{"id":1722,"date":"2020-05-05T14:58:10","date_gmt":"2020-05-05T18:58:10","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1722"},"modified":"2020-05-05T14:59:11","modified_gmt":"2020-05-05T18:59:11","slug":"1722","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1722","title":{"rendered":"INDICATOR: April NonManufacturing Activity and March Trade Deficit"},"content":{"rendered":"\n

NAROFF ECONOMICS,\nLLC<\/em><\/strong><\/p>\n\n\n\n

Joel L. Naroff<\/strong><\/p>\n\n\n\n

President and\nChief Economist<\/strong><\/p>\n\n\n\n

215-497-9050<\/strong><\/p>\n\n\n\n

joel@naroffeconomics.com<\/strong><\/p>\n\n\n\n

INDICATOR:<\/strong>  April NonManufacturing Activity\nand March Trade Deficit<\/strong><\/p>\n\n\n\n

KEY DATA:<\/strong>  ISM (NonManufacturing): -10.7 points;\nActivity: -22 points; Orders: -20 points; Employment: -17 points\/ Trade\nDeficit: $4.6 billion wider; Exports: -9.6%; Imports: -6.2%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cDeclining world economic activity hit the\nU.S. hard in March, but the empire will likely strike back in April, when\ndomestic activity shut down.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  It wasn\u2019t just the industrial portion of the\neconomy that shut down in March and into April. \nNon-Manufacturing also cratered.  The\nInstitute for Supply Management\u2019s index dropped to its lowest level in eleven\nyears,<\/em><\/strong> as all the key sub-indices, business activity, orders and\nemployment, flat lined.  With\norder books thinning, conditions are likely to worsen over the next few months,\ndespite the beginnings of the economy reopening.<\/em><\/strong>  <\/p>\n\n\n\n

The COVID-19 pandemic is a global economic disaster\nand we can see that in the trade data. \nIn March, U.S. imports fell sharply, led by massive declines in consumer\ngoods and vehicles.<\/em><\/strong>  With the economy operating for\nhalf the month, demand for foreign capital goods, industrial products and food were\nup.  But with the rest of the world, especially\nChina, having already moved into shut down mode, our exports fell even more.<\/em><\/strong>  Every major category, including food, was\ndown. As for the situation with China, the March deficit was down 43% from\nMarch 2019.  <\/em><\/strong>That may change over\ntime, but at least the outflow of income to China has slowed for a while. With\nexports falling more than imports, there was a major widening in the trade\ndeficit.<\/em><\/strong>  It looks like the\ninitial reading on the trade deficit that was in the first quarter GDP report\nmay have been a little light and we could see growth revised downward.  Looking forward, with businesses shuttered\nand consumers hunkered down, look for our imports to disappear in the next\ntrade report and the deficit to narrow.  <\/em><\/strong>That\nhas been the typical pattern when we go into recession.  <\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  We\nare already beginning to see the depths of the downturn that we are in and the\nmost distressing April numbers have not even come out.  While there is some reopening, it is\nhappening in fits and starts and is unevenly distributed across the\ncountry.  If you thought that it would be\nquick and easy, think again.<\/em><\/strong>  This\nis going to be a very long process that should stretch through the summer.  And that assumes no major resurgence in the\nnumber of new cases and deaths.  That is\nhardly assured, if you believe the scientists \u2013 which I do.  You also have to factor in the reduction in\ngovernment welfare payments to households and businesses, the likelihood of\ngrowing numbers of bankruptcies and simple fear on the part of consumers and\nworkers in returning to what we call more normal lives.  Friday we get the April employment report\nand it could show the largest decline in employment in the history of the\ncountry \u2013 something in the range of 22 million. \nThe unemployment rate should rise above 15%.<\/em><\/strong>  I have it more like 18.5%, but it may take us\na month or more to peak.  Regardless, the\nhole has been dug and we have to figure out how to fill it in.  <\/em><\/strong>Given it is the size of the Grand\nCanyon, as I keep saying, it will be a long time before we get back to the\nemployment level we had in February and an even longer period before we see an\nunemployment rate near 5%, let alone the 3.5% rate we had two months ago.  I am not trying to be negative, just\nrealistic.  Hope for the best but plan\nfor the more likely and that is \u201cu\u201d not a \u201cV\u201d-shaped recovery. <\/p>\n","protected":false},"excerpt":{"rendered":"

NAROFF ECONOMICS, LLC Joel L. Naroff President and Chief Economist 215-497-9050 joel@naroffeconomics.com INDICATOR:  April NonManufacturing Activity and March Trade Deficit KEY DATA:  ISM (NonManufacturing): -10.7 points; Activity: -22 points; Orders: -20 points; Employment: -17 points\/ Trade Deficit: $4.6 billion wider; Exports: -9.6%; Imports: -6.2% IN A NUTSHELL:  \u201cDeclining world economic activity hit the U.S. hard … Continue reading INDICATOR: April NonManufacturing Activity and March Trade Deficit<\/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-1722","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1722","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=1722"}],"version-history":[{"count":2,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1722\/revisions"}],"predecessor-version":[{"id":1724,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1722\/revisions\/1724"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}