Economy

Economic Data Roundup (09/02/2020)

9/2/20 8:00 AM

Recently we have highlighted how surveyed business leaders in both the goods-producing and service-providing industries have expressed a marked improvement in overall sentiment compared to March and April when the lockdowns were in full effect and pandemic-related uncertainty was at its peak. “Hard” data on actual output are encouragingly starting to confirm the uptick in optimism. For example, a report from the U.S. Census Bureau released last week showed that orders for U.S.-manufactured durable goods (items meant to last at least three years) jumped 11.2 percent in July, and the less volatile “core” metric also climbed by more than anticipated. Both gauges are still down on a year-over-year basis but it is clear that activity is starting to turn a corner. Further, orders for nondefense capital goods excluding aircraft, i.e. core capital expenditures, an important proxy for U.S. business investment, also exceeded forecasts in July and is now nearly back to unchanged levels versus this same period last year.

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The work-from-home shift is showing up in the data as well, with orders for computers and communications equipment that facilitate life in a socially distant world growing at an annualized rate of 3.8 percent during the past three months. As for the service sector, updated OpenTable data confirm that more Americans feel comfortable dining out, and restaurant traffic is even starting to surpass the June peak in many second-wave “hot spot” states. Skeptics may point to stagnating hotel occupancy data but this is probably more a reflection of the summer travel season winding down. Looking ahead, updated survey data released this week suggest that the recovery has continued in August. IHS Markit’s purchasing managers’ index (PMI) for the U.S. manufacturing sector, for instance, rose to 53.1 last month, the strongest print since January 2019. ISM’s manufacturing index similarly jumped to 56.0 in August, the best reading in more than a year and a half. There also appears to have been a notable uptick in order backlogs recently that should encourage many firms to take on more staff. If such trends are confirmed by tomorrow’s release of the Markit and ISM service sector data then this will bode well for Friday’s big nonfarm payrolls report from the U.S. Labor Department. Highlighted comments from business managers in the August ISM survey can be found below:

  • “Business is very good. Production cannot keep up with demand. Some upstream supply chains are starting to have issues with raw material and/or transportation availability.” (Chemical Products)
  • “Current sales to domestic markets are substantially stronger than forecasted. We expected a recession, but it did not turn out that way. Retail and trade customer markets are very strong and driving shortages in raw material suppliers, increasing supplier orders.” (Fabricated Metal Products)
  • “Homebuilder business continues to be robust, with month-over-month gains continuing since May. Business remains favorable and will only be held back by supply issues across the entire industry.” (Wood Products)
  • “We are seeing solid month-over-month order improvement in all manufacturing sectors such as electrical, auto and industrial goods. Looking to add a few factory operators.” (Plastics & Rubber Products)
  • “Rolling production forecasts are increasing each week compared to prior forecast.” (Primary Metals)
  • “Strong demand from existing and new customers for our products, stable-to-decreasing input costs for our operations, and record numbers of new business opportunities from prospective customers’ reshoring measures. All trends continuing from the first quarter of fiscal year 2017.” (Electrical Equipment, Appliances & Components)
  • “Capital equipment new orders have slowed again. Quoting is active. Many customers waiting for the fourth quarter to make any commitments.” (Machinery)
  • “We are starting to see parts of our business rebound in August, while other parts remained weak. Some of our export business has come back for the first time since the start of COVID-19; however, domestic portfolios remain mixed.” (Paper Products)

 


 

Sources: Econoday, U.S. DoC, Wells Fargo, OpenTable, IHS Markit, ISM

Post author: Charles Couch

Disclosures