High-frequency economic data is showing that Covid-19 is already greatly impacting the US economy in the early, patchwork stages of lockdowns and social distancing, according to a weekly update from Deloitte global economists Ira Kalish and Mike Wolf.
Economic indicators are reported at a lag, so much of the data on economic activity predates most of the stringent shelter-in-place, social distancing, border closures, and lockdown measures put in place to combat Covid-19. As such, the economists at Deloitte sought out more timely and higher-frequency metrics to examine the magnitude of economic losses so far.
Jobless claims are reported weekly, and unemployment claims in the US have soared to an unprecedented 6.6 million this week, with 3.3 million filed the week before. Before last week, the previous record was 695,000 filings, in 1982.
Same-store retail sales jumped 9.1% for the week ending March 21, driven by stockpiling activity. Same-store sales figures, however, focus on larger chain stores which may have grocery offerings and be deemed essential services – and thus could obscure the losses of smaller retailers. US auto sales, meanwhile, fell 22% year-over-year for the week of March 22.
With other major economic data reported monthly, the Deloitte economists looked at some more unconventional data sources. There have been no bookings at restaurants that allow reservations through OpenTable since March 21, for example. On March 24, the US box office recorded its first-ever zero revenue reading, with most theatres (other than drive-ins) shut down, and many movie releases postponed. TSA traveler throughput was 89.5% YoY as of March 25, while usage of the Transit app (a proxy for public transportation demand) was down 71%.
Movement of goods is also struggling, with the Association of American Railroads reporting rail traffic decreasing 8.6% in the week of March 21 compared to last year, while intermodal volume decreased by 11.4%.
Mortgage applications for purchase, which indicate housing demand, fell 11%. Kalish expects residential investment to see a substantial decline following the slight recovery seen at the end of 2019.
The update also highlighted IHS Markit’s PMI index for March, which demonstrated a slowdown in major developed markets. Purchasing managers’ indices (PMIs) are forward-looking indicators that signal the direction of activity for the services and manufacturing sectors – based on output, new orders, export orders, employment, inventories, and sentiment, among other metrics. A PMI above 50 indicates growing activity.
March saw a stunning drop for services in the US and other markets, including the Eurozone, UK, and Japan, and a less severe drop for manufacturing. The US services PMI dropped from 49.1 in February to 39.1 in March, a record low – with Covid-19 restrictions rocking travel and hospitality. The manufacturing PMI fell from 50.7 to 49.2, which was still a 10-year low. The dip was linked to weak client demand, lost exports, or supply shortages.
Markit stated that the two PMIs are consistent with an annualized decline in GDP of 5%. The second quarter is expected to be worse, driven by wider and more severe lockdowns in the country as case levels and deaths climb.
The figures in the US were not as bad as the Eurozone, where the services PMI fell from 52.6 in February to 28.4 in March and the manufacturing PMI fell from 48.7 to 39.5. This is likely because of a slightly delayed response in US lockdowns, as well as a patchwork of restrictions based on state devolution of powers.