Weekly Economic Update June 22, 2020

Brad StevensUncategorized

The Summer of 2020 will be known for not having the many town festivals that were always a joy added to the warm weather.  It seemed like every town has some sort of celebration, Foley Fun Days, Hopkins Raspberry Festival, Spud Days in Big Lake, Smelt Fry in Brooklyn Center, what part of the nation does not have a Founders Day or Pioneer Days?  It just is not Summer without Marching Bands in a parade, carnival rides that make you cough up all the cotton candy and hot dogs you should not have eaten before going on the rides.  Overall I cringe to think how much of my allowance money was spent on rides and games at these fairs, but oh the memories.

So how fast will the economy recover?  That is a big question.  From all indications we should be back to where we were in January by early Fall.  As we start the third quarter next week, the middle of the second quarter numbers show the strength of the comeback.  Retail sales increased 17.7% in May over April numbers.  Auto sales were also strong in May.  Without auto sales, the retail number was 12.4% growth.  The incentives along with adequate supplies on the lots allowed for deals to be made.  With inventory numbers on lots down, the manufacturing sector should show a strong restart in June to rebuild the numbers. 

Industrial production grew 1.4% over April numbers.  April was of course down dramatically.  Manufacturing production was also up a strong 3.8% over April after plummeting 15.5% from the March number.  Capacity Utilization in May was 64.8% which rose by .8% from April.  Still low, but it turned around and is back on the upswing.  Many companies I talk to are doing well with new orders in June pouring in.  The issue is again finding workers who are trained and want to work.  Until the sunset on the extra $600 per month for unemployment compensation occurs, many are finding it more of an incentive to wait than take a job. 

The housing market is also jumping.  The number of new housing starts continue rise.  Construction is in full bloom in many areas.  With rates low and existing houses still at a premium, new starts are the only way some are able to purchase a house.  Sadly, in talking to realtors, there is already a flood of inquiries of those in the inner city looking to leave, heading out to the suburbs or further.  The civil unrest over the past month was the final straw for many.  Without readily available grocery stores or other needed services along with the fear, realized or not, of personal safety, there appears to be the start of a new exodus.

Lastly, the Fed Manufacturing indexes.  Philadelphia came in at 27.5 against the April number of negative 43.1.  New York which had dropped by 48.5 in May is only .2 negative here in June.  The ISM manufacturing report that is due on July 1 should be very strong bouncing back to pre-covid numbers of 50 or above and showing the start of manufacturing expansion.

Take Care, have a great last week of the second quarter, may is pass and never be seen again.

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