{"id":1763,"date":"2020-06-16T11:42:03","date_gmt":"2020-06-16T15:42:03","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1763"},"modified":"2020-06-16T11:42:03","modified_gmt":"2020-06-16T15:42:03","slug":"may-retail-sales-and-industrial-production-and-june-home-builders-index","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1763","title":{"rendered":"May Retail Sales and Industrial Production and June Home Builders Index"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Sales: 17.7%; Ex-Vehicles: +12.4%\/ IP: +1.4%;\nManufacturing: +3.8%\/ NAHB: +21 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe reopening is creating massive increases\nin activity and that should continue in June and maybe even in July.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The economy shut down in March and April, so\nwhen it started to reopen, it was expected that all the indicators would\nrebound sharply.  Well, just as we had\nhistoric declines in the previous month, we now have historic increases.  Retail sales soared in May, led by a rebound\nin vehicle purchases and demand for clothing.<\/em><\/strong>  The clothing number is a clear example of the\nvolatility of the data.  In April,\nclothing purchases largely disappeared. \nThe level was less than one-third the lowest on record, which dates back\nto 1992.  May was up 188% from April\u2019s\nhistoric low.  That looks amazing, but it\nis still down 63% from the February 2020 number.  So be cautious in thinking that happy days\nare here again.  We still have a long way to go\nbefore we start seeing numbers anywhere near what we had been recording.  Still, this was very good report.  Every component of sales rose and it was good\nto see restaurant demand pick up.  <\/em><\/strong>Of\ncourse, the food services component was still off nearly 40% over the year.<\/p>\n\n\n\n

Industrial production was up solidly in May as well,\nmirroring the reopening of the economy. \nManufacturing activity jumped, though much of that came from the\nreopening of vehicle assembly plants that had been idled.<\/em><\/strong>  In April, almost no vehicles were built.  In May, they were at a 2.7 million annualized\npace.  To put that in perspective, nearly\neleven million vehicles were assembled in 2019. \nStill, the sector is ramping up and that is key.  The paper products industry actually cut\nproduction for the fourth consecutive month. \n<\/em><\/strong>If you were wondering why the stores remain empty, that tells\nyou everything.  Why the sector hasn\u2019t\nrecovered is anyone\u2019s guess.<\/p>\n\n\n\n

Housing is coming back as well.  The National Association of Home Builders\u2019\nindex surged in early June, with all components up massively.  The index is actually back to where it was in\n2016 and is not that much below where it was a year ago.<\/em><\/strong>  That is the comparison we have to look for:\nHow far have we come back to more normal levels.  The housing industry is not there yet, but\ncertain components are getting there. \nThe housing starts and sales numbers for May and June will be\ntelling.   <\/p>\n\n\n\n

IMPLICATIONS:<\/strong> The economy is recovering, but\nwhen you start at historic lows and you reopen, that should not surprise\nanyone.  The issue over the next two or\nthree months will not be how big a gain we get, but how close we get to the end\nof 2019 levels.<\/em><\/strong>  The strong\nretail and production numbers should lead to some improvement in second quarter\nforecasts.  I don\u2019t expect to see too\nmany forty percent declines and estimates in the thirties may start to\ndisappear.  The latest Blue Chip\nconsensus for the second quarter was -35.7%.  I started at -22% two months ago and reduced\nthat decline to -18% last week.  I am\nsticking with it, though it is pretty close to the lowest decline in the\nforecast panels.  Keep in mind, if we get\nsomething in the 20% to 25% range and the reopenings continue to accelerate,\nthen the third quarter growth rate would be a lot lower than people currently\nthink. The Blue Chip estimate is +17.2%. \nI am at +6%, so I am a true outlier. \nStill, the real issue is how long it takes to get back to where we were\nwhen the virus shut things down.  Even\nthe optimistic Blue Chip numbers, GDP doesn\u2019t recover until near the end of\n2021.  I don\u2019t have it fully recovering\nuntil spring 2022.  What I am saying is\nthat we\nknew the second quarter would be horrible and the third quarter would be\ngreat.  But it is the fourth quarter and\n2021 that really matter and it is hard to forecast those growth rates because\nwe will not know the extent of the damage until the end of this year.<\/em><\/strong>  So, enjoy the great data that we will be\ngetting for the next two to three months, but also wait to see what things look\nlike at the end of the year before getting too bulled up about 2021.    <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Sales: 17.7%; Ex-Vehicles: +12.4%\/ IP: +1.4%; Manufacturing: +3.8%\/ NAHB: +21 points IN A NUTSHELL:  \u201cThe reopening is creating massive increases in activity and that should continue in June and maybe even in July.\u201d WHAT IT MEANS:  The economy shut down in March and April, so when it started to reopen, it was expected … Continue reading May Retail Sales and Industrial Production and June Home Builders Index<\/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-1763","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1763","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=1763"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1763\/revisions"}],"predecessor-version":[{"id":1764,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1763\/revisions\/1764"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}