Industrial Production, Retail Sales Shrink As 22 Million File For Unemployment BY CHAD MOUTRAY, PH.D. Economic indicators continue to decline sharply as the effects of COVID-19 continue to ripple across the United States.
• Manufacturing production fell sharply by 6.3 percent in March as firms grappled with the COVID-19 outbreak, including closures, reduced activity and significant supply and demand dis- ruptions globally. Durable and nondurable goods production decreased 9.1 percent and 3.2 per- cent in March, respectively, with all 19 major sec- tors experiencing declines.
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Chad Moutray
• On a year-over-year basis, manufacturing production has declined 6.6 percent. Manufacturing capacity utilization plummeted from 75.0 per- cent in February to 70.3 percent in March, the lowest rate since May 2010. Meanwhile, total industrial production decreased 5.4 percent in March, the largest monthly decline since January 1946. • The current outlook is for production in the sector to decline 12 per- cent between February and May before starting to rebound in June and beyond. However, the economic damage will take some time for manufacturing to fully recover from, with production down 6.5 percent in 2020. • The New York and Philadelphia Federal Reserve Banks reported sharp- ly reduced activity in their districts in April, with more than 70 percent of respondents in both reports noting decreased orders for the month. With that said, respondents in both reports felt cautiously optimistic for a rebound over the next six months. • With Americans under stay-at-home orders nationwide, retail sales plummeted 8.7 percent in March, the largest monthly decline since the series began in 1992. The extent of the decline in retail spending in March was mind-blowing, particularly in some sectors, but there were also some bright spots. Over the past 12 months, retail spending has declined 6.2 percent, but with motor vehicles and gasoline station sales excluded, retail sales eked out a 0.2 percent year-over-year gain. • New housing starts fell 22.3 percent in March, down from an annual- ized 1,564,000 units in February to 1,216,000 units, an eight-month low. Over the past 12 months, new housing starts have risen 1.4 percent, with single-family starts up 2.8 percent but multifamily activity down 1.6 percent since March 2019. Housing permits eased to the slowest rate since July, declining from 1,452,000 units at the annual rate in February to 1,353,000 units in March. • Nonetheless, builder confidence plummeted to the lowest level since June 2014 on worries that residential construction and sales will be severely impacted by the worsening in economic conditions due to the COVID-19 pandemic. New housing starts and permits will also likely move lower in April, perhaps closer to 1 million units at the annual rate, before hopefully rebounding in subsequent months. • There were 5,245,000 initial unemployment claims for the week end- ing April 11, building on the 6,615,000 claims added for the week end- ing April 4. These are unprecedented levels, suggesting that 22 million Americans filed for unemployment insurance in the past four weeks as the economic toll of the COVID-19 crisis takes hold. At the same time, continuing claims increased from 7,446,000 for the week ending CONTINUED ON PAGE 14
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April 27, 2020
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