U.S. retail sales and factory output posted historic declines in March, and other figures showed that the worst is yet to come.
The value of overall retail sales fell 8.7 per cent from the prior month, the biggest decline in records dating back to 1992, according to Commerce Department data released Wednesday. Federal Reserve figures showed U.S. factory output dropped in March by the most since 1946, just after World War II ended.
But surveys in April looked even worse, with manufacturing in New York state and sentiment among U.S. homebuilders plummeting by previously unthinkable amounts.
Coronavirus containment measures escalated quickly in the month as states began closing restaurants and bars to dine-in customers and urging residents to stay home. Now, almost every state has issued a stay-at-home order and many businesses have temporarily shuttered in the wake. The month was also defined by millions of layoffs, which have continued into April, and sharply reduced spending power.
One bright spot: Food and beverage stores posted a record 25.6 per cent surge as Americans stocked up on essential goods; sales also rose at health and personal care stores, general merchandise stores and nonstore retailers. But most categories were down sharply, with clothing stores’ sales falling by half, while restaurants and bars were down 26.5 per cent.
“When you shut an economy down, you’re basically turning the lights off. So aside from grocery stores and whatever they can get online, there’s really not much going on out there,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. “At some stage when the economy starts to reopen you’re going to get a bounce, but the bounce is not going to come anywhere close to replacing what was lost for a long, long time.”
U.S. stocks fell, while 10-year Treasury yields were lower and the dollar strengthened.
JPMorgan Chase & Co. said in a note that it continues to expect a 40 per cent annualized decline in gross domestic product in the second quarter.
What Bloomberg’s Economists Say
“March retail sales posted the worst decline on record, but there are compelling reasons to consider that the stunning collapse did not reflect the true extent of the pullback. The Census Bureau noted irregular reporting of results, as many businesses had either curtailed or ceased operations -- presumably those hardest hit were the least able to collate and report results.”
“While personal consumption may start to come back in the third quarter, a downturn in business investment will linger. The sector may not start to recover until the end of the year at best, according to our forecast.”
-- Carl Riccadonna, Yelena Shulyatyeva and Eliza Winger
Two surveys released Wednesday highlighted the effects of economic shutdowns. The New York Fed’s general business conditions index, covering manufacturers in the state, tumbled 56.7 points to minus 78.2, the lowest in records back to 2001.
U.S. homebuilder sentiment plunged in April to the lowest level in almost eight years as the pandemic kept potential buyers quarantined and paralyzed construction, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index.
“The March data is bad but the April data is likely to be even worse because for a good half of March, things were still open,” said Michael Gapen, chief U.S. economist at Barclays Plc.