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Initial jobless claims in the United States are surging, and are likely to continue to climb:
Regional manufacturing reports are coming in well below expectations, which is not surprising:
China’s industrial production figures are illustrative (source CME Group): “Chinese industrial production fell 13.5 percent on the year for January and February combined, down sharply from growth of 6.9 percent in December. Production in the first two months of the year fell an unprecedented 26.63 percent compared with December levels after increasing 0.58 percent previously. Separate year-on-year data for January and February are not published because of the impact of differences in the timing of lunar new year holidays.”
U.S. PPI Declines in February Nationwide and in Scrap Materials The producer price index for final demand declined 0.6 percent in February 2020, on a seasonally adjusted basis, according to the Bureau of Labor’s latest PPI release. This basically reverses the 0.5 percent increase the previous month and 0.2 percent increase in December 2019. Most of February’s decrease is attributable to final demand for goods which fell 0.9 percent. Final demand for services dropped 0.3 percent.
Producer prices for iron and steel scrap and corrugated/paper scrap, reflected in Stage 1 intermediate demand, fell by a combined 1.6 percent in February 2020 following a 0.2 percent increase the previous month. The producer price index for Stage 1 intermediated demand goods decreased 2.5 percent in February 2020. From February 2019, this index declined 4.6 percent. See the table below for comparative scrap numbers.
Consumers’ Sentiment Down – University of Michigan The University of Michigan’s Consumer Sentiment Index has one of the most recent measures of consumers’ reactions to the coronavirus, and it is not favorable. March’s index of consumer sentiment fell 5 percent from February to 95.9. The index of consumer expectations fell 7.4 percent to 85.3.
The current business conditions index also fell, by 2.0 percent to 112.5. According to Richard Curtin, Survey of Consumers Chief Economist: “Consumer sentiment fell in early March due to the spreading coronavirus and the steep declines in stock prices. Importantly, the initial response to the pandemic has not generated the type of economic panic among consumers that was present in the runup to the Great Recession. Nonetheless, the data suggest that additional declines in confidence are still likely to occur as the spread of the virus continues to accelerate.”
Looking forward, the length of the curtailment of economic activity due to the coronavirus, along with the stimulus measures in response to the crisis, are two critical factors that will determine the depth of the downturn and speed of the recovery. Here’s the outlook from MacroBond on the expected impact on GDP under different time scenarios: