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ISM Non-Manufacturing Index (NMI)
The economic index based on surveys of more than 400 non-manufacturing (or services) firms’ purchasing and supply executives undertaken by the Institute of Supply Management was released last Monday.
The NMI registered at 57.1 percent in June, compared to a May reading of 45.4 percent, an 11.7% increase, representing growth in non-manufacturing after two months of contraction. Among the industries that saw the most growth: Agriculture, Forestry, Fishing & Hunting, and Accommodation & Food Services. One respondent said “we are at the end of employee furloughs and layoffs. Our work efforts have been focused on navigating COVID-19. We are now shifting to value-add projects.” In April the index suffered its largest one-month decline of 10.7%.
Job Openings
The Labor Department released its Jobs Openings and Labor Turnover Survey (JOLTS) report for May on Tuesday (it lags the nonfarm payrolls release by one month).
Hires, which are newly hired employees and rehired employees, increased by 2.44 million to 6.5 million in May. The industries seeing the greatest rise were Accommodation & Food Services, Health Care and Social Assistance and Construction. These industries also the greatest rises in job openings, whose total increased to 5.4 million from 5 million. The job openings rate, however, remains significantly below pre-pandemic levels.
In a bit of good news, “separations, which include quits, layoffs, and discharges, decreased by 5.8 million to 4.1 million, the largest decline in history.” As a Business Insider article states, the May data “suggest that even if workers start to search more intensely, they have fewer job opportunities.”
Bureau of Labor Statistics
Consumer Credit
Borrowing fell at a slower 5.3% annual pace in May after registering a historically low rate of 20% in April. Yet another piece of evidence that consumers cut back on spending during the onset of the pandemic but have gradually regained their confidence as businesses reopen and the government continues to provide support to prop up the economy.
Jobless Claims
New unemployment claims fell by 99,000 to 1.3 million for the week ended July 4th. This is about four and a half times pre-pandemic levels, but it is also about a fifth of the mid-March figure of 6.9 million, which means this metric has been gradually improving. Meanwhile “continuing claims fell by about 700,000 to 18.1 million, its lowest reading since April 18,” indicating that a growing number of people are going back to work and less firms are laying off their employees. However this is still a little over 10 times the pre-pandemic figure of 1.7 million.
Federal Reserve Economic Data (FRED)
Wholesale Inventories
The US Department of Commerce release a report on Thursday showing a 1.2% decrease from April to May as “many businesses operated on a limited capacity or ceased operations completely” due to covid-19. According to Fox Business, “goods imports dropped in May to their lowest level since July 2010 as the coronavirus crisis suppressed demand and upended global trade.”
Producer Price Index
“The wholesale cost of US goods and services fell in June reflecting depressed demand in retail and other major parts of the economy caused by the coronavirus pandemic…most companies have had to cut prices to drum up sales as reluctant customers worried about the pandemic hoarder their cash. ”
Obviously demand dried up as a result of the pandemic, and with so many people out of work, businesses are not making any new major capital expenditures while the pandemic persists, which is why we’re seeing slight deflation despite the Fed lending massive amounts of money and keeping interest rates at zero. And of course, our favorite topic…
Stocks
All three indices were positive for the second consecutive week. The 10-year Treasury note fell to 0.571% Thursday evening as Asian stocks sold off but later climbed to 0.633% as US equities gained. Gold surpassed the $1,800 mark, while energy prices lagged. Shares of Carnival gained after they announced they would reduce their fleet, while “BioNTech, a German biotech firm that has joined with Pfizer to develop a coronavirus vaccine, rallied after its chief executive said early data for its vaccine was promising and it could seek regulatory approval by the end of the year. Meanwhile the Chinese stock market posted a 2% decline after climbing 16.5% in eight straight sessions. This comes as the National Council for Social Security Fund unloaded stocks and state media stressed the importance of long-term investment, presumably expecting a significant draw-down sometime in the future.
Monday - Federal Budget
Tuesday - Consumer Price Index; Core CPI
Wednesday - Import Price Index
Thursday - Initial and Continuing Jobless Claims; Retail Sales; Business Inventories; NAHB Home Builders’ Index
Friday - Consumer Sentiment Index