Economic Data Roundup (06/03/2020)

6/3/20 8:00 AM

More evidence that the second quarter will mark the trough in economic activity can be found in the various business surveys released for the month of May. For example, the Institute for Supply Management’s (ISM’s) manufacturing index rose to 43.1 last month, and a similar gauge from IHS Markit climbed to 39.8 in May. Every regional gauge of manufacturing activity from the Federal Reserve released recently also signaled an improvement in May (see below). However, all of the above-mentioned indicators are still at historically weak levels, and basically every index remaining below 50 implies continued contraction in overall activity across the country. Put simply, although conditions continued to deteriorate in May the rate of deterioration has at least started to slow. This is an important first step before activity stops contracting and resumes expanding.


If the lifting of the lockdowns continues to go well then more substantial improvements should be seen in these and other real-time metrics over the next few months. The pace of the recovery, though, also depends heavily on how quickly customer demand rebounds, and Markit’s researchers cautioned that “There remains a high risk that any recovery will be frustratingly slow as ongoing social distancing measures, high unemployment, job insecurity and damaged balance sheets constrain consumer and business spending. The recovery will of course also fade quickly if virus infections start to rise again. For now, however, we focus on the good news that we may be past the worst in terms of the economic decline.” Most manufacturers in the ISM survey also expressed cautious optimism about the future, while one respondent in the machinery industry even said his firm is now “looking at what really needs to be [made] in China.” This rethinking of supply chains and a potential onshoring of more goods and services could be a big post-pandemic theme both here in America and in other developed nations. Below are a few more highlighted comments from the ISM survey:

  • “Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & Electronic Products)
  • “We see an issue with suppliers that are affecting production. At the same time, social distancing measures in [the] manufacturing plant and customer demand are impacting the rate of production.” (Transportation Equipment)
  • "Increased COVID-19 sales in the food business has really stressed our production capabilities.” (Food, Beverage & Tobacco Products)
  • “Fuel sales demand are beginning to rebound in May as stay-at-home orders are lifted across the country.” (Petroleum & Coal Products)
  • “Business activity remains strong for consumable applications and very weak in durable segments.” (Plastics & Rubber Products)
  • “We see a lot of positive signs, despite what's going on. People seem to continue to be building and looking to projects for fall of 2020 and beyond. There is good optimism out there.” (Nonmetallic Mineral Products)



Sources: Econoday, IHS Markit, ISM, FRBSL

Post author: Charles Couch