Economy contracts at record pace in March
Early reports on April even worse
San José, CA – On Wednesday, April 15 the U.S. Commerce Department reported that retail sales of household goods fell 8.7% in March, the largest drop since the report began in 1992. This was twice as bad as the worst month during the last financial crisis and will probably be worse in the report on April sales as many stores did not shut until late in March.
The U.S. Federal Reserve Bank, or Fed, also reported that industrial production fell 5.4% in March, the largest drop since 1946, when production for World War II drew to an end. The drop in the number of jobs in March reported in the employment report issued earlier in the month was the first indication that a recession had started. Now with both sales and industrial production also falling for March, three of the four key economic reports are all showing the start of a recession. Only personal income is left, but with the big drop in jobs, it is all but certain that the upcoming report on income will also show a drop in March.
The first economic news for April was even worse. The New York Federal Reserve Bank’s index of manufacturing in New York state fell from -21.5 to -78.2. In this index zero means neither expansion nor contraction. Not only was this the worst report since the survey began 20 years ago, it is more than twice as bad as the worst report following the 2008 financial crisis.
Another bad report came from a survey of homebuilders. This index of confidence among home construction companies fell from 72 in March (where 50 is break-even) to 30 in April. This is the biggest drop in this report going back to 1985.
While many investors on Wall Street are still hoping for a quick recovery, a survey of economists showed that the average time they expected the economy to come back to where it was back in February of this year was 27 months – or about mid-2023. While no one knows the future, more and more signs show that this economic downturn will be the worst since the Great Depression of the 1930s.