{"id":1700,"date":"2020-04-15T11:35:13","date_gmt":"2020-04-15T15:35:13","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1700"},"modified":"2020-04-15T11:35:13","modified_gmt":"2020-04-15T15:35:13","slug":"march-retail-sales-industrial-production-april-home-builders-index-and-empire-state-manufacturing-survey","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1700","title":{"rendered":"March Retail Sales, Industrial Production, April Home Builders Index and Empire State Manufacturing Survey"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Retail Sales: -8.7%; Ex-Vehicles: -4.5%\/ IP:\n-5.4%; Manufacturing: -6.3%; Capacity Utilization (Man.): -4.7 points\/NAHB: -42\npoints\/Empire State: -56.7 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe decline in economic activity is\nbreathtaking.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The data are just starting to come for March\nand early April and they are even worse than expected.<\/em><\/strong>  Indeed, the declines were breathtaking.  Let\u2019s start with March retail sales, which\nwere down massively. <\/em><\/strong>Gasoline sales cratered, though some of that was\ndue to the decline in prices.  But the\nrest of the categories show how demand has shifted.  The declining categories:  Vehicles (-25.6%), furniture (-26.8%),\nelectronics (-15.1%), gasoline (-17.2%), Clothing (-50.5%), sporting goods\n(-23.3%), department stores (-19.7%) and restaurants (-26.5%).<\/em><\/strong>  Keep in mind, most of the closings were in\nthe second half of the month.  Not\nsurprisingly, supermarkets soared, posting a 26.9% rise.<\/em><\/strong>  Health care, building supply and online\nstores were up strongly, but those increases paled in comparison.   <\/p>\n\n\n\n

A closed economy means reduced production and every\nsingle industry posted a decline in output. \nThis was the third greatest decline on record, with the other two\noccurring during the post-WWII demobilization period.<\/em><\/strong>  The largest drop was in vehicles, as the\nassembly rate declined by over one-third. \nEight of the nineteen manufacturing industry groups were off by\ndouble-digits.  Capacity utilization also fell\noff the cliff, dropping by the largest amount on record.  <\/em><\/strong><\/p>\n\n\n\n

Moving into early April, the National Association of Home Builders index was down an amazing 42 points.<\/em><\/strong>\u00a0 It went from 72 to 30. Traffic largely disappeared.\u00a0 So much for the housing market.\u00a0 The New York Fed\u2019s Empire State Manufacturing Index disappeared from sight.<\/em><\/strong>\u00a0 That should not surprise anyone given that the New York metro area has been the epicenter of the pandemic.\u00a0 <\/p>\n\n\n\n

IMPLICATIONS:The economic numbers are coming in even worse than most economists expected.\u00a0 We really cannot wrap our minds around these enormous levels of changes, so it is hard to forecast the total collapse that we are starting to see.\u00a0 And the April numbers, which will reflect a whole month, are likely to be a lot worse.\u00a0 Which brings us to the equity markets.<\/em><\/strong>\u00a0 The spread of the virus may be easing, at least we hope. \u00a0New York looks like it is near or at the peak, but other areas are starting to heat up.\u00a0 Every state is now involved.\u00a0 Starting to open the economy in two weeks (May 1st<\/sup>) is hardly likely and when the economy does start to open, it is not going to happen quickly or easily.<\/em><\/strong>\u00a0 Yet investors have been exuberant the last three weeks.\u00a0 Is it rational or irrational?\u00a0 Where is Alan Greenspan when we need him? First quarter earnings are just starting to come in and for most firms they are gruesome.\u00a0 And that was with less than one month of a shutdown.\u00a0 What happens when we have two or even three months of restricted activity in a quarter followed by a slow, rolling reopening?<\/em><\/strong>\u00a0 It is hard to comprehend why businesses would invest in this type of economy.\u00a0 Businesses may start opening, but which ones?\u00a0 Without wide scale testing capacity, can we really open retail establishments that require social contact?\u00a0 The rest of the world is also going to slowly reopen and who knows when that will happen.\u00a0 And state and local governments are already starting to downsize as tax revenues are crashing.\u00a0 It is one thing to say that the government and the Fed are pouring trillions into the economy, but it is another to say that demand will recover to anywhere close to what it had been in February.<\/em><\/strong>\u00a0 And if it doesn\u2019t, firms will not see demand raise enough to keep the government funded workers, so layoffs and business closings could resume.\u00a0 Households will have used up some of the money they were given and if they don\u2019t have jobs (the unemployment rate could still be double-digits in July), spending will fade.\u00a0 And that could trigger a significant increase in loan losses and pressure on financial institutions.\u00a0 That is the prospect for the summer\/fall economy.\u00a0 And what if the reopening has a set back due to a resurgence in parts of the country, even if those relapses are minor?\u00a0 So, where are the profits going to come from? <\/em><\/strong>\u00a0I am just an economist, but I simply don\u2019t see what investors are seeing and to be honest, what other economists are saying is going to happen.\u00a0 I focus on the underlying factors that will drive future economic growth and earnings and while we will see an initial upturn once the economy reopens, the strength and length of that recovery is not clear at all.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Retail Sales: -8.7%; Ex-Vehicles: -4.5%\/ IP: -5.4%; Manufacturing: -6.3%; Capacity Utilization (Man.): -4.7 points\/NAHB: -42 points\/Empire State: -56.7 points IN A NUTSHELL:  \u201cThe decline in economic activity is breathtaking.\u201d WHAT IT MEANS:  The data are just starting to come for March and early April and they are even worse than expected.  Indeed, the … Continue reading March Retail Sales, Industrial Production, April Home Builders Index and Empire State Manufacturing Survey<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1700","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1700","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1700"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1700\/revisions"}],"predecessor-version":[{"id":1701,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1700\/revisions\/1701"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1700"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1700"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1700"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}