It’s a rather lackluster day, and the major indices are relatively flat.  The S&P 500 is continuing to try and break through to a new all-time high, but so far, has yet to do so. There has been a lot of economic data today, and it has helped push several sectors higher.  Eight of the eleven sectors are in positive territory, and two are flat.  Treasuries are also up slightly, and the 10-year yield is down to 0.69% and up from 0.56% at the beginning of the week. The dollar continues to weaken and is trading at 93.05.

Technology and Real Estate are the best performing sectors. 

Breadth is mixed with new highs outpacing new lows.

Economic News

Productivity

Nonfarm business sector labor productivity rose 7.3% in the second quarter, as output decline 28.9% and hours worked was down 43%.  First quarter was revised to a 0.3% decline from -0.9%. Unit labor costs increased 12.2% in the second quarter, following the first quarter increase of 9.8. increasing a revised 9.8% (from 5.1%) in the first quarter. Year over year, productivity has increased 2.2%. Despite the significant improvement in productivity in the second quarter, activity remains depressed as more areas shutdown and implemented restriction due to the pandemic. 

Manufacturing was hard hit, as the sector productivity declined at a rate of 15.5% annually with output falling 47% and hours worked decreasing 37.3%, marking the largest decline ever reported (1987).

Production

Total industrial production advanced 3.0% in July on the heels of June’s revised 5.7% increase.  Despite this rise, activity is still 8.4% lower that the pre-pandemic level set in February.  Manufacturing output rose 3.4%, topping market forecast, albeit lower than in June.  Motor vehicles and parts production saw the most significant increases, up 28.3%. Mining rose 0.8% after decline for 5 consecutive months.  Utilities also rose 3.3% as warmer weather drove the need for air conditioning.

Capacity utilization improved to 70.6% from June’s revised rate of 68.5%.

Consumer Sentiment

The preliminary University of Michigan Index of Consumer Sentiment for August notched up slightly to 72.8 from July’s final reading of 72.5. There was a huge difference in the sentiment of expectations by political affiliation, with Republicans at 97.4, Democrats at 45.0, while independents were 66.7.

• Current Economic Conditions Index declined to 82.5 from 82.8.
• The Index of Consumer Expectations increased to 66.5 from 65.9.

“Consumers chief economist, Richard Curtin, stated, “The policy gridlock has acted to increase uncertainty and heightened the need for precautionary funds to offset lapses in economic relief programs and to hedge against fears about the persistence and spread of the coronavirus as the school year gets underway. Bad economic times are anticipated to persist not only during the year ahead, but the majority of consumers expect no return to a period of uninterrupted growth over the next five years."

Have a great weekend.  Be safe and stay well.