- Initial jobless claims hit 40 million for 10 weeks.
- Consumer spending falls; saving hits a record.
- Consumers believe it is a good time to buy a vehicle.
The peak in daily new COVID-19 cases was five weeks ago, and case growth generally continues to be on a declining trend for the U.S. overall, but some markets are still seeing growth. Testing is also growing.
Some markets are seeing more cases reported as a function of outbreaks but also as a function of big increases in testing. More businesses are opening up, which is producing increases in economic activity. Auto sales have been recovering strongly, but Memorial Day was a tough comp.
Jobless claims rise: The damage to the economy can be seen in declining pending home sales and consumer spending in April and continued growth in unemployment. Over the past 10 weeks (through May 22), 40.7 million Americans have applied for unemployment compensation. However, the number remaining on continuing claims fell by 3.8 million last week.
Consumer sentiment improves: Consumer sentiment improved last week, and consumers believe it is a good time to buy a vehicle. The number planning to buy has almost recovered. Auto sales and Cox Automotive’s leading indicators show that we ended May on a positive trend even though Memorial Day weekend was a slight setback.
The final reading on Consumer Sentiment in May from the University of Michigan fell mid-month but closed up for the full month. The most notable concern from the data was that half of respondents expect “bad financial times over the next five years.”
Vehicle sales improve: Last week has resumed a positive recovery trend in vehicle sales. We estimate that new-vehicle sales through last Thursday are down 28% year over year. Used-vehicle sales are up 6% year over year.
Consumer spending plummets: Consumer spending in total declined 13.6% in April with big declines in durable goods, non-durable goods, and services, but spending on durable goods like vehicles declined the most. The spending decline in April was the largest in the history of the data back to 1959.
Personal income soars: Personal income increased 10.5%, the largest increase in income in history. Beneath the income jump, wages and salaries fell 8%, but government payments skyrocketed. The decline in spending combined with the increase in government payments led to a big increase in the personal savings rate, by far the highest savings rate in the history of the data.
Home sales up: The new home sales SAAR increased, outperforming consensus expectations of a decline. The pace of new home sales is now down from a year ago. Unlike new home sales, the pending home sales index for April declined the most since the data series started in 2001, suggesting that possible weakness in existing home sales in May even with new home sales picking up and mortgage rates falling to all-time lows. However, mortgage purchase applications are now higher year over year. As lockdowns eased and pandemic fears lessened in May, housing seems to have bottomed in April.
Check back tomorrow for a video that will include updated data.