Multiple Bounces: June 15 – 19

May signaled some improvement. Here are the five things we learned from U.S. economic data released during the week ending June 19.

While improving in May, forward-looking economic measures indicate a long road to recovery. The Conference Board’s Leading Economic Index added 2.7 points during the month to a seasonally adjusted reading of 99.8 (2016=100). The LEI, which had fallen sharply over the previous three months, remained 10.6 percent below its year-ago reading. Seven of ten LEI components made positive contributions in May, led by jobless claims, manufacturing hours worked, and building permits. The coincident index added a full point to a reading of 95.3 but remained 10.3 percent below its year-ago reading. Two of four coincident index components—nonfarm payrolls and industrial production—made positive contributions. The lagging economic index shed 1.9 points to 111.4 (+3.6 percent versus May 2019) as only two of seven index components made a positive contribution. The press release warned that “breadth and depth” of the leading index “suggest the economy at large will remain in recession territory in the near term.”

Retail partially sprang back in May. Sales at retailers and food services rose 17.7 percent during the month to a seasonally adjusted $485.5 billion, following a 14.7 percent decline in April. Even with the rebound, the Census Bureau data series remained 6.1 percent below its May 2019 mark. Sales surged at auto dealers/parts stores (+44.1 percent) and gas stations (+12.8 percent). Net of both, core retail sales jumped 12.4 percent May but remained 3.9 percent behind their year-ago pace. Sales rose sharply during the month at every significant retail segment, and even some had positive year-to-year comparables (including building materials, groceries, and sporting goods). Nonstore retailers—i.e., web merchants—report a 9.0 percent jump in sales, as transactions 30.8 percent above year-ago levels.

Industrial production and manufacturing both enjoyed a modest bounce in May. The Federal Reserve reports that industrial production increased a seasonally adjusted 1.4 percent during the month after plummeting 12.5 percent in April and 4.6 percent in March. Because of the damage inflicted earlier in the spring and a general sense of malaise before that, industrial production in May was 15.3 percent below that of a year earlier. Manufacturing output rose 3.8 percent, its first increase since last December, split by gains for durable and nondurable goods of 5.8 percent and 2.1 percent, respectively. Manufacturing activity, however, remained 16.5 percent behind the previous year’s pace. Automobile production restarted gradually, as it rose 1,480.8 percent in May but remained 74.8 percent below year-ago levels. Utility output slowed 2.3 percent while mining output fell 6.8 percent (oil/gas drilling dove 36.9 percent).  

Housing starts also moderately recovered in May. The Census Bureau estimates privately-owned housing starts jumped 14.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.066 million. Even with the gain, housing starts remained 9.9 percent below year-ago levels. Almost all of the improvement came with multifamily units, where starts rose 16.9 percent. Single-family starts edged up 0.1 percent. Looking towards the future, the annualized count of issued building permits surged 14.4 percent to 1.220 million units (-8.8 percent versus May 2019). Permits for single-family homes gained 11.9 percent, while those for multifamily units with at least five homes jumped 18.3 percent. Completions continued to lag, falling 7.3 percent during the month to an annualized 1.115 million homes (-9.3 percent versus May 2019).

The unemployment rate fell and nonfarm payrolls expanded in most states during May. The Bureau of Labor Statistics reports that the unemployment rate fell in 38 states and the District of Columbia and held stable in nine others. The unemployment rate rose in Minnesota, Connecticut, and Florida. But despite the gain in most states in May, the unemployment rate remained well above their year-ago readings in all 50 states and the District of Columbia. Nonfarm payrolls rebounded in 46 states and held steady in three others. Payrolls contracted in Hawaii and the District of Columbia. Like in the case of the unemployment rate, payrolls remained significantly below their year-ago levels.   

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending June 13, First-Time Claims, seasonally adjusted): 1,508,000 (-58,000 vs. the previous week, +1,289,000 vs. the same week a year earlier). 4-week moving average: 1,773,500 (+708.9% vs. the same week a year earlier).
• Housing Market Index (June 2020, Index (>50=More Homebuilders View the Housing Market as “Good” versus being “Bad,” seasonally adjusted): 58 (May 2020: 27, June 2019: 64).
• Business Inventories (April 2020, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.981 trillion (-1.3% vs. March 2020, -2.2% vs. April 2019).
• Treasury International Capital Flows (April 2020, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$150.2 billion (vs. March 2020: -$227.1 billion, vs. April 2019: +$27.7 billion).

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