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US March Conditions Data Confirm Activity Slowdown Has Started

There has been relatively little March US data released to this point, but what has been reported confirms that an economic slowdown has begun.

Analysts and politicians are anxiously awaiting Thursday’s initial claims report, which is expected to show an even larger surge in unemployment filings than posted last week. Prior to that, there is enough regional conditions data to get an idea of where things stand.

Earlier Tuesday, Markit said its national flash estimates for manufacturing and service conditions for the current month both declined. The manufacturing reading fell to 49.2 from 50.7 in February, the lowest point since 2009, while the services index fell to a record low 39.1 from 49.4.

The composite index, a combination of the manufacturing and services readings, fell to a record low reading of 40.5 from 49.6 in February. Markit said the number of new businesses contracted in the month, with declines seen in new orders and employment as customers put orders on hold due to the COVID-19 crisis.

The Richmond Fed’s measures, also released on Tuesday, were just as pessimistic. The Richmond Fed’s index indicated virtually no change in the month, ticking up to a reading of 2 in March from -2 in February

At the same time, the index of services revenue plunged to a reading of 1 after rising to 26 in February, the largest drop in 17 years, with declines across all revenue categories and sharp pullback in employment.

The Richmond Fed said both the manufacturing and services surveys pointed to a more pessimistic outlook for conditions six months out.

Conditions data released last week foreshadowed the coming declines. The Empire State survey, which covers the hard-hit New York region, plunged to -21.5 in March from 12.9 in February, the lowest level in 11 years.

Likewise, the Philadelphia Fed Index fell to -12.7 in March after surging to 36.7 in February, the lowest level since July 2012. Both the Philadelphia Fed and Empire State data included much more pessimistic 6-month outlook readings as well.

Still to come is regional data from the Kansas City Fed on Thursday and from the Dallas Fed early next week. This precedes the national ISM data to be released later next week, along with the key employment report on April 3.

Kevin Kastner

Colin Lambert

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