Economic Indicators Hit Historic, Troubling Records Due To COVID-19 BY CHAD MOUTRAY, PH.D.
Many economic indicators hit historic and troubling records as the eco- nomic damage globally from the COVID-19 pandemic grows. Here are some of the record-breaking numbers:
• Weekly initial unemployment claims soared to 3,283,000 for the week ending March 21, the highest level on record by far. This foreshadows a rapid increase in the unemployment rate, likely jumping from 3.5 percent in February to 5.5 per- cent to 6.0 percent in March, with sharply higher rates in April.
Chad Moutray
• With many consumer-facing businesses closed and more Americans staying closer to home, the IHS Markit Flash U.S. Services Business Activity Index declined from 49.4 to 39.1, a record low. Manufacturing Negatively Impacted The U.S. manufacturing sector has also been negatively impacted, with March sentiment surveys contracting at rates not seen since the Great Recession. • The IHS Markit Flash U.S. Manufacturing PMI declined from 50.7 in Feb- ruary to 49.2 in March, the fastest rate since August 2009, as the sec- tor struggles with the COVID-19 outbreak and significant demand and production disruptions. • Manufacturing activity fell at the fastest pace in 11 years in the latest survey from the Kansas City Federal Reserve Bank, with data contract- ing across the board. Beyond the COVID-19 challenges, respondents also cited the sharp drop in oil prices, which hit the energy sector in the district hard. • Improved motor vehicles and parts demand helped to boost new du- rable goods orders in February, but excluding transportation equip- ment, sales fell 0.6 percent for the month. Core capital goods orders decreased 0.8 percent in February. Prior to the current crisis, new or- ders for durable goods have declined 0.1 percent since February 2019, but excluding transportation equipment, sales have fallen 0.9 percent year-over-year. Consumer Sentiment Shrinks The Index of Consumer Sentiment from the University of Michigan and Thomson Reuters declined from 101.0 in February to 89.1 in March, the lowest level since April 2016, and is likely to continue to trend lower when the next preliminary data are released on April 9. There were more indicators showing that, after a challenging 2019, the U.S. economy had strengthened before the COVID-19 pandemic brought growth to a sudden stop: • Real GDP grew 2.1 percent at the annual rate in the fourth quarter, with the U.S. economy growing modestly. In 2019, real GDP rose 2.3 per- cent, easing from 2.9 percent growth in 2018. Obviously, the current crisis has brought that growth to a halt, with the U.S. economy predict- ed to decline 1.5 percent in the first quarter and historically sharp de- creases forecasted for the second quarter. Still, growth could rebound in the second half of this year once the effects of the coronavirus pan- demic start to wane. • Personal income grew strongly in February, rising 0.6 percent for the second straight month, with 4.0 percent growth over the past 12 CONTINUED ON PAGE 14
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April 13, 2020
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