Economic Data Roundup (07/08/2020)

7/8/20 8:00 AM

As early as April we argued that economic activity in this country had likely already bottomed, and the incoming data since then have generally supported this viewpoint. Additional evidence that the worst is behind us can be found in the recently-released reports on business activity from IHS Markit and the Institute for Supply Management (ISM). For example, Markit’s purchasing managers’ index (PMI) for the U.S. manufacturing sector jumped to 49.8 in June, the largest gain on record and helped by sharp increases in output, new orders, and employment. Markit’s service-sector PMI also stabilized last month, and comparable gauges from ISM signaled an even greater improvement in June.


Although the broad rebound is encouraging it is important to remember that these particular metrics are diffusion indexes, meaning that all they can really tell us is how the proportion of managers who believe business conditions are getting better compares to the proportion that feels conditions are deteriorating. Seeing some gauges above 50 therefore does not necessarily mean that overall activity is back to pre-pandemic levels but simply that conditions in general are no longer getting worse. However, this is still a very important first step on the road to a full recovery. Markit’s Chris Williamson similarly added that “The record rise in new orders, coupled with low inventory holdings, bodes well for a further improvement in production momentum in July. A record upturn in business sentiment about the year ahead likewise hints that business spending and employment will start to revive,” but also cautioned that “while the PMI currently points to a strong v-shaped recovery, concerns have risen that momentum could be lost if rising numbers of virus infections lead to renewed restrictions and cause demand to weaken again.” Below are highlighted comments from business managers in the June ISM surveys:

Goods-Producing Firms
  • “While we are seeing signs of an uptick in business activity, it is a slow recovery at this point.” (Chemical Products)
  • “Difficulty keeping up with a significant increase in demand related to COVID-19. Industry is up 62.5 percent versus [a] year ago. Supply challenges throughout the supply chain. Supply could be hindered if another wave of COVID-19 hits in the fall.” (Food, Beverage & Tobacco Products)
  • “Market demand for refined products has increased as statewide quarantines have been lifted, but it is still below normal volumes.” (Petroleum & Coal Products)
  • “We are seeing an increase in orders as the economy starts to get rolling again. Slow and steady, sales are increasing. So far, so good.” (Primary Metals)
  • “Demand is down significantly due to COVID-19 but is starting to stabilize. We are hopeful for recovery in the second half of the year.” (Miscellaneous Manufacturing)
  • “The building industry continues to defy expectations, as we continue to rebound stronger from the previous month. Being an essential business across most states and a surge in DIY projects has fueled the industry forward. While the industry will follow the greater economy, we do believe it will be more resilient than most due to potential migration from larger cities and an undersupplied housing market.” (Wood Products)

Service-Providing Firms

  • “Surprising recovery to sales volume over the past four weeks.” (Agriculture, Forestry, Fishing & Hunting)
  • “Sales have picked up tremendously. Sporadic supply issues. Biggest concern for us is lumber shortages.” (Construction)
  • “We continue to all work from home globally. Strict restriction on travel and external events. Senior management focusing on a plan for returning to the office.” (Finance & Insurance)
  • “COVID-19 and the riots have disrupted the normal flow of business. There is no new normal yet.” (Real Estate, Rental & Leasing)
  • “Advertisers are starting to place more advertisements and the media business is turning around. Generally, we are at the end of the employee furloughs and layoffs. Our work efforts have been focused on navigating COVID-19. We are now shifting to value-add projects. We are cautiously optimistic, although as we get closer to the presidential election, we are on guard of unprecedented civil and social unrest.” (Information)



Sources: Econoday, IHS Markit, ISM

Post author: Charles Couch