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Pending Home Sales Posts its Largest Ever Monthly Gain

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Economic Report Monitor #50 June 27th, 2020
Another quiet day economic day opens the last week of June trading which has been bearish so far. Indexes ended their rebounds off March bottoms as uncertainty over a resurgence in cases rises to limit hopes that the health crisis would be over quicker than expected. That does not seem to be the case. However, the real estate market looks to have shaken off that disappointment. The National Association of Realtor's (NAR) pending home sales report released today increased 44.3% in May after two months of declines. This is the highest one month increase in the series history. Despite the steep incline, year-over-year contract activity was still down -5.1%.  The NAR's chief economist Lawrence Yun suggests that the robust rebound in the housing sector "could lead the way for a broader economic recovery." With the strong report, the forecasts for existing-home sales and new home sales for 2020 were increased.

The Dallas Fed Manufac…

Consumption Recovery Slow Despite Massive Increase in Disposable Income

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Economic Report Monitor #49 June 26th, 2020

The week ends with a look at the report of personal income and outlays in May. On a month over month basis, personal income fell -4.2% after being boosted by stimulus checks in April. Disposable income fell with it, down -4.9%. The increase in cash from the stimulus and partial reopening of the economy allowed consumption to rise 8.2% in May. The largest bump was in durable goods consumption which grew 28.6% while services consumption was up just 5.4% and nondurable goods consumption was up 7.7%. However, inflation remains at lows from April with the general PCE price index at 0.5% and the more closely followed PCE price index (excluding food and energy) at 1.0%. YoY comparisons still put personal consumption down -9.8% despite disposable personal income up 8.2% in the same period. Here, services lag the most, down -14.3% from a year ago. It's clear that consumers' economic well-being is not the culprit for sluggish consumption, but in…

Initial Jobless Claims Still Over 1 million as Sluggish Employment Recovery Continues

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Economic Report Monitor #48 June 25th, 2020

Jobless claims take the headlines again as elevated initial claims numbers continue to be reported. Last week 1.48 million initial claims for unemployment were filed, just a 60,000 drop from the week before. Continued claims also remained high, despite states reopening, with a 13.4% insured unemployment rate dropping just 0.5%. That means 19.522 million individuals are still claiming unemployment, just a 767,000 drop. Employment just hasn't recovered as most would hope with businesses still forced to keep costs low on restricted cash flow. There is also the concern that individuals receiving more in benefits than they would in wages might decide to delay their return to the workforce. These are just two factors playing into the sluggish recovery seen in jobless claims.
Durable goods new orders data was a bit more optimistic as the May report showed a 15.8% increase in new orders. Transportation equipment, an industry that was hurt badly, sa…

Uncertainty Remains High for Businesses as COVID-19 Cases Resurge

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Economic Report Monitor #47 June 24th, 2020
On a mostly quiet day of economic indicator reporting, the stock market fell in response to an increase in COVID-19 effects in certain states. A resurgence in cases has injected new uncertainty into the economic outlook as the reopening process looks to be ineffective in staving off further infections. The hardest-hit states, Florida and Texas, have yet to see major strains on their respective healthcare systems, but if the situation isn't addressed, that the strain could return. 

Businesses reflected this increase in uncertainty in the June update of the Atlanta Fed's Survey of Business Uncertainty. The headline Business Uncertainty Index rose to 311.8 in June from 285.7 in May as respondents reported not knowing how sales, employment, and capital expenditures will look in the next 12 months. Uncertainty over sales growth continues to be a major concern for firms as it rises 397.3 to 440.0. If businesses can't be sure that revenues…

First June PMI Signals a V-shape Rebound

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Economic Report Monitor #46 June 23rd, 2020
The first look of June manufacturing data was released today as IHS Markit reported its IHS Markit Flash U.S. Composite PMI. In true V-shaped fashion, the composite index shot up to 46.8, up from 37.0 in May and about 27 in April. The service and manufacturing index were equally as strong as both bounced from high 30's to high 40's as demand returned with the reopening of the economy in early June. However, some businesses noted that "renewals and requests for new business were historically muted." Employment contractions slowed as well as furloughed staff returned, but many businesses were still forced to cut labor costs. A recovering cost of business was also visible in rising prices paid and received by businesses as deflationary effects eased. Still, IHS suggests any economic expansion "will be prone to losing momentum due to persistent weak demand for many goods and services." It would not be entirely surprisin…

High Yield Downgrades, Default Rates Near Financial Crisis Level

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Economic Report Monitor #45 June 22nd, 2020
The week starts quietly with just two major economic reports headlining on Monday. The Chicago Fed National Activity Index bounced back in May up to 2.61 after a steep drop to -17.89 in April. The rebound came on the back of a huge May jobs report where payrolls rose by over 2.5 million after the steep 20 million-plus drop in April. There was, of course, a footnote to the massive jobs gains as the Bureau of Labor Statistics admitted the job addition might have been inflated, so aggregate economic indicators like this and the Conference Board indexes may be inflated because of this. The CFNAI also saw an 0.89 bump from production indicators, an increase that could've been larger if industrial production didn't disappoint at up just 1.4%. Sales, orders, and inventories indicators contributed just 0.02 and personal consumption and housing indicators just 0.17. The latter category struggling as strong real estate is offset by weak personal…

Employment Data Lags While Rebound Continues

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Economic Report Monitor #44 June 18th, 2020
Here we go again. Another jobless claims number breaks a million as 1.508 million initial unemployment claims were filed last week, down just 58,000 from the week before. In addition to another high initial claims number, continuing claims fell just 62,000, maintaining its level above twenty million at 20.544 million or 14.1%. Both trends contradict the surprise May jobs report and suggest the rebound seen in other areas of the economy has not been replicated in the labor market. In fact, the federal version of the Pandemic Unemployment Assistance program saw claims increase 66,063 in the week of June 13th after a fall of over 100,000 in the previous week.
The momentum in the jobless claims report differed from the Philadelphia Fed Manufacturing Survey which saw its headline business activity data jump 70.6 points to 27.5. The readings for new orders and shipments saw similar increases as both rose sharply out into positive territory. While jum…