Weekly Economic Update June 15, 2020

Brad StevensUncategorized

Father’s Day is coming this week end.  Over the years I have given and received some great gifts.  I have also heard of others who have reached beyond the cliché of socks and ties and done something very special.  Sometimes it is just something small that tugs at the heart strings, sometime it is the unusual and sometimes, it is just being there with Dad. If you dad is still with you, make it a special day.  If he has already passed, remember those special times when he was there and made a memory that brings a smile or a tear.

May numbers indicate that the US Economy experienced a .1% deflation in prices. This was primarily due to the drop in fuel prices, clothing and insurance.  Food prices were marginally up.  This is the third month in a row of deflation.  March was -.4%, April was -.8% and May was of course, -.1%.  With the energy markets approaching a balanced level we can expect June and July prices to rise slightly.  Inflation should be back to .1 to .3 range.  The producer price index, essentially inflation at the production point, bounced to .4% in May from a -1.3 in April.  This is a leading indicator that inflation is returning to normal, not excessive levels.

The next retailer to file for bankruptcy?  Likely the group that owns Men’s Warehouse, Tailored Brands.  They also operate Jos. A Bank.  While they have been hurt like others with the new paradigm shift in retail, they have also been impacted by the move to more casual work place wear.  The most recent nail in the coffin is the work from home move during the Covid crisis.  Who needs anything more than a tie and shirt to be on Zoom?  Many of the women’s clothing outlets have filed so it was about time that the men’s side caught up.

Lastly, here are five items that show optimism that the economy is starting to open up with likely a strong bias.  First is Apple Map direction requests.  After hitting lows of 50% below January numbers in April, the requests are now up nearly 25% over the number in January.  Restaurant bookings that flat lined in March, are now climbing.  As of last week they were 70% below February numbers and climbing rapidly.  Hotel occupancy that fell to 20% in April are now at 40%.  In February they reached a high of 60%.  People appear to be traveling more.  Air travel is showing a slight improvement.  The number of people going through TSA Lines in April were down 99% from a year ago.  Now they are down 80%.  A small sign but one that needs to be watched. Home purchases rose dramatically from May into June. Year over year change in home purchases had dropped to -35% in April.  They are now 15% above 2019 June levels.  That is dramatic.  Looks like there is a strong pent up demand in the economy.  I would say the third quarter is going to be one to watch.

Have a great week.

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