Retail, Factory Data Show Fainter U.S. Economic Pulse Pre-Virus
Uninspiring retail sales and factory output in February show a fainter pulse for the U.S. economy even before coronavirus
(Bloomberg) -- Uninspiring retail sales and factory output in February show a fainter pulse for the U.S. economy even before growing supply-and-demand disruptions brought on by the rapidly spreading coronavirus.
Purchases at the nation’s retailers slid 0.5%, the most since the end of 2018, as sales declined in nine of 13 retail categories, Commerce Department figures showed Tuesday. Output at manufacturers barely rose as idled Boeing Co. 737 Max production continued to weigh on the industry, according to Federal Reserve data.
While March figures will likely include Americans’ rush to grocery stores to stock up on food as government officials urge social distancing, an increasing number of retail establishment closings indicate a substantial cutback in consumption is well under way. Until recently, consumer spending has been the economy’s chief source of fuel. Such demand destruction and economic stoppage explains now-elevated recession risks.
February sales in the “control group” subset, which some analysts view as a more reliable gauge of underlying consumer demand, were little changed, compared with projections for a 0.4% gain, the Commerce data showed. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
One bright spot was a 0.7% increase in non-store retail sales, the biggest advance since August. Amazon.com Inc. stands to win big as the virus threatens brick-and-mortar retailers. The pandemic has led even more Americans to order household essentials online instead of going to crowded stores. Amazon said it will hire 100,000 people and give workers a $2-an-hour raise to meet crushing demand.
Meantime, conditions will almost certainly weaken further for U.S. producers, already beset by reduced corporate capital investment and slumping export markets. Production of business equipment dropped in February for a third straight month, the Fed’s industrial output report showed.
With recession odds growing by the day, global financial markets remain volatile. U.S. stocks failed to bounce back much from Wall Street’s worst day since 1987, Treasuries slipped and stresses appeared in the short-term funding and front-edit credit markets. While the Fed has slashed its benchmark interest rate to near zero and attempted to alleviate poor credit conditions, lawmakers have been slow to respond.
Read More: Mnuchin to Ask Congress for $850 Billion Stimulus Package
A separate report Tuesday showed homebuilder sentiment declined to a four-month low as sales expectations dimmed despite the recent plunge in mortgage rates. The National Association of Home Builders/Wells Fargo Housing Market Index slipped to 72 from 74 in February. Some 21% of builders reported some supply disruption due to virus concerns in other countries such as China, Robert Dietz, NAHB’s chief economist, said in a statement.
©2020 Bloomberg L.P.