Attention is Beginning to Shift to When the Economy Can Reopen

By | April 20, 2020

Welcome to FTR’s “Monday Morning Coffee “ blog. The following article is designed to keep busy executives up to date with the latest economic data releases. Released every Monday, this blog promises to keep our clientele updated with the latest weekly economic news and developments, highlighting its impact on the transportation, freight, and equipment markets. Hopefully, this will be an informative addition to the fine body of work associated with FTR.


World stocks made a decent run toward a second straight week of gains on Friday after President Trump laid out plans to gradually reopen the coronavirus-hit U.S. economy. Reports that patients with severe COVID-19 symptoms had responded favorably to a drug made by a U.S. company Gilead Sciences helped Seoul and Tokyo rise 3%. Europe’s main markets also made a 3% gain, placing the pan-regional STOXX 600 up almost 8% in two weeks. And MCSI’s global index was up nearly 11%. The market continues to look past the present terrible economic data on anticipation of economies reopening. Data from China was bad, with the economy falling 6.8% from a year earlier. Retail sales fell more than expected, but industrial output only dipped slightly, suggesting the manufacturing sector is recovering more quickly.

U.S. stocks rose on Friday and posted gains for the week, boosted by a surge in Boeing shares, President Trump’s plans on reopening the economy and hopes of a potential drug by Gilead to treat COVID-19. Boeing shares soared nearly 15% on plans to restart commercial jet production in Washington State after halting operations last month due to the COVID-19 pandemic. The S&P is up nearly 30% from its March low, following a raft of global stimulus and hopes the spread of the virus is nearing a peak in the United States. However, the deep economic slump will likely affect financial markets in the near-term. The Dow Jones Industrial Average rose 704.81 points, or 2.99% to 24,242.49 and the S&P gained 75.01 points, or 2.68% to 2,874.56. For the week, the Dow rose 2.2% and the S&P 3%.

Economic data has started coming in from the early stages of the Great Shutdown and they are bad. 22 million people, or nearly 15% of the workforce have filed for unemployment insurance in the last four weeks. Retail sales, industrial production and homebuilder confidence all posted historic declines. Regional fed indexes point to even more pain in April. The only goods news was that the stimulus checks have started to arrive and the $349 billion in PPP loans was exhausted. A reload is likely.

Retail sales fell 8.7% in March, as a 26% surge in grocery stores sales was drowned out by big declines in auto sales, gasoline and about every other category. Even this fall is incomplete because retail sales don’t include hotel stays, airlines and movie ticket sales. This fall in consumption suggests a mild negative reading for the first quarter, but a disaster is following in the second quarter. Industrial production fell 5.4%, the worst decline since 1946 and the New York and Philly Fed indexes are pointing to a ISM reading of between 30 and 35. Housing starts fell 22% in March, despite decent activity for the first half of the month.

Luckily, some help has started arriving, in the form of $1,200 stimulus checks for millions of Americans. Small businesses have taped the fiscal spigot with gusto. The $349 billion Paycheck Protection Program has run dry. The White House wants to reload with another $250 billion. That is unlikely to be enough but some form of additional stimulus does seem likely. Attention is beginning to shift to when the economy can reopen. The reopening will likely be patchwork, with a region here and there opening some factories and then some nonessential businesses. There could be setbacks, if the disease reappears. The real question is the consumer and business confidence. Things will get back to normal only when people feel safe and it may take awhile before people gather in large groups.

Latest Data

The U.S. Economy:

Retail sales plunged in March as stores closed and stay-at-home orders impacted a growing number of consumers. Retail sales fell 8.7% after a revised 0.4% decline in February. It was the largest monthly decline in the data series that began in 1992 and beat the 3.9% decline during the Great Recession. Some of the declines were stunning magnitude. Specialty apparel store sales fell by more than 50%. Sales fell more than 25% at auto dealers, furniture stores and restaurants. Grocery store sales jumped more than 25%. Total sales were down 6.2% from a year earlier. Gasoline sales were down more than 18% due to both volumes and price. Near term relief does not look good. Sales will be disastrous in April and may only pick up a little in May as the economy starts to reopen. Millions of people have lost their jobs. The stimulus checks will help but it may take years for spending not fully heal.

Few parts of the U.S. economy have avoided the impact of COVID-19. Industrial production plunged 5.4% in March, more than during the Great Recession and the largest since 1946. Manufacturing fell 6.3% in March as autos and parts production plunged 28%. Excluding autos, manufacturing fell 4.5%, the third consecutive monthly decline. Utility output fell 3.9% in March Defense and space output fell 3.2%, while construction supplies dropped 5.8%. Total industrial production was down 5.5% from a year earlier. It is going to be a tough year for the industrial sector. Manufacturing was in recession before the impact of COVID-19 and is now in a deep downturn. April will be worse and May will be weak even if some nonessential businesses start to reopen. The global economy is in a deep recession and the trade-weighted dollar is strong. Global oil prices and demand as plunged. The road back will be slow but industrial activity will start to rebound in the second half of the year.

Inventory build stumbled again in February. Business stockpiles fell 0.4% in February, following a 0.8% contraction in January. Among categories, wholesalers were the weakest performers, falling 0.7% for the month. Retail contracted 0.3% and manufacturers slipped 0.4%. Business sales fell 0.5% in February after rising the same amount in January. The total business inventory-to-sales ratio fell to 1.37, unchanged month-to-month but down from 1.39 a year earlier. Inventories are high, another weight to future production as demand is falling sharply because of the impact of COVID-19.

COVID-19 is taking a toll on housing and it is unlikely to get any better in April. Housing starts fell 22.3% in March to an annual pace of 1.216 million. It was the largest monthly decline since 1984. Single-family starts fell from 1.037 million in February to 856,000. Multi-family starts fell 31.7% to 360,000. Housing permits fell 6.8% to 1.353 million. The single-family permits fell 12%, while the multi-family sector saw a 4.9% advance. Some of the decline in March may have been weather-related. Warm weather and low 8nterest rates spurred activity in January and February. The near-term future looks grim. With millions out of work, starts, and existing and new home sales will fall sharply. Activity will pick up in the second half of the year but the risks are heavily weighted to the downside. Reflecting the loss of confidence, the NAHB index fell from 72 to 30, the largest decline on record.


China’s economy contracted for the first time on record in the first quarter as the coronavirus shut down factories and shopping malls and put millions of people out of work. Real GDP fell 6.8% in the first quarter on a year-on-year basis. It was the first contraction in the world’s second largest economy since at least 1992, when official quarterly records were published. Providing some help was a smaller-than-expected fall in factory production n March, suggesting that the tax and credit relief was helping firms restart parts of the economy that were shutdown since February. On a quarter-on-quarter basis, real GDP fell 9.8% in the first quarter, compared to 1.5% growth in the quarter preceding. Weak consumption will be a problem going forward as disposable income adjusted for inflation fell 3.9% from a year earlier in the first quarter. Industrial output fell by a less0than-expected 1.1% in March from a year earlier. However, retail sales fell 15.8% and fixed asset investment dropped 16.1% in the January-March period. The People’s Bank has loosened monetary policy, but its easing has been well below efforts it took in 2009 that led to a large accumulation of debt. Many eyes are on China as a guide to the timing it takes for other countries to recover, including the U.S. and Europe. For 2020, China’s real GDP is expected to tumble to 2.5%, the weakest pace in half a century.

Important Data Releases This Week

March PPI will be released on Thursday, April 5 at 8:30 AM. Inflation is weak, slowed by lower energy prices and a general global weakness in industrial commodities. The PPI fell 0.6% in February.

March PPI will be released on Friday, April 6 at 8:30 AM. Headline consumer prices likely slowed in March, aided by falling energy prices. Inflation will be weak the next few months.

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Category: Monday Morning Coffee Tags: The EconomyEdit

About Steve Graham

Steve is one of the premier analysts in the transportation equipment industry. On a monthly basis Steve tracks and analyzes in detail the trailer and heavy-duty truck industry. Aside from following these two sectors he is also instrumental in helping our customers analyze the economy and its impact on transportation and transportation equipment.View all posts by Steve Graham →

Category: Monday Morning Coffee

About Steve Graham

Steve is one of the premier analysts in the transportation equipment industry. On a monthly basis Steve tracks and analyzes in detail the trailer and heavy-duty truck industry. Aside from following these two sectors he is also instrumental in helping our customers analyze the economy and its impact on transportation and transportation equipment.