Dallas Manufacturing Dives in March

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Economic Report Monitor #4
March 30th, 2020

A new week opens as March closes out with almost 130,000 world cases more than market close on Friday. As infection rates maintain pace, Italy and Spain surpass China in total cases and have the two highest death rates per million. Economic policy responses continue to be introduced as economic data reveals the first bits of damage.


The second Federal Reserve March manufacturing survey reported dire numbers this morning with a drop in the production index equivalent to 2008. Only 0.4% of respondents described general business activity as improving while over 70% described it as worsening. This is the lowest reading ever. New orders and shipments were crushed as well as manufacturing appears to have halted. Finished goods inventories appearv relatively stable though with the measure coming in at -6.5. Employment fell sharply to -23.0, but was mostly stable as 71.8% of respondents citing no change. Employment is likely to lag production and order numbers as businesses will try and hold out as long as possible. Six months ahead, companies were still pessimistic, but the readings were not as bad as the current conditions. What's troubling is that the data has dropped quickly to 2008 levels without warning. People will be looking to see if data bottoms or stabilizes instead of declines past 2008 conditions. Manufacturers continued to cite COVID-19 as a concern as well as low oil prices.

Pending home sales in February was the only other economic report on the day. The overall index was up 2.4% as housing activity continued as normal in the month leading up to the COVID-19 outbreak hitting the US. Annually, the index is up strongly at 9.4%. The National Association of Realtors' chief economist Lawrence Yum sees a healthy housing market experiencing an abrupt interruption in the upcoming months. He surmises that real estate "may get a V-shaped robust recovery later in the year.” However, with general wealth related to the stock market likely to be down sharply for the year, homebuyers might find it tough to feel financially secure.

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