The preponderance of leading indicators are suggesting increased likelihood that the US economy, as measured by US Industrial Production, will be on the back side of the business cycle in 2019. However, our forecast does not just call for Phase C, Slowing Growth, in 2019; we are anticipating a mild contraction in the US industrial economy next year.
US Domestic Corporate Profits are among the indicators supporting the outlook. Profits lead US Industrial Production by approximately 10 months, and Profits for the last 12 months are down 4.4% from the prior year. This is an important indicator for the upcoming year because, without profits, companies will have a harder time investing in their businesses, consequently slowing demand for new raw materials, machinery, and energy – all components of US Industrial Production.
In every business cycle, it is important to know where your markets are going, but such knowledge is especially pertinent for next year, as not all segments of the economy will contract in 2019. Declining Corporate Profits trends in the following industries are suggesting these markets may face more challenges in 2019 than some of the more upbeat segments of the economy.
If you are selling into these segments, evaluate your customers’ health when extending credit. You don’t want their financial woes to extend your accounts receivable when you are trying to invest in your business for a more prosperous 2020.
Jackie Greene
Director of Economics