All Posts Tagged: manufacturing

An Unprecedented Drop in Retail Sales and Manufacturing

Scott Anderson
Chief Economist

Another week and more records shattered, and not the good kind.

It is hard to believe but April retail sales were even worse than our already below consensus forecast for April. Retail sales dropped off a cliff last month, plunging 16.4% after dropping 8.3% in March.

The March decline broke records last month and April’s sales declines were nearly twice as bad for retailers.

These numbers are bad enough to push the 3-month average to a -35.7% and total retail sales are now down 21.6% from a year ago.

On a brighter note, we anticipate April retail sales will at least prove to be a near-term low point for retailers as more of them reopen in May. However, it will be a long way back to normal for most, and many won’t make it. More store and restaurant closures and bankruptcies are ahead.

There are a few positives in April’s retail sales report to note. Non-store retailers managed a gain last month with sales rising another 8.4%, building on March’s 4.9% increase. Motor vehicle sales dropped a smaller 12.4% in April after plunging 25.7% in March as some vehicle buyers took advantage of big discounts and lower financing costs.

Even so, the only way to describe April’s retail sales performance is a consumer spending depression.

Clothing, electronics, and furniture store sales all dropped 59% or more in April. Eating and drinking establishments saw another 29.5% decline in sales after plunging 29.7% in March. Even categories that did well in March like general merchandise stores and grocery stores saw sales drop last month, down 20.8% and 13.1% respectively.

The optimists in the room will latch on to this morning’s preliminary May reading of the University of Michigan Sentiment Index, which unexpectedly showed a modest improvement over April to 73.7 from 71.8. Some consumers appear to be responding positively to their virus relief payments, big discounts on big-ticket items like vehicles, and lower interest rates thanks to the Fed’s emergency measures. A robust stock market rebound off of the March lows certainty didn’t hurt either.

Improved consumer confidence in May, along with more retail and restaurant businesses opening their doors, will help drive at least a temporary improvement in retail sales and consumer spending this month. Consumers’ view of current conditions improved 8.7 points in early May to 83. However, the future expectations index continued to deteriorate, dropping another 2.4 points to 67.7, hitting its lowest level since 2013.

Even so, economists will likely have to take a second look at their Q2 real consumer spending and GDP forecasts and make another downward revision, based on this morning’s retail sales data.

Industrial production also dropped the most it ever has in one month in April on records dating back to 1919. Industrial production plunged 11.2% with manufacturing production dropping 13.7%.

Transportation, apparel, printing, textiles, furniture, and primary metals were some of the hardest hit manufacturing sectors last month.

Some recovery is coming in the months ahead. Indeed given the magnitude of the declines in retail sales and manufacturing in April, there is nowhere left to go but up on a sequential basis. However, if one looks at the level of activity in the economy, May and June will remain anything but normal.

To learn more, check out this week’s U.S. Outlook

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Only the Tip of the Iceberg

Scott Anderson
Chief Economist

The March employment report was shockingly bad. Seven hundred and one thousand jobs lost last month – more than 7 times higher than economists’ consensus forecast.

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January’s Employment Gains Solid

Scott Anderson
Chief Economist

The January payroll report was a solid report across most metrics.

The headline nonfarm payroll gain of 225k jobs last month handily beat analysts’ forecasts looking for a gain of 165k jobs in January. U.S. nonfarm payroll growth was 1.8% on an annualized basis last month.

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U.S. Outlook: Signs Still Point to Slower Growth Ahead

Scott Anderson
Chief Economist

The U.S. consumer is increasingly looking tired, and retail sales growth is on a clear downtrend.

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U.S. Outlook: October Payrolls – Data Revisions Steal the Show

Scott Anderson
Chief Economist

The U.S. labor market is slowing, just not as quickly as we all thought before the release of the October payrolls report. Despite the substantial headwinds of the GM strike and escalation of the trade war in September, U.S. nonfarm employment managed to increase a better than expected 128k jobs last month.

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