{"id":1741,"date":"2020-05-26T12:39:32","date_gmt":"2020-05-26T16:39:32","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1741"},"modified":"2020-05-26T12:39:32","modified_gmt":"2020-05-26T16:39:32","slug":"may-consumer-confidence-and-philadelphia-fed-nonmanufacturing-index-april-new-home-sales-and-national-activity","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1741","title":{"rendered":"May Consumer Confidence and Philadelphia Fed NonManufacturing Index, April New Home Sales and National Activity"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Confidence: +0.9 point, Phil. Fed (NonMan.):\n+41.1 points\/ Home Sales: +0.6%\/ CFNAI: -11.8 points  <\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe free fall started to stabilize in May, but\nthe economy is in a really deep hole.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  We expected April to be the cruelest\neconomic data month and it was.  In\ncontrast, the May and June data should start to tell us the extent to which\nconditions have stabilized or maybe even turned.<\/em><\/strong>  One critical measure is consumer confidence\nand in May, the Conference Board\u2019s Index rose a touch, which was good to see.<\/em><\/strong>  However, the current conditions index\ncontinued its decline, though that drop was modest.  There was a slightly larger increase in\nexpectations, which was expected given that the economy did start to reopen\nduring the survey period.  While it was\nnice to see that the overall confidence index is no longer collapsing, it was\ndisturbing to see that the percent of respondents saying that\nbusiness conditions were bad rose fairly solidly and is now over fifty percent.<\/em><\/strong><\/p>\n\n\n\n

The May Philadelphia Fed\u2019s NonManufacturing Index\nrose sharply.  But don\u2019t look at that\ngain as being good.  The level of the\nindex was coming off of record lows and remains in deep recession mode. <\/em><\/strong> Also, this is a diffusion index, which does not measure\nlevels, only relative changes.<\/em><\/strong>  In\nApril, manufacturing crashed and burned. \nIn May, the conflagration continued. \n<\/p>\n\n\n\n

The good news today was that new home sales actually\nincreased.  That was totally unexpected.<\/em><\/strong>  Even though many states allowed construction\nto continue, it was expected that sales contracts would drop. Demand\nwas up in three of the four regions with only the West reporting a\ndecline.  The other eye-opener in the\nreport was the 8.6% drop in prices.<\/em><\/strong> \nIt is hard to really know whether this represents builders having \u201cfire\u201d\nsales (pardon the pun) or just a shift toward lower priced homes, but the\ndecline was quite large.  <\/p>\n\n\n\n

The Chicago Fed\u2019s National Activity Index plunged in\nApril.  This is a very broad measure as\nit includes eighty-five indicators and it signaled that the downturn was spread\nacross the entire economy. <\/em><\/strong> That should\nnot surprise anyone, but it will take a lot just to get us back to expansion\nmode from deep recession mode. <\/p>\n\n\n\n

IMPLICATIONS:<\/strong> It was good to see that consumer\nconfidence has stabilized.  <\/em><\/strong>Given\nthat every state is now starting to reopen, the outlook for the future should\nimprove solidly in the months to come.  At\nleast for the next few months, it is the measures of current conditions that\nmay matter more. <\/em><\/strong> If\nthey start improving significantly, it would be a sign that households are\nready to spend money.  Modest\nimprovements, though, would be warnings that consumption may not surge and that\nwould mean a more tepid recovery.<\/em><\/strong> \nMeanwhile, investors are more focused on vaccine issues than the\neconomic data.  Anytime hopes for a\nvaccine being found by year\u2019s end rise, the markets soar.  But as I have noted, it could take up to two\nyears to get back to where we were at the end of 2020.  That should factor into earnings potential,\nsince one assumes that the level of activity has something to do with the level\nof potential earnings.  Yet the S&P\nis back to late October 2019 levels, when investors were factoring in decent\ngrowth this year.  (It is also back to\nearly March, but that was when the markets were collapsing.)  So, does earnings growth or do earnings\nlevels matter?  Ask investors. I\u2019m just\nan economist who teaches corporate finance and theory and practice don\u2019t seem\nto be in synch to me.  Also,\npart of today\u2019s rally is likely due to Dr. Fauci saying last week:  \u201cI think it is conceivable, if we don\u2019t run\ninto things that are, as they say, unanticipated setbacks, that we could have a\nvaccine that we could be beginning to deploy at the end of this calendar year,\nDecember 2020, or into January, 2021\u201d.  Man,\nhe sounds just like an economist, hedging his forecast in every way possible.\nLet\u2019s hope he is close to being right.   \n <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Confidence: +0.9 point, Phil. Fed (NonMan.): +41.1 points\/ Home Sales: +0.6%\/ CFNAI: -11.8 points  IN A NUTSHELL:  \u201cThe free fall started to stabilize in May, but the economy is in a really deep hole.\u201d WHAT IT MEANS:  We expected April to be the cruelest economic data month and it was.  In contrast, the … Continue reading May Consumer Confidence and Philadelphia Fed NonManufacturing Index, April New Home Sales and National Activity<\/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":[3],"tags":[],"class_list":["post-1741","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1741","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=1741"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1741\/revisions"}],"predecessor-version":[{"id":1742,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1741\/revisions\/1742"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}