Macroeconomic Outlook

The preponderance of evidence suggests upward momentum in the US economy will persist into at least mid-2021. Real potentialities exist that could disrupt that trend. An uptick in restrictions, mostly targeting crowding in consumer spaces, is occurring in many US states and in Europe. The potential escalation of these restrictions is a downside risk to the US and global outlook. While this can be disheartening and disconcerting, don’t count the consumer out just yet – the below indicators illustrate consumer strength:

  1. Retail Sales are trending mildly above expectations, a good sign of consumer resiliency. US Disposable Personal Income and consumer savings trends suggest consumers are well-positioned to spend moving into the first half of 2021. Due to the pandemic-related decline in driving, Retail Sales at Gas Stations are hurting Total Retail Sales. If we exclude Gas Stations, the Total Retail Sales rate-of-growth is 1.4 percentage points higher. While consumers may not be at the stores in force, they are shopping at home – E-Commerce is growing at the fastest annual rate since 2004.
  2. US Private Sector Employment increased by 1.46 million jobs from September to October but remains 5.1% below the pre-pandemic level. Employment is recovering as firms bring employees back amid the economic recovery. Leisure and Hospitality as well as Professional and Business Services posted the biggest net gains from September to October. The US Employment Trends Index suggests that, barring a return to widespread shutdowns, upward momentum in Employment will persist into mid-2021.
  3. The single-family housing market is heating up, with monthly Single-Unit Housing Starts ending October 31.5% above the October 2019 level. Decline in the Homeowner Vacancy Rate suggests new housing is needed, and historically low interest rates are appealing to potential buyers. This is resulting in rising Single- Unit Housing Permits, which bodes well for those involved in new construction and for downstream home-goods markets, such as furniture, appliances, and hardware.
  4. The automobile industry is also benefiting from consumer spending. Favorable trends are developing in US Retail Sales at New Car Dealers, which were up 4.0% in the last three months compared to the same three months one year ago. Combined with the higher growth rates in Used Car Dealers Retail Sales (up 17.2%), this signals that the consumer’s appetite for cars is returning, which bodes well for related production.

Largely focus your energy on things you can control

Ensure you have a plan in place if shutdown orders escalate, but largely focus your energy on things you can control. Consider conducting market research to determine whether consumer preferences have changed due to the shutdowns. Use this time of lower activity to ensure your online platform is competitive and that your products still align with your target market.

Make Your Move

Prices for many raw materials are likely to be higher next year. Consider locking in prices this year.

Investor Update

The market’s momentum remains generally positive. This is consistent with the rate of expansion in money supply through September. Both factors suggest that we are likely to see more instances of rise as opposed to decline in the quarters ahead.

ITR Economics' Long-Term View

2020 - Decline

2021 - Recovery and Rise

2022 ­­­- Growth