NAM: Monday Economic Report
The limited number of releases last week each highlighted the rebound in economic activity seen this summer following the sharp, unprecedented declines in the spring due to the COVID-19 pandemic. This is encouraging news, even as overall activity remains well below prerecessionary levels.
The IHS Markit Flash U.S. Manufacturing PMI recovered in July to the best reading since January, bouncing back after pulling back sharply in April at the worst rate since the Great Recession. Manufacturers feel optimistic for continued production growth over the next six months.
The IHS Markit Flash Eurozone Manufacturing PMI expanded in July at the fastest rate since December 2018, ending 17 straight months of contracting activity.
Existing and new home sales soared 20.7% and 13.8% in June, respectively, and both have been boosted by historically low mortgage rates and reopenings across the country. It was the best reading for new single-family home sales since July 2007. With inventories low, median sales prices have pulled higher.
The Chicago Federal Reserve Bank’s National Activity Index and the Conference Board’s Leading Economic Index reflect the bounce backs seen in the macroeconomy, with both rising in May and June after dropping at record declines in April.
With that said, there have been some renewed closures related to the continued spread of COVID-19 in many areas, and this could lead to some softening in demand, production and hiring in forthcoming data. This was seen last week in the initial unemployment claims, with the first increase in 16 weeks.
Meanwhile, continuing claims declined from 17,304,000 for the week ending July 4 to 16,197,000 for the week ending July 11. In the latest data, 11.1% of the workforce received unemployment insurance.
There will be several key economic data points to watch this week.
After weeks of speculation on just how bad it will be, the Bureau of Economic Analysis will release its first estimate of second quarter real GDP. My estimate is for a decline of 28%, but the consensus is for the U.S. economy to fall by more than 30%. Either would be unparalleled and a reflection of the scope of the damage from the COVID-19 outbreak.
On the manufacturing front, there will be new surveys released from the Dallas and Richmond Federal Reserve Banks, along with a preliminary read on June durable goods orders and shipments. Each is expected to reflect stronger growth.
The Federal Open Market Committee will meet this week, but it is not expected to make any significant changes from its statement on June 9–10 except to acknowledge recent economic progress.
Other highlights include consumer confidence, international trade and personal income and spending.