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Look forward at June 15, 2020 week: Consumers may be spending a bit more on big ticket purchases

A look forward to the June 15 week includes the numbers on retail and food sales in May. It is possible that consumers’ reluctance and/or inability to spend on anything except essentials will be less sever in the month’s numbers. The level of motor vehicles sales was up noticeably in May, albeit to a still relatively soft 12.2 million units. Gasoline prices were trending higher and people were on the move more, so that should lift the dollar value of sales at service stations. Fewer restrictions on public interactions and aggressive efforts to shift to providing take-out service should help improve sales at restaurants. Mild spring weather and boredom while stuck at home may have encouraged sales at building and gardening supply centers. If consumers were interested in buying nonessentials, a lot of that will go to nonstore retailers rather than brick-and-mortar locations.

The data on industrial production and capacity utilization should show that conditions remained generally weak although the worst of the declines should be past after the decreases of 11.2% and 4.5% in April and March, respectively. There could be some pick up in isolated industries. However, many businesses will be cautious and rely on current inventories and only place new orders cautiously.

The first of the monthly surveys of manufacturing for June will be the New York Fed’s Empire State Survey at 8:30 ET on Monday and the Philadelphia Fed’s Manufacturing Business Outlook at 8:30 ET on Thursday. Their respective general business conditions indexes for May showed a big improvement although the level remained one of deep contraction after massive declines in April. Conditions should add back a little more activity in June even as the recession in the factory sector remains solidly in place.

The June New York Fed Business Leaders Survey at 8:30 ET on Tuesday is the first of the District Bank surveys for the service sector. The business activity index is expected to be better than the deeply contractionary readings of April and May while remaining consistent with an ongoing recession for non-manufacturing businesses.

The NAHB/Wells Fargo Housing Market Index for June at 10:00 ET on Tuesday may build on the 7 point increase to 37 in May. While the housing market has suffered during the COVID-19 pandemic from efforts to limit the spread, it has shown surprising resilience. Sellers are finding ways to show homes for sale and buyers are anxious to capture historically low mortgage rates while they are still available. Builders paused on projects in April while sorting out funding and appropriate protocols to keep workers healthy. However, it looks like new homes will still find buyers and suddenly there are more qualified workers to hire to get projects completed as well adequate credit to fund them.

The May data on housing starts and permits issued are expected to reverse some of the decline in April. Again, while some workers have been taken out of the housing market by job losses, apparently there are enough who have kept their jobs who want to buy while rates make homebuying more affordable and housing stock is a little more available.

Initial jobless claims for the week ended June 13 may confirm at levels of new filings are easing further while remaining skyhigh in the historical context. What may be more interesting is if continuing claims start to see more people rolling off if businesses are recalling laid off workers with the reopening of some economic activity.

State unemployment and payrolls in May at 10:00 ET on Friday will be more than usually interesting as it highlights where the COVID-19 pandemic response has had its greatest impact on the labor market. The whole country is affected but some parts more than others.

The current account balance for the first quarter 2020 at 8:30 ET on Friday will expand what is known about trade in goods and services by adding in remittances abroad. These are likely to be down from the prior quarter as many workers lost working hours in March and had less to send home in other countries.
This won’t have much to add to filling in the assumptions for the third estimate of first quarter GDP when those numbers are released at 8:30 ET on Thursday, June 25. Data on business inventories will update the advance numbers for retailers in April. This should not change estimates for GDP much. If anything in the week does, it will be the revisions to retail sales.

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