Industry Analysis

Arrow denotes 12-month moving total/average direction

Retail Sales

  • Monthly US Total Retail Sales were $545.9 billion in August, essentially flat compared to August of 2019
  • Flat year-over-year Retail Sales represent a softening relative to the previous two months’ roughly 3.5% year-over-year growth, posted prior to the expiration of enhanced unemployment benefits
  • Our system of leading indicators suggests US Total Retail Sales are likely to transition to a full-fledged recovery trend in the first half of 2021

Wholesale Trade

  • US Total Wholesale Trade in June and July was down 3-4% from respective year-ago levels, a marked improvement from 20+% declines in April and May
  • The most recent three months of Consumer Nondurable Goods New Orders were 11.8% below the same three months one year ago; Durable Goods New Orders were down 7.6%
  • Leading indicators suggest that Wholesale Trade will transition to a recovery trend in the first half of next year

Auto Production

  • Monthly North America Light Vehicle Production was 1.2 million vehicles in July, up 4.6% from July 2019 after double-digit declines the previous four months
  • US Light Vehicle Retail Sales for August were down 19.1% from August 2019, the sixth straight month of double-digit decline
  • The US Auto Loan Delinquency Rate stood at 5.03% in the second quarter, nearly a full percentage point above the five-year average; expect more negativity in the auto sector

Manufacturing

  • US Total Manufacturing Production in the three months through August was 8.3% below the year-ago level
  • The State Street Industrial Sector ETF is exhibiting positive momentum in its quarterly and monthly rates-of-change, which bodes well for future manufacturing sector activity
  • The ITR Leading Indicator™ suggests an early-2021 business cycle low for Manufacturing Production

Rotary Rig

  • The US Rotary Rig Count averaged 260 rigs in the three months through August, down 72.7% from the same three months one year ago
  • Oil Futures prices have been oscillating around $40 per barrel in recent weeks, roughly $6-12 below the price needed to profitably drill a new well
  • Expect prices to generally rise into the middle of next year, sustainably exceeding $50 per barrel by the second quarter of 2021

Capital Goods

  • Monthly US Nondefense Capital Goods New Orders (excluding aircraft) in June and July were virtually even with year-ago levels, compared to 7-8% declines in April and May
  • The most recent three months of US Defense Capital Goods New Orders were up 11.6% from the same three months in 2019
  • We expect Defense Capital Goods New Orders to expand into at least the middle of next year; target opportunities accordingly

Nonresidential Construction

  • US Total Nonresidential Construction in the three months through July was virtually even with the year-ago level
  • Sectors related to in-person consumer activity such as Private Multi-Tenant Retail have been hit hard by the pandemic, while the Public Nonresidential component is expanding
  • Be cautious about your projections, as Nonresidential Construction tends to lag the economy through the business cycle by around one year

Residential Construction

  • US Total Residential Construction in the three months through July was virtually flat versus one year ago
  • The most recent three months of US Housing Starts were up 10.0% year over year, and numerous other housing market leading indicators are rising
  • Record low mortgage rates bode well for Residential Construction into 2021

Leading Indicator Snapshot

Key Takeaways

  • Our leading indicator analysis suggests that business cycle decline in the US industrial sector will persist into early 2021
  • Our system of leading indicators signals that a subsequent recovery trend in industrial activity will extend into at least mid-2021
  • Some of the daily and weekly leading indicators we track have softened in the first half of September; while some volatility in the data is normal, we are watching closely to determine whether these movements represent the beginning of sustained trend reversals or are simply noise amid broader general rise