US Economy and Credit Markets Ended May 15, 2020

Bob Carey
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US Economy and Credit Markets Ended May 15, 2020

Posted Under: Weekly Market Commentary

In the middle of last week Federal Reserve Chairman Jerome Powell said the central bank was not considering employing negative interest rates to combat slowing economic conditions. And the data last week did indicate that COVID is wrecking havoc with US economic activity. Last Tuesday witnessed a decline in the Consumer Price Index of 0.8% for April. Energy prices declined 10.1% in April, while food prices rose 1.5%. The "core" CPI, which excludes food and energy, declined 0.4% in April, versus a consensus expected -0.2%. Core prices are up 1.4% versus a year ago. The April decline was the largest since March of 2008. The best news in the report was the rise of hourly earnings which were up 5.6% in April. However, this was largely the result of the lowest wage jobs experiencing layoffs. The Producer Price Index also registered a decline in April. The plunge in energy prices drove the index down 1.3%. The bad news continued through Friday of last week as April retail sales declined 16.4% and industrial production was down 11.2%. Retail sales were down nearly 22% from the year before. Sales at restaurants & bars fell 29.5% general merchandise stores were down 20.8%, sales at food & beverage stores fell 13.1%, Gas station sales dropped 28.8%, non-store retailers (internet and mail-order) were up 8.4% in April and up 21.6% from a year ago. These sales now account for 19.4% of overall retail sales, an all-time record. "Core" sales, which exclude the most volatile categories of autos, building materials, and gas station sales, declined 17.2% in April and are down 17.6% from a year ago. Overall sales are down 21.6% from a year ago. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Tuesday: April Housing Starts (950K, 1216K); Wednesday: May 15 MBA Mortgage Applications (N/A, 0.3%); Thursday: May 16 Initial Jobless Claims (2,425K, 2,981K), May preliminary Markit US Manufacturing PMI (38.0, 36.1), April Leading Index (-5.7%, -6.7%) and April Existing Home Sales (4.30M, 5.27M).

Posted on Monday, May 18, 2020 @ 8:14 AM • Post Link	Share:
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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