Insights from Our CEO

Four Reasons to Smile, Two Reasons to Frown

By Brian Beaulieu on June 23, 2020

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Brian Beaulieu

Brian Beaulieu has served as CEO and Chief Economist of ITR Economics™ since 1987, where he researches the use of business cycle analysis and economic forecasting as tools for improving profitability.

The Good News: Encouraging but Early Trends

1.  Arguably the best news is the trend in mortgage applications for single-family home purchases. The ascent is tangible evidence the consumer has more than a pulse; they are activity pursuing the American Dream.

US Home Purchases

2.  Additionally, OpenTable data through June 6, 2020, is affirming what other surveys have shown. We are going back to dining out. We are not even close to a complete recovery, but the trend is moving in the right direction.

3.  The consumer is in better financial shape than was true at the end of the Great Recession. The chart below presents Disposable Personal Income (after-tax income). Combined with the two points above, this suggests that we not only have the desire to be our normal selves, we may also have the means.

US Disposable Personal Income

4.  There is no sugarcoating that the decline in employment was catastrophic. But now is the time to look forward, not backward. You can see improvement in the May employment data. This is better than we expected to see, and it is encouraging. It remains to be seen if it continues, but combined with the above input, it very well may. However, do not expect the recovery trend to be linear; it is likely there will be up months and down months as we go through the end of this year and at least the first quarter of 2021.

Data Trend

The Bad News: Worrisome Trends

1.  COVID-19 cases are rising in some states. This was assumed to occur in our preparing of forecasts. Now we enter the real unknown area.

a. Will deaths rise to the same extent as new cases?

b. Will the governors shut parts of the economy again?

We are monitoring the situation very closely and will alter our forecasts as needed depending on a. and b. above.

2.  Retail Sales, which had been in the early throes of recovery, weakened in the last week of May. We warned that the trend would not be one of positive change month after month, but the extent of the May weakening was surprising. We will have to see how the first two weeks of June come in before we draw any conclusions. It could simply be that we were enjoying socializing again.

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Brian Beaulieu


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