Measures of industrial and retail activity for the US collapsed in April, reflecting the deep economic effects of nationwide coronavirus lockdowns and millions of job losses.
Friday’s data comes in the wake of unemployment figures that laid bare the historic hit to the once-strong labour market. The figures also confirm that the longest expansion on record for the world’s largest economy has effectively come to an end.
“The coronavirus-induced recession has caused significant damage to the economy that the easing of social distancing measures alone won’t fix,” Oren Klachkin at Oxford Economics said.
“Looking ahead, significantly weaker demand, lower oil prices, supply chain disruptions, tighter financial conditions and persistently elevated uncertainty will severely constrain the recovery from the current recession. We forecast that industrial output losses will not be recovered until late-2021.”
Industrial production, led by a severe contraction among manufacturers, tumbled 11.2 per cent in April, after a 4.5 per cent drop the previous month, data from the Federal Reserve on Friday showed.
That was the biggest monthly drop in the history of the data series, which tracks output from factories, mines and utilities, stretching back to the start of 1919. The fall was only slightly better than the 11.5 per cent drop economists surveyed by Refinitiv expected.
At the same time, headline US retail sales, a measure of sales in shops and restaurants, tumbled 16.4 per cent to $403.9bn in April, according to data from the commerce department — far worse than the 12 per cent drop economists had forecast.
It was the biggest decline since collection of the data began in 1992, and deeper than the 8.7 per cent decline in March, as the effects of stay-at-home orders swept across the country in April.
The data illustrate how badly conventional retailers have been affected by the lockdowns, even as online retailers such as Amazon benefited.
Between February and April, spending at clothing and accessories stores plunged nearly 90 per cent. Over the same period, sales at non-store retailers — which include online vendors — rose about 21 per cent.
The panic-buying that had seen consumers flock to grocery stores in March eased in April, with sales falling 13.2 per cent from the previous month.
There were some faint signs of hope, however. A survey of manufacturers in New York showed that general business conditions deteriorated last month, but a slower pace than in March
Meanwhile, an index of consumer sentiment tracked by the University of Michigan rose about two points to 73.7 in May, defying expectations of a decline.
Economists said April’s retail sales report might mark the nadir for the sector, and spending in coming months should be helped as states begin gradually reopening their economies — a process that senior health officials warn is not without health risks.
Over the past 10 years, retail sales have accounted for about 42 per cent of consumer spending, which itself comprises about 70 per cent of US GDP, according to James Knightley, chief international economist at ING.
“Given the 23 per cent cumulative fall in retail sales over the last two months this alone is enough to knock more than 6 percentage points off the level of nominal GDP,” he said.
Although stay-at-home orders are being eased, any rebound in retail “is likely to be limited by social distancing restricting the number of people on the premises, consumer caution regarding the virus and the hit to consumer demand caused by tens of millions of people having lost their job,” Mr Knightley noted.
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Source: Economy - ft.com
