Regional Fed manufacturing indexes average in April is recessionary; services on the cusp

 

 - by New Deal democrat

This month the economic surveys by the five regional Feds which conduct them - New York, Philly, Richmond, Kansas City, and Dallas - have assumed additional importance as among the likely first warnings of impacts from T—-p’s trade wars. 

This morning the last manufacturing survey for the month, from Dallas, was released, and declined sharply. Below is the April update of the new orders component of all five:

• Empire State up +6.1 to -8.8
• Philly down -42.3 to -34.2
• Richmond down -9 to -13
• Kansas City up +1 to -11
• *Dallas down -19.9 to -20.0
• Month-over-month rolling average: down -18 from +1 to -17

Some other observers have also been keeping track of these surveys. Here’s a graph of the above new orders indexes including all of them except for this morning’s update from Dallas:

The average now is as bad as it was at its worst at the end of 2022. 

I’ve also been keeping track of the same regional Feds’ non-manufacturing service sector surveys. Dallas will not report until tomorrow. Here are the other four:

• Empire State down -0.5 to -19.8
• Philly up +1.3 to +6.9
• Richmond down -16 to -30
• Kansas City up +3 to +3
• 
  

The average for service so far this month is -7. Here is a similar graph of those surveys:

Again, the average is about where it was at its worst in 2022. But then global supply chain pressures were easing post-COVID; now they are almost certainly rapidly worsening. 

In general the regional average for the Fed surveys is more volatile than the corresponding ISM index, but usually correctly forecasts its month-over-month direction. Last month I closed my report on the average of the two ISM surveys with the comment that

“For March alone, the economically weighted headline average was 50.4, but the new orders weighted average fell into contraction at 49.1. The three month economically weighted average for the manufacturing and non-manufacturing indexes combined is 51.8 for the headline, and 50.9 for new orders.

“Because it is only one month in the new orders component that has fallen below 50, we aren’t quite in the yellow caution zone yet. But if next month’s readings duplicate this month’s, the new orders component will give at very merit the yellow caution flag.”

The regional Fed reports suggest that yellow caution flag is very likely to be hoisted when the April reports come out. And in case you haven’t seen this elsewhere, here is what is coming with trans-Pacific contained shipping to the West Coast:

We could be in a recession in a month.

Coronavirus dashboard: five years on

 

 - by New Deal democrat



Covd-19 has now been with us for over five years. The first reliable statistics started to be kept at the end of March 2020. On Friday the CDC issued the final update for deaths ending the week of March 29, 2025, which means we now have five full years of documentation. So this is a good time to take a look back, and to update where we stand.

To cut to the chase, it appears the original Omicron variant was a watershed. All variants that have come and gone since then have been descended from that one.Between widespread, probably near universal infections from that line over the past three years, and vaccinations targeted at that variant line, it very much looks like the virus is now facing a wall of resistance.

Here is the CDC’s wastewater particle graph. This graph started at the time Omicron was rampant, so it only covers the last 3+ years:

You can see that Covid particles in wastewater have never gotten close to their Omicron levels, and there has been a general decline over the past year.

Even more significant is what has happened to deaths. Here is the full five year long weekly chart of deaths:

Basically, there was an awful first two years, followed by a sharp and continuing decline thereafter.

Here is the same chart, but just for the last three years (note difference in scale):

Even confined to just this time period, the pattern of ever decreasing fatalities is clear.

Not only have deaths declined, but they have declined by far more than can be explained simply by the prevalence of the virus in circulation. Below I show particles per milliliter for each significant peak beginning with Omicron (1st column), deaths in thousands (second column), and number of fatalities per virus particle (3rd column):

12/21 24.6. 21.3. 866

6/22. 10.5. 3.4. 324

12/22. 11.3. 3.9. 345

12/23. 14.0. 2.6. 186

6/24. 9.0. 1.4. 156

12/24. 5.5. 1.0. 182

On a per particle basis, lethality declined by more than half in 2022, and then by about another half from the end of 2023 on. This is due to a combination of better treatments for the disease, more and repeated vaccinations, and nearly universal exposure with resulting varying levels of resistance.

To drive the point home, here is the number of deaths for each 52 week period beginning April 1 of each of the past five years:

4/1/20-3/31/21 504,000

4/1/21-3/31/22 433,000

4/1/22-3/31/23 128,000

4/1/23-3/31/24 64,500

4/1/24-3/31/25 36,400. 

One year ago I closed this update with the following:

“Finally, how does this compare with the flu? Well, the typical flue season gives rise to about 35,000 deaths +/-10,000. So even at 64,000 COVID is presently the equivalent of a very bad flu season. If the trends of the past several years continue, then in 1 or 2 years we will be down in the vicinity of 35,000 deaths per year.”

And here we are, one year later, extremely close to that 35,000 benchmark. Covid has become like a second flu. If this trend continues for another year, we could be down to about 20,000 deaths. 

Infectious disease modeler JP Weiland recently wrote that for another significant outbreak, a new line of variants not descended from the original Omicron would probably have to develop. Let’s keep our fingers crossed that it does not happen.

Weekly Indicators for April 21- 25 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

Another important indicator - corporate profits - tipped into negative territory this week, as Q1 profits look to be substantially below those of Q4 of last year. On the other hand, real money supply from the Fed has tipped back into positive territory.

As per most of my posts in the past few weeks, the real crux of the matter at present is whether producer and consumer durable goods spending, and consumer spending in general, turn negative. So far they have not.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a penny or two for my efforts.

March existing home sales continued the slow process of rebalancing in the housing market

 - by New Deal democrat

Existing home sales are not that important for forecasting purposes, since they have much less economic impact than new home sales, because the main effect is simply a change in ownership. But there has been an ongoing shortage of housing for over a decade, which was only exacerbated by the pandemic. So I mainly look at this data for evidence of a rebalancing of the market.

And in March there was further evidence of that rebalancing.

Like new home sales, existing home sales have been rangebound for the past 2 years, in reaction to mortgage rates remaining in the 6%-7% range. In February they were near the top of that range at 4.26 million annualized. In March they retreated towards the bottom of that range, at 4.07 million, so the rangebound trend continued:

But as indicated above, the main issue has been a chronic lack of inventory. As shown in the graph below, this trend has been going on for at least 10 years, well predating the pandemic. Unlike sales, this series is not seasonally adjusted, so it must be looked at YoY. In March inventory continued its slow climb from its 2022 Covid lows, at 1.330 million units, a 19.8% increase, and the highest March reading since 2020:

Nevertheless inventory remains well below its pre-2014 levels (not shown), which typically were in the 1.7 million to 1.9 million range, which means that the shortage still exists.

This shortage is still creating upward pricing pressure, but that pressure is abating somewhat. Like prices, this data is not seasonally adjusted and so must be looked at YoY. Here is what the last 10 years look like:

In the immediate aftermath of the pandemic in 2021-22, prices increased as much as 15% or more YoY. After the Fed started its sharp hiking regimen, prices briefly turned negative YoY in early 2023, with a YoY low of -3.0% in May of that year. Thereafter comparisons accelerated almost relentlessly to a YoY peak of 5.8% in May of 2024, before decelerating to 2.9% in September.

Here are the comparisons since:

October 4.0%

November 4.7%

December 6.0%

January 4.8%

February 3.6%

In March this deceleration continued, with a YoY% gain of 2.7%, the lowest such gain since September 2023.

This is good news, but as indicated above pricing pressures will remain until the shortage of inventory is resolved.

The bottom line is that existing home sales continued the slow rebalancing of the housing market. Next week we will see if the repeat sales indexes buttress this evidence.

More front-running in March, for durable goods orders; but more manufacturing contraction in April

 

 - by New Deal democrat



This morning we got more hard data on manufacturing, one from March, one for this month.

In March new durable goods orders (blue in the graph below) soared higher by 9.2% to an all-time high. This was all about front-running tariffs, because excepting motor vehicles they were unchanged (not shown). Meanwhile core capital goods orders (red, right scale) increased only 0.1%, -0.2% below their January peak:

Since this pulled orders forward from future months, there must inevitably be a giveback in the months ahead. But this does tell us that Q1 was not negative for manufacturing at least.

Meanwhile the Kansas City Fed reported on manufacturing in its district for this month declined slightly further into contractionary territory again, at -4:

Note that this is still above its average reading for the past several years.

The new orders subindex rose +1 to a still very contractionary -11.

The average for the four regional Feds reporting manufacturing so far is -13. For new orders the average is -17. Needless to say, this is consistent with a recession in the manufacturing sector.

The Kansas City Fed will update its general business conditions survey, that includes services, tomorrow.

Jobless claims remain well behaved

 

 - by New Deal democrat

Jobless claims remained well behaved last week, as they increased 6,000 to 222,000. The four week moving average declined -750 to 220,250. With the typical one week delay, continuing claims declined -37,000 to 1.841 million, at the low end of its range over the past 10 months:

As usual, the YoY% changes are more important for forecasting. There, initial claims were up 6.2%, the four week average up 3.0%, and continuing claims up 4.0%:

These are all consistent with a slowly expanding economy.

Since initial claims lead the unemployment rate by several months, here’s our updated look at that, including initial plus continuing claims:

There is no indication of upward pressure on the unemployment rate in the next several months.

Finally, although I won’t bother with a graph this week, after several days being negative YoY, for the past week the stock market has rebounded to higher YoY, finishing yesterday up +6.0%. Thus the “quick and dirty” recession forecasting model indicates continuing expansion for now.

And now, for some decent economic news: new home sales steady, prices slowly deflating

 

 - by New Deal democrat

In ordinary times, new home sales are important because while they are very noisy and heavily revised, they are the most leading of all housing metrics. They remain important even presently because they can tell us about the underlying upward or downward pressure on the economy going forward one year or more. 

By way of background, remember that housing responds first and foremost to mortgage rates, and since those have been rangebound generally in the 6% - 7% range for 2.5 years, so have new home sales in the range of 611,000-741,000.

In March, new home sales increased 7.4% from a slightly downwardly revised February, to 724,000 units annualized, continuing the rangebound behavior. As per usual, the below graph compares with with single family permits (red, right scale), which lag slightly but are much less noisy:

.

Both demonstrate the recent range bound behavior. 

Over the same 2.5 year period of time, prices at first stalled, and then began a very slow deflation. This continued last month, as on a non-seasonally adjusted basis, the median price of a new single family home declined -7,900 to 403,600, with the exception of last November the lowest price in three years:

Although I won’t bother with a graph this month, on a YoY basis, the median price of a new home is continued to decline, down -7.5%.

Builders are much more able to respond to market pressures, and - tariffs aside for the moment - this continues to make new homes relatively much more attractive than the constricted existing homes market, with its continuing upward price pressure.

Finally, recessions have in the past happened after not just sales decline, but the inventory of new homes for sale - which also consistently lag - also decline (as builders pull back:

So it is good news that last month’s slight downward tick was revised away, and the inventory of new homes for sale rose 3,000 to a new 17 year high of 503,000 annualized:

Because manufacturing has been flat to declining in the past three years, construction has been important in the continued expansion of the economy. This month’s report tells us that while new home construction is not increasing significantly, it is not meaningfully decreasing either, and is not showing any sign of any imminent recession.