By Brian Beaulieu on Aug 20, 2020 3:03:54 PM
The recovery in the US economy is real. Even if you are concerned about another COVID-19 disruption, you need to know certain realities.
- It is time to make your move to capitalize on the trends taking shape
- The economy is coming back to life
- The resurgence is strong
- It is likely to carry forward
It Is Time to Make Your Move
Making your move requires the net result of three overarching actions on your part. It is time for you to be in the process because the US economy is turning around with a vigor that will surprise a lot of people. The three overarching actions are.
- Identify where your company is in the business cycle
- Plan your course for maximizing the opportunities or minimizing the dangers of the coming change in trend
- Execute that plan
It is increasingly likely that the only thing that will knock this recovery down is governmental action closing the state economies as a reaction to COVID-19. We are watching the state trends very closely. Our read is that to date the situation is manageable for the governors and therefore the economy at large, even though certain types of business are being put back into untenable situations.
Determine if you:
- Lead the overall economy
- Tend to rise or decline with the overall economy (e.g. US Industrial Production)
- Tend to lag the economy
Best July Result in 75 years
US Total Industrial Production surged upward from June. We analyze non-seasonally- adjusted data to get the cleanest possible view of the underlying trend in the data. The July increase from June was the first time a July rise occurred since 1946. There have only been seven stronger July results in the last 120 years, and they all occurred in the more volatile era before WWII, when the US was a much smaller economy. The 2020 result is very encouraging and shows that the economy is able and willing to respond to market activity.
The Total Industrial Production monthly Index is recovering from an April 2020 low, and the associated three-month moving average of the Index (3MMA) established a probable June 2020 low point.
For those familiar with rate-of-change: the 1/12 and 3/12 rates-of-change have reversed direction. April is holding as the 1/12 rate-of-change low, and we have a probable June low in the 3/12. We will likely have the next positive ITR Checking Point™ in the fourth quarter when the 1/12 rises above the 12/12 rate-of-change.
Further Rise Is Consistent With the Retail Sales Trend and Leading Indicators
Retail Sales rose strongly in July. This comes on the heels of tremendous surges noted for May and June. The three-month gain since April is the strongest recorded in the post WWII period and demonstrates the consumer has:
- An ability to spend money
- A desire to spend money
- The means to spend that money
We are very aware, along with you, that there is as of yet no political agreement on additional fiscal stimulus for the economy. We think the stall is not detrimental to our forecast because:
- Leading indicator trends are in ascent
- Consumers have saved a lot of money that is yet to be spent
- Employment is improving
- Rising retail sales and rising production becomes a very virtuous feedback loop
Make Your Move
The recovery is real and will endure based on economics. A compounding wave in the natural disaster that is COVID-19 could preclude immediate additional rise. Politics and fear could create an additional near-term drag on the recovery. We have the latter concern already covered via our forecasts. We continue to assume that a vaccine will be available as of 1Q21 and that the governors will not need to shut down their states again, based on trends we are seeing in other parts of the world.
Make your move. Know your trend and its position in the continuum of the economic chain of events/indicators. Have your plans prepared for how you will prosper if you lead or are generally coincident with the economy; perhaps minimize your risk if you determine that the worst of the economic storm is ahead because you lag the overall economy. Have the right team to execute the plan. Beware – executing the plan is the hardest part.