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Monday Economic Report
By
Tom Morrison
posted
07-02-2020 09:35 AM
0
Recommend
As COVID-19 Worries Linger, Economy Tries to Charge Forward
As the nation continues to grapple with lingering COVID-19 worries, the data last week reflected bounce backs in activity, suggesting that the economy is trying to charge forward. These “green shoots” provide some encouragement that the U.S. economy will rebound in the second half of this year, even as it is also clear that activity remains well below pre-recessionary levels.
New orders for durable goods
jumped 15.8% in May, beginning the process of rebounding after plummeting 16.7% and 18.1% in March and April, respectively. Excluding transportation equipment, new orders rose 4% in May, with higher sales in every major category. Yet, new durable goods orders have dropped 17.9% over the past 12 months, or with transportation equipment excluded, sales have fallen 6.3% since May 2019.
The
IHS Markit Flash U.S. Manufacturing PMI
stabilized for the second consecutive month in June, increasing from 36.1 in April, to 39.8 in May, to 49.6 in June. The index for future output improved to the best reading since February, an encouraging sign that respondents are optimistic in their outlook for the next six months.
The regional data is also supportive of some steadying of the manufacturing sector, with activity stabilizing in both the
Kansas City
and
Richmond
Federal Reserve Bank districts in June. The same was true in the
Eurozone
and in the
United Kingdom
, according to preliminary sentiment data from IHS Markit. Yet,
Germany
continued to contract, albeit at a slower pace.
In advance statistics, the
goods trade deficit
rose from $70.73 billion in April to $74.34 billion in May. The decline in goods exports was steeper than for goods imports. Goods exports were at the slowest pace since August 2009, and goods imports dropped to the lowest level since July 2010.
After plummeting by a record 12.6% in April,
personal consumption expenditures
jumped 8.2% in May, with Americans starting to emerge from their homes and increasing their purchasing. The savings rate, which had soared to an all-time high of 32.2% in April, declined to a still elevated 22.3% in May. This suggests that consumers remain cautious in their spending as the nation continues to grapple with the COVID-19 outbreak and a severe economic recession.
Meanwhile, personal income decreased 4.2% in May, pulling back after skyrocketing by 10.8% in April. Government assistance checks continue to boost income for many Americans, and personal income has risen 7% since May 2019.
Manufacturing wages and salaries rose from $796.5 billion in April to $830.1 billion in May, down by 8.7% from $909.5 billion one year earlier. With more activity starting to come back online, we expect this data to continue to improve in the coming months.
Consumer confidence
rose for the second straight month, according to the University of Michigan and Thomson Reuters, but sentiment remains well below the levels seen before the COVID-19 outbreak. Respondents to the latest survey continue to express a record high level of uncertainty regarding income.
The housing market data were mixed last week. On the one hand,
new single-family home sales
soared 16.6% in May, showing signs of recovering after slowing dramatically during the COVID-19 crisis. Historically low mortgage rates likely boosted these figures. On the other hand,
existing home sales
fell 9.7% in May. This figure extends the declines seen in March and April but likely reflects earlier weaknesses. The outlook for June is positive, however.
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