The Bumpy Road Ahead: April 20 – 24

The impact of COVID-19 continued to ripple through the U.S. economy. Here are the five things we learned from U.S. economic data released during the week ending April 24.

#1The U.S. economy was in total freefall in March. The Chicago Fed National Activity Index (CFNAI) plummeted by 423-basis to a reading of -4.23. The weighted index of 85 indicators (set such that 0.00 indicates a U.S. economy expanding at its historical rate) was at its third lowest reading in its 53-year history. Only 18 of the 85 indicators made a positive contribution to the CFNAI, while 65 others made negative contributions. Among the four major categories of indicators, those suffering vast declines were those tied to production (making a -2.72 contribution to the CFNAI) and employment (-1.23). Indicators linked to personal consumption (-0.19) and sales/orders/inventories (-0.05) each had relatively modest negative impacts. The CFNAI’s three-month moving average slumped to -1.47, well below the -0.70 reading that typically signals a recession.

#2First-time jobless claims continued at a historic rate. The Department of Labor reports that there were a seasonally adjusted 4.427 million first-time claims made for unemployment insurance claims during the week ending April 18. This was a decline of 810,000 from the prior week but also was 1,859 percent above the count of first-time claims during the same week a year earlier. The first-time claims’ four week-moving average of 5,786,500 was 2,646 percent ahead of that a year earlier. Continuing jobless claims surged by 4.064 million during the week ending April 11 to 15,976,000, up an extraordinary 963 percent over the previous year. The insured unemployment rate was 11.0 percent, compared to just 1.2 percent as recently as a month ago.

#3Consumer sentiment appears to have stabilized during the latter half of April. The University of Michigan’s Index of Consumer Sentiment ended the month at a seasonally adjusted reading of 71.8 (1966Q1=100). While down a startling 17.3 points from March and 25.4 points from a year earlier, the index managed to improve by 8/10ths of a point from its mid-April reading. The current conditions index shed 29.6 points from March to 103.7 (April 2019: 112.3), while the expectations measure lost 9.6 points during the month to 70.1 (April 2019: 87.4). The press release notes that consumers will be paying close attention to the handful of states that will attempt to reopen, noting that “an incorrect decision to reopen [would have] serious repercussions” that “could cause a deeper and more lasting pessimism.” 

#4Durable goods orders plummeted in March, but core goods held relatively steady. The Census Bureau places its estimate of new orders for manufactured durable goods at a seasonally adjusted $213.2 billion down 14.4 percent from February. Transportation goods orders were in a freefall—decreasing 41.0 percent—thanks to civilian aircraft orders declining -295.7 percent (including a massive number of order cancellations) and an 18.4 percent drop in motor vehicle orders. Net of transportation goods, core durable goods slowed by a far more modest 0.2 percent. While communications equipment orders gained 3.7 percent, transactions declined for primary metals (-2.5 percent), fabricated metal products (-0.5 percent), machinery (-0.2 percent), and computers/electronics (-0.1 percent).

#5Sales of previously owned homes fell in March but stayed above year-ago levels. The National Association of Realtors reports that existing home sales slowed 8.5 percent during the month to a seasonally adjusted annualized rate of 5.27 million. Despite the drop, home sales were 0.8 percent ahead of year-ago levels. Sales fell during the month in all four Census regions: West (-13.6 percent), South (-9.1 percent), Northeast (-7.1 percent), and Midwest (-3.1 percent). There were 1.50 million unsold homes on the market at the end of March (+2.7 percent vs. February 2020, -10.2 percent vs. March 2019), the equivalent to a 3.4-month supply. The median sales price of $280,600 was up 8.0 percent from a year earlier. 

Other U.S. economic data released over the past week:
New Home Sales (March 2020, New Home Sold, seasonally adjusted annualized rate): 627,000 (-15.4% vs. February 2020, -9.5% vs. March 2019).
FHFA House Price Index (February 2020, Purchase-Only Index, seasonally adjusted): +0.7% vs. January 2020, +5.7% vs. February 2019.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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