Retail Inventories Increase and Exports Plummet as Lockdown Stifles Demand

Economic Report Monitor #23
April 28th, 2020

Store Visit Conversions from Online Ads Drop 90% as Retail Businesses See Traffic Plummet

A few advance economic indicators came out today. The report, which is usually quiet, showed some movement should be expected in future March reports for international trade and wholesale/retail inventories:

• The trade deficit grew 7.2% in March according to an initial estimate. Exports fell -6.7% as the economy started its lockdown towards the end of the month. The largest decrease was in auto vehicles which dropped -17.8% as demand for durable goods dried up as seen in other reports. Industrial supplies, including petroleum and petroleum products, fell -7.5%. Food, feeds, and beverages, likely deemed essential, saw only a -0.1% drop. Imports of vehicles also saw a large drop at -9.0%. Foods, feeds, and beverage imports were unsurprisingly higher up 3.4%.
• Wholesale inventories saw a drop of -1.0% while retail inventories grew 0.9% in March. In a trend similar to the trade data, durable goods grew 0.1% for wholesalers and motor vehicles and parts inventories grew 5.1% for retailers as demand dried up. Nondurable goods inventories fell -2.6% for merchants as stockpiling had a significant effect.

Conference Board's report on consumer confidence came out for April, and documented a steep decline similar to the UMich report. The composite index fell from 118.8 to 86.5. The current business and labor market conditions reading fell at the largest pace ever, down -90.3 pts to 76.4. Also like the UMich report, consumer expectations were relatively resilient. The index measuring consumers' outlook actually increased 7 pts to 93.8. Employment readings were also weak with the number of respondents saying jobs are "plentiful" fell while the number of respondents claiming jobs are "hard to get" grew. The report confirms what many reports, surveying both manufacturers and consumers, are saying. The current conditions are some of the worse ever seen, but there is hope that things will return to normal within 6 months.

Speaking of manufacturers, the Richmond Federal Reserve released its April manufacturing activity survey with numbers comparable to other Fed PMIs. The composite index fell to -53, down 55 pts. Shipments and new orders were the worst categories at -70 and -61, a trend seen in the other reports. Inventories, both finished and raw, saw increases to 19 and 30. Employment fell with number of employees down to -21 and average workweek down to -28. This is another instance where a drop in time at work has been steeper than the number of people at work. This likely means businesses are trying to use furloughs as much as possible. Expectations were better with expected shipments and expected new orders both up to -7 and -14. Capital expenditures was down 26 pts to -15 while employment expectation readings were slightly higher than their current counterparts. The Richmond Fed report does show a bit more deflation in prices received compared to other reports. From February to April, the growth in prices received fell from 1.54% to 0.92% with expected prices received only slightly higher at 1.04%.