Key Takeaways
- Real-time data suggests that U.S. economic activity has hit a speed bump as COVID-19 cases remain elevated. Positively, the pace of vaccinations doubled--to an average of about 1 million doses per day last week, compared with a low point of 500,000 per day in late July.
- Mobility rates across most parts of the U.S. have softened as people became more reluctant to visit restaurants and take trips.
- Weekly consumer confidence readings have stabilized at their August lows. Same-store retail sales grew by 16.6% year over year, somewhat lower than their 17.9% peak the week of July 2.
- The manufacturing and service industries reportedly saw relatively faster deliveries of supplies at lower prices. While positive, the indicators we track largely remain largely above pre-pandemic levels, indicating that supply constraints have not disappeared.
| Summary Of Indicators | |
|---|---|
| Indicator | How the data looks |
| Virus and mobility | |
| COVID-19 cases | Daily new cases (seven-day moving average) have likely peaked, with an 8% drop this week compared with the previous week, though it is to early to make a trend. Hospitalizations have remained elevated in recent weeks. |
| Google mobility | Mobility in the U.S. has stabilized since May as all states have fully reopened. However, in recent weeks mobility of retail and recreation nudged down a bit (3-4 percentage points), largely because of a surge in COVID-19 cases and perhaps some seasonal factors. |
| People-facing COVID-19-sensitive | |
| Open Table | Seated dinners booking at restaurants remain 7% above the comparable period in 2019 as of Sept. 7, reflecting persistent improvement in food services activities. |
| Air traffic | Air traffic data suggests that demand for domestic travel dropped in the first week of September as the summer travel season is fading and children return to school. Higher COVID-19 cases may also be a factor. |
| Hotel occupancy | In response to the recent surge in new COVID-19 cases and drop in air traffic as the summer season ends, the hotel occupancy rate declined to 61% (as of Aug. 28) from its peak of 71% (on July 31). |
| Current and future activity | |
| Home mortgage applications | The Mortgage Purchase Index was weak, as housing prices remained very high, discouraging prospective buyers from the housing market. |
| Business applications | Business applications for the week ended Aug. 28 were 7.6% above the 2019 average but declined from their peak in January and continued to approach their pre-pandemic level. |
| Johnson Redbook Index | For the week ended Aug. 27, the same-store sales index increased by 16% on a year-over-year basis (four-week moving average) and continued to be elevated as consumer demand remained strong. |
| Consumer confidence | University of Michigan consumer sentiment fell to a 10-year low in August, on the surging delta variant and higher inflation. August Conference Board consumer confidence fell to its lowest level since February. The weekly Ipsos-Forbes Consumer Confidence Index improved slightly the first week of September after falling to a 23-week low the week of Aug. 8. |
| Prices | |
| Lumber futures | Lumber futures prices remained low compared with their record high in May. There was a slight pickup in lumber prices this month, partly because of Hurricane Ida, which disrupted communication in some parts of the country. |
| Industrial Metal Price Index | Industrial Metal Price Index is currently 37% above its 2019 average owing to a surge in demand for industrial metals as manufacturing activity continued to expand. Further, global supply chain constraints pushed freight charges higher, which, in turn, led to a surge in metal prices. |
| Baltic Dry index | The Baltic Dry Index continued to decline to its lowest since mid-August, as demand eased across all vessel segments. This partly reflects the ease in supply chain bottlenecks that the global economy has been facing. |
| ISM Manufacturing PMI, supplier deliveries | Suppliers deliveries to manufacturing firms cooled in August to 69.5 (the lowest level since January) from 72.5 in July, signaling ease in supplier delivery. |
| Forward inflation expectations | Inflation expectations have drifted down by 6 bps for the 10-year forward and 4 bps for the five-year forward. Inflation expectations are up 20 bps and 40 bps, respectively, year to date. They remain 17 bps and 18 bps below their respective highs year to date. |
| Labor market | |
| Initial jobless claims/continuing claims | Despite the surging delta variant, claims have trended lower since mid-July. Jobless claims fell to a new pandemic low of 310,000 last week. |
| Indeed job postings | Bureau of Labor Statistics U.S. job openings reached a record high in July. Indeed job postings on Sept. 3 were 40% above the pre-pandemic baseline, reaching an all-time high. |
Real-time data suggests that U.S. economic activity has hit a speed bump as total COVID-19 cases continue to climb higher amid bottlenecks across the supply chain. Fortunately, the rate of new infections has slowed in September. The silver lining may be that some people formerly reluctant about getting vaccinated have decided to get vaccinated, either because of worries about the new variant or because of new vaccination requirements for certain activities. In the U.S., the pace of COVID-19 vaccinations doubled--to an average of about 1 million doses per day last week, compared with a low point of 500,000 per day in late July.
Mobility rates have cooled across most parts of the U.S., in part because of the surge in COVID-19 cases and the end of the summer (see table). Google community trends for retail and recreation slipped to -7, after reaching -2 in early August. In major cities across the U.S., streets were less crowded in August. More people ate at restaurants the week of Sept. 6 (compared with the 2019 baseline), according to our real-time data reading, though the Labor Day holiday explains a portion of the jump.
Air traffic data suggests that demand for domestic travel dropped in the first week of September while hotel occupancy declined to 61% in late August after reaching its post-crisis peak of 71% in late July. Consumer spending in real terms also declined. As the year-over-year pace of weekly same-store sales trends lower, and unit car sales are down 1.5 million to 13.1 million in August given bottlenecks in the sector, spending activity is projected to slow further. But spending is still well above precrisis levels.
Vaccination Rates Pick Up
In the first week of September, the number of new cases fell for the first time since its resurgence in late June. The seven-day average of daily new cases was 152,000 on Sept. 7, down from 166,000 on Sept. 1 (see chart 1). Faster vaccination rollout accompanying the new wave took the country closer to herd immunity. There are now 62.7% of Americans who have received at least one dose and 53.3% fully vaccinated. The southeast, however, is still lagging the rest of the country in terms of vaccination rates and is, as a result, getting hit hard by the delta variant (see chart 2).
Chart 1
Chart 2
The decline in new cases may have reflected the end of the traveling season, which kept people away from crowds. It takes time to confirm whether the new wave is under control, especially with schools reopening and children under 12 still unvaccinated. Canada leads the G7 countries in terms of percentage fully vaccinated (68%).
Consumer Sentiment Stabilized After Being Hit By The Delta Variant
Consumer sentiment seems to have stabilized near its August low. A weekly consumer sentiment tracker by Ipsos-Forbes Advisor improved slightly to 56.6 in the week of Sept. 2, after falling to its 24-week low of 54.8 the week of Aug. 5 from a 62.4 high in late June (chart 3). All subcomponents of the index appear to have found a floor, for now (see chart 4). This suggests moderate changes for the September releases of two more well-known consumer sentiment indicators, the University of Michigan Consumer Sentiment and the Conference Board Consumer Confidence Indices, which fell for two consecutive months through August, to 10-year and six-month lows, respectively (see chart 5).
Mobility Cooled Amid A Resurgence In New Cases, Seasonal Factors, And A Natural Disaster
In major cities across the U.S., streets were less crowded and fewer people ate at restaurants in August. The slight easing of mobility could be a result of staycations due to fears about the delta variant, as well as Hurricane Ida, which landed on Aug. 29.
Google community trends declined slightly to 6% below the 2020 baseline as of Sept. 9, after reaching 2% below a month ago (see chart 6). Despite a Labor Day-led surge in the first week of September, the number of in-restaurant diners went down to 10% below the 2019 baseline at the end of August, from 6% below in late July (see chart 8).
As the traveling season ends amid a still-elevated number of new cases, hotel occupancy rates fell below the 2019 average to 61% for the week ended Aug. 28, after staying above the pre-pandemic level for two months starting mid-June (see chart 9). Similarly, TSA checkpoint numbers fell to 25% below the 2019 baseline as of Sept. 7 from 11% below at the end of July (see chart 10).
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Lower Interest Rates And Increased Inventories Attracted Homebuyers
Homebuyers were more active in the past month as mortgage rates ticked down and home inventories increased. As the 30-year fixed mortgage rate declined from 3% in late June to around 2.75% in July and August, the number of mortgage applications for home purchases increased by 4% in the past month, as shown by the weekly Purchase Index from the Mortgage Bankers Assn., though still consistent with a softening in the market since early this year (see chart 11). Meanwhile, existing home sales edged up for two consecutive months in June and July, though at 5.99 million, they're far off the year-to-date high of 6.66 million in January. New home sales ticked up to 708,000 in July after a sharp decline over the last three months.
With that in mind, home supply is somewhat more in line with demand. The months' supply of existing and new homes sales are 2.6 and 6.2 months respectively, up from 2.1 and 4.2 months in March. Home inventories went up 7.3% to 1.32 million from June to July. That said, most of the sales happened in the upper-tier market, and unsold inventories are still under the 2019 level of 1.39 million. High prices are still constraining homebuying activities, with July median prices for existing and new homes up 17.8% and 18.4% year over year, respectively.
Inflationary Pressures Declined As Demand Softened And Supply Constraints Eased
As consumers switch from goods to services, inflationary pressures eased slightly. Inflation readings likely peaked in the second quarter, and while still high, the pace of month-over-month gains has slowed. Consumer prices (CPI), both overall and core when excluding food and fuel, were 0.5% and 0.3%, respectively, in July, from 0.9% and 0.9% the month before. Moreover, inflation expectations have drifted down by 6 basis points (bps) for the 10-year forward and 4 bps for the five-year forward (see chart 13). And though still high, inflation expectations remain 17 bps and 18 bps below their respective highs year to date.
As people stopped taking on more home projects and apparently lost interest in building new homes, and lumber dealers replenished their shelves, lumber prices (1,000 ft board) stabilized around $500 in August, down 69% from their $1,600 peak in May (see chart 12). Signs of softening in demand for U.S. vehicles--as the impact from stimulus checks wanes--may have helped stabilize the CMCI Industrial Metal Price Index at a still-high $1,486 per point in August and early September (see chart 14). Similarly, raw steel capacity utilization seems to have stabilized, staying around 85% from July to early September (see chart 15).
On the supply side, producers reportedly saw relatively faster deliveries while paying less for shipping of raw materials. The Institute for Supply Management (ISM) supplier deliveries subindex came down to 69.5 in August from 78.8 in May (see chart 16). Prices paid fell 6.3 points to a still-high 79.4 and well above its benchmark neutral rate of 50 points. In the services sector, the supplier deliveries subindex declined by 2.4 points to 61.7 in August. Prices paid also fell, by 6.9 points to 75.4.
While readings for both manufacturers and services indicate significant bottlenecks, at least supply and pricing pressures have moderated a tad. The Baltic Exchange Dry Index, an index showing prices businesses paid on dry bulk material transportation, was down a little, to 3,707 on Sept. 7 from its peak of 4,235 at the end of August (see chart 17). Nevertheless, these indicators are still well above pre-pandemic levels, indicating that supply constraints have not disappeared.
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Labor Market Improvement Continues
While the Bureau of Labor Statistics' (BLS) jobs headline reading was a disappointment, with job gains a lackluster 235,000 in August, we put less weight on the results. With many business managers on vacation and therefore unable to fill out the forms, August is notorious for initially undercounting overall job gains.
Moreover, other recent jobs data still points to a tight market, with businesses desperate to hire workers. The BLS Job Openings and Labor Turnover Survey (JOLTS) reached a new series high of 10.9 million in July. Weekly Indeed data indicated that this trend continued through early September, with the number of job postings on Indeed increasing to 40.5% above the pre-pandemic levels on Sept. 3 (see chart 19). The upward trend remains intact despite the delta variant wave. The number of business applications stayed 7.62% above the 2019 baseline at the end of August, although much lower than its peak of 33.8% above in March (see chart 20).
For job seekers, after federal pandemic unemployment benefits ended in early September, more folks will have to search for jobs. This may alleviate the current labor-shortage issue. However, as millions of Americans may have to join the jobs market in a short period of time, a more complicated matching process may also lead to a temporarily slow hiring process. In the first week of September, initial claims fell to 310,000, one step closer to the 2019 average of 218,000 (see chart 21). The impact of the end of unemployment benefits may take some time to be reflected in the data.
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The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.
This report does not constitute a rating action.
| U.S. Chief Economist: | Beth Ann Bovino, New York + 1 (212) 438 1652; bethann.bovino@spglobal.com |
| U.S. Senior Economist: | Satyam Panday, New York + 1 (212) 438 6009; satyam.panday@spglobal.com |
| Contributor: | Shuyang Wu, Beijing |
| Research Contributors: | Debabrata Das, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai |
| Shruti Galwankar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai | |
| Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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