,000 units in February to 1,276,000 units in March to 891,000 in April, the slowest pace since January 2014. New single-family and multifamily housing starts have fallen 37.1% and 54.8%, respectively, over the past two months.
Housing permits declined 20.8% from 1,356,000 units at the annual rate in March to 1,074,000 units in April, the slowest rate since January 2015. While permitting has fallen 30.1% from January’s nearly 13-year high, there was also cause for some optimism, with permits not falling as much as starts. Since permits are a proxy of future activity, that perhaps gives reason for some cautious optimism that the housing market will improve over the coming months once the current crisis abates.
Existing home sales fell 17.8% in April, extending the 8.5% decrease seen in March. Existing home sales have declined from an annualized 5.76 million units in February to 5.27 million units in March to 4.33 million units in April, the weakest reading since September 2011. In April, single-family and condominium and co-op sales fell 16.9% and 26.4%, respectively.