If you were waiting for additional proof of safe haven demand before investing, the latest economic activity reports should have you ready to buy now.
The just released U.S. Composite Output Index has suggested the economy has contracted, with the data for manufacturing and service industries giving a reading of 27.4 – more than 20 points below the 50 threshold for economic contraction.
90% of the US is currently subjected to a shelter in place order, which prevents citizens from leaving home for anything other than food or exercise. As we mentioned above, 26.4 million people have filed for unemployment benefits as many industries have all but ground to a halt. Manufacturing activity has declined at the fastest rate in over a decade as a result of the pandemic, while retail and food services fell 8.7% in March, the largest deterioration since records began in 1922.
The chief business economist of IHS Markit, which compiled the data, Chris Williamson says this data is far worse than anything seen during previous recessions. He commented, “The COVID-19 outbreak dealt a blow to the U.S. economy of a ferocity not previously seen in recent history during April. The deterioration in the flash PMI numbers indicates a rate of contraction exceeding that seen even at the height of the global financial crisis.
Loyola Marymount University, LA’s business economics professor, Sung Won Sohn says, “The economy is almost in free fall. We will see the bottom when the coronavirus infection rates stabilize. It’s going to be a pretty deep bottom from which to come up.”
Wells Fargo Securities’ senior economist Tim Quinla adds, “In general consumer spending is going to look about as bad as it has ever been, although there will be some categories of resilience. The panic buying at grocery stores cannot offset the retrenchment in spending that we will see in other categories.”
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