The Decline Continued in April: May 18 – 22

Like just about everything else, the housing market slammed on the brakes in April. Here are the five things we learned from U.S. economic data released during the week ending May 22.

#1

Forward-looking economic indicators show business activity fell sharply again in April (but not as drastically as March). The Conference Board’s Leading Economic Index (LEI) shed 4.6 points in April to a reading of 98.8 (2016=100), down 11.7 percent from a year earlier. Four of ten LEI components made positive contributions to the measure, including stock prices and the interest rate spread. The other six components pulled down the LEI, led by average manufacturing hours, jobless claims, and building permits. The coincident index nosedived by 9.4 points to 96.6, down 9.4 percent from April 2019. Of the index’s four components, the two tied to nonfarm payrolls and industrial production pulled the index down. The lagging index, however, advanced by 4.5 points to 115.3 that left the measure up 7.3 percent over the past year. The press release said the broad-based drop in the LEI “suggests that an imminent re-opening of some sectors does not imply a fast rebound for the economy at large.”

#2

Sales of previously owned homes were not immune to the pandemic in April. The National Association of Realtors reports that existing home sales sank 17.8 percent during the month to a seasonally adjusted annualized rate (SAAR) 4.330 million units. This was the biggest single-month percentage drop in home sales in a decade, leaving the measure at its lowest mark since July 2010. Sales were down in all four Census regions on both a month-to-month and year-to-year basis. Beyond softer demand, holding back sales was the number of homes on the market. There were 1.470 million homes on the market at the end of April, down 1.3 percent from March and 19.7 percent from April 2019, and the equivalent to a 4.1 month supply. The median sales price of $286,800 was up 7.4 percent from a year earlier.

#3

…neither were housing starts. The Census Bureau estimates privately-owned housing starts plummeted 30.2 percent during April to a seasonally adjusted annualized rate (SAAR) of 891,000 units. This was the data series’ largest single-month decline (going back to 1959) and left starts at its lowest level since 2015. Single-family home starts were down 25.4 percent from March while the multi-family home (5+ units) starts were off 40.3 percent. Starts fell sharply in all four Census regions on both a month-to-month and year-to-year basis. Looking towards the future, annualized count of issued building permits slumped 20.8 percent to 1.074 million units (also a five-year low). Home completions slowed 8.1 percent to an annualized 1.176 million units. 

#4

Homebuilder confidence rebounded a smidge in May. The National Association of Home Builders’ Housing Market Index added seven points during the month to a seasonally adjusted reading of 37, after plummeting 42 points in April. (An HMI reading below 50 means that more homebuilders see the housing market as “poor” versus being “good.”). The HMI recovered some of its April losses in three of four Census regions: West (+12 points to 44), South (up eight points to 42), and Midwest (adding seven points to 32). The HMI shed another two points in the Northeast, however. The present sales index added six points to 52 while the expected sales index advanced by ten points to 46 and prospective traffic measure moved forward by eight points to 21. The press release noted that “[l]ow interest rates are helping to sustain demand.”

#5

Payrolls shriveled as the unemployment rate rose in all 50 states and the District of Columbia in April. The Bureau of Labor Statistics indicates that the unemployment rate hit new data series highs (going back to 1976) in 43 states, with the highest rates reported in Nevada (28.2 percent), Michigan (22.7 percent), Hawaii (22.3 percent). Only four states had unemployment rates below ten percent: Nebraska (8.3 percent), North Dakota (8.5 percent), Utah (9.7 percent), and Maryland (9.9 percent). States reporting the largest payroll declines were California (-2,344,700), New York (-1,827,300), and Texas (-1,298,900). Payrolls also were below their year-ago levels in all 50 states and the District of Columbia. 

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 16, First-Time Claims, seasonally adjusted): 2,438,000 (-249,000 vs. the previous week, +2,225,000 vs. the same week a year earlier). 4-week moving average: 3,042,000 (+1,274.9% vs. the same week a year earlier).
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Retail Sales, Industrial Production & Prices: All Grim: May 11 – 15

Just about everything declined in April. Here are the five things we learned from U.S. economic data released during the week ending May 15.

#1Retail sales fell hard in April. The Census Bureau estimates retail and food establishment sales hemorrhaged 16.4 percent to a seasonally adjusted $403.9 billion. This was 21.5 percent under April 2019 sales totals. Sales tumbled 12.4 percent at auto dealers and 22.8 percent at gas stations. Net of both, core retail sales were 16.2 percent behind that from March. Virtually every retail segment suffered double-digit sales declines: apparel (-78.8 percent), electronics/appliances (-60.6 percent), furniture (-58.7 percent), sporting goods/hobby (-38.0 percent), restaurants/bars (-29.5 percent), department stores (-28.9 percent), health/personal care (-15.2 percent), and groceries (-13.2 percent). The only retail segment to report a sales gain was nonstore retailers (e.g., internet retailers) with an 8.4 percent advance.

#2Industrial production suffered its biggest decline in more than a century in April. Industrial production nosedived 11.2 percent as factories closed or slowed production. This was the biggest single-month decline ever in the 101-year history for the Federal Reserve data series. Manufacturing output slumped 13.7 percent, following March’s 5.5 percent drop. Durable goods production slowed 19.3 percent, hurt by (among other things) a nearly total stoppage in automobile output, and significant declines for primary metal products, aerospace equipment, and furniture. Nondurables production decelerated 8.2 percent with sharp drops for textiles mills, apparel/leather, printing, and petroleum/coal products. Utility output slowed 0.9 percent while mining output sank 6.1 percent with oil and gas well drilling seeing its biggest decline in the 48-year data series’ history. 

#3Consumer and wholesale prices tumbled in April. The Consumer Price Index (CPI) dropped a seasonally adjusted 0.8 percent during the month, following a 0.4 percent decline in March, per the Bureau of Labor Statistics. Energy prices plummeted 10.1 percent, with gasoline prices diving 20.6 percent. Meanwhile, food prices jumped 1.5 percent. Net of energy and food, core CPI declined 0.4 percent, pulled down by price drops for apparel (-4.7 percent), transportation services (-4.7 percent), used cars/trucks (-0.4 percent), and medical care commodities (-0.1 percent). Medical care services prices gained 0.5 percent. Headline CPI has risen a mere 0.3 percent over the past year, but core CPI has a 12-month comparable of +1.4 percent. The BLS noted its difficulties collecting price data since mid-March.

Meanwhile, the Producer Price Index (PPI) for final demand fell for the third consecutive month with a seasonally adjusted 1.3 percent decline. The Bureau of Labor Statistics’ core wholesale price measure, which nets out foods, energy, and trade services, pulled back 0.9 percent. Energy PPI plunged 19.0 percent (wholesale gasoline prices: -56.6 percent), while food PPI decreased 0.5 percent. Core goods PPI (net of energy and food) fell 0.4 percent. Trade services PPI rose 1.6 percent. Wholesale prices have fallen 1.2 percent over the past year, while the core measure was off 0.3 percent from April 2019.

#4Small business owner sentiment weakened again in April. The Small Business Optimism Index from the National Federation of Independent Business lost 5.5 points during the month to a seasonally adjusted 90.9 (1986=100). Over the past two months, the index shed 13.6 points to its lowest reading since March 2013. Nine of ten index components fell during the month, including double-digit drops for measures linked to expected real sales, earnings trends, current job openings, and whether it is a good time to expand. The one measure that advanced in April tracked expected economic conditions.

#5Job openings and hiring slowed, separations skyrocketed in March. The Bureau of Labor Statistics estimates there were a seasonally adjusted 6.191 million open jobs at the end of the month, down 813,000 from February, off 15.9 percent from the same month a year earlier, and the fewest reported since May 2017. Industries with sharp double-digit year-to-year percentage declines in job openings included leisure/hospitality (-31.6 percent), construction (-31.4 percent), manufacturing (-27.4 percent), trade/transportation/utilities (-15.9 percent), and health care/social assistance (-12.0 percent). There were 5.206 million hires in March, down 658,000 for the month, and 8.5 percent from a year earlier. Meanwhile, job separations surged by more than 8.9 million to 14.517 million (+161.4 percent versus March 2019). Layoffs swelled 569.7 percent from a year earlier to 11.372 million. 

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 2, First-Time Claims, seasonally adjusted): 2,981,000 (-195,000 vs. the previous week, +2,764,000 vs. the same week a year earlier). 4-week moving average: 3,616,500 (+1,510.9% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (May 2020-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 73.7 (vs. April 2020=71.8, vs. May 2019=100.0).
Import Prices (April 2020, All Imports): -2.6% vs. March 2020, -6.8% vs. April 2019. Nonfuel Imports: -0.5% vs. March 2020, -1.0% vs. April 2019.
Export Prices (April 2020, All Exports): -3.3% vs. March 2020, -7.0% vs. April 2019. Nonagricultural Exports: -3.3% vs. March 2020, -7.3% vs. April 2019.
Business Inventories (March 2020, Manufacturers and Trade Inventories, seasonally adjusted): $2.013 trillion (-0.2% vs. February 2020, -0.3% vs. March 2019).
Treasury Budget (April 2020, Deficit Over First Seven Months of FY2020): -$1.481 trillion (+179.0% vs. First Seven Months of FY2019).
Treasury International Capital (March 2020, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$238.1 billion (vs. February 2020: +$14.4 billion, vs. March 2019: -$21.5 billion).

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Jobless Claims Build, Confidence Falls: April 6 – 10

Americans continued filing for jobless claims as consumers and businesses grew gloomy. Here are the five things we learned from U.S. economic data released during the week ending April 10.

#1Another historic week for jobless claims. The Department of Labor reports there were a seasonally adjusted 6.606 million first-time claims made for unemployment insurance benefits during the week ending April 4. This represented a 261,000 decline from the prior week but also a 3,150 percent jump from the year-ago pace. (Filing difficulties in some states likely have suppressed the reported claims numbers.) There were 7.455 million people receiving continued unemployment insurance benefits during the week ending March 28, well above the 1.705 million people count from the same week a year earlier.

#2Consumer sentiment is in a freefall. The preliminary April reading of the University of Michigan’s Index of Consumer Sentiment nosedived by 18.1 points (the largest single-month decline in the 50-plus year history of the index) to a seasonally adjusted reading of 71.0. The measure has lost 30.0 points over the last two months. The current conditions index has lost 31.3 points so far in April to 72.4, while the expectations index shed 9.7 points to 70.0. The press release noted that the relatively “small” drop in expectations reflected a belief among consumers that “the infection and death rates from COVID-19 would soon peak and allow the economy to restart.” If and when that fails to materialize, “a renewed and deeper slump in confidence” will emerge. 

#3Small business owner sentiment deteriorated rapidly in March. The Small Business Optimism Index from the National Federation of Independent Business dropped by 8.1 points during the month to a seasonally adjusted reading of 96.4. This was the measure’s lowest reading since November 2016 and the biggest single-month drop in the study’s history. Nine of the ten index components fell in March, led by huge drops for expected real sales, expected economic conditions, whether it is a good time expand, and plans to increase employment. The press release stated, “[t]he small business sector is anticipating and bracing for continued economic disruptions going forward.” 

#4Prices fell in March. The Consumer Price Index (CPI) declined 0.4 percent on a seasonally adjusted basis during the month, its biggest single-month decline since January 2015, per the Bureau of Labor Statistics. Energy prices plummeted 5.8 percent, pulled down by a 10.5 percent drop in gasoline prices and declining electrical (-0.2 percent) and natural gas (-1.4 percent) utility prices. Food prices gained 0.2 percent. Net of energy and food, core CPI decreased for the first time in ten years with a 0.1 percent decline. While prices rose for used cars/trucks (+0.8 percent) and medical care services (+0.5 percent) but plummeted for apparel (-2.0 percent), transportation services (-1.9 percent), and new vehicles (-0.4 percent). CPI has grown 1.5 percent over the past year, while the core measure has a 12-month comparable of +2.1 percent.

Meanwhile, the final demand wholesale prices slumped for a second consecutive month, shedding a seasonally adjusted 0.2 percent. The core Producer Price Index (PPI), which nets out foods, energy, and trade services, also pulled back 0.2 percent in March. Energy prices plunged 6.7 percent (gasoline: -16.8 percent) while food prices held steady (although prices for eggs and frozen foods rose). Final demand services PPI edged up 0.2 percent as the measure for trade services (which measures retailer and wholesaler margins) surged, but the measure for transportation/warehousing plummeted. PPI has grown a modest 0.7 percent over the past year, while core PPI has gained 1.0 percent over the past year.

#5The number of job openings narrowed in February. The Bureau of Labor Statistics estimates there were a seasonally adjusted 6.882 million open jobs at the end of the month, off 120,000 from January and 2.4 percent from a year earlier. At the time, this is significantly greater than the number of unemployed adults (5.787 million). A few industries reported year-to-year increases in job openings; including, the government (+11.1 percent), financial activities (+9.3 percent), and education/health services (+3.1 percent). Openings were below their year-ago comparables at wholesale trade (-19.4 percent), manufacturing (-9.1 percent), retail (-8.1 percent), and leisure/hospitality (-7.4 percent). Hiring slipped by 29,000 jobs to 5.896 million, which was up 3.4 percent from a year earlier. Separations contracted in February, dropping by 143,000 for the month and 2.0 percent over the previous year. Obviously, this will not hold true in the coming months. 

Other U.S. economic data released over the past week:
Wholesale Trade (February 2020, Inventories of Merchant Wholesalers, seasonally adjusted): $655.8 billion (-0.7% vs. January 2020, -1.3% vs. February 2019).
Consumer Credit (February 2020, Outstanding Non-Real Estate-Backed Consumer Debt Balances, seasonally adjusted): $3.129 trillion (+$18.1 billion vs. January 2020, +4.9% vs. February 2019).
Monthly Treasury Statement (March 2020, Federal Budget Surplus/Deficit): First six months of FY2020: -$743.6 billion (vs. +7.6% vs. the first six months of FY2019).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.