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Good News Pointing to Rising Trends

June 26, 2020

We’re seeing more good news for the US economy – what does that mean for the next rising trend? Catch our newest TrendsTalk episode with ITR Director of Speaking Services Alex Chausovsky to learn more about our outlook

 

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Transcript by Rev


Hello, everyone. My name is Alex Chausovsky. I'm the director of Speaker Services at ITR economics, and welcome to another edition of TrendsTalk with ITR. Today, I wanted to share a couple of pieces of good news with you. The first piece of information that I wanted to share has to do with the COVID-19 data that we've been tracking. We found since the beginning of the crisis, that it is not the infections or the case count data that's reliable, nor really the hospitalizations or ICU bed availability, but rather daily deaths. We focused on tracking these numbers since the beginning of the crisis in the March timeframe. What we've seen, especially over the last week, has been some of the lowest recorded daily deaths in the United States since that late March timeframe, which is extremely encouraging. In fact, if you look at the trend line in the data, you'll notice that it has been continuously declining off of a mid-April 2020 peak.

As of right now at least, it does seem like the situation is improving. Now, I'm sure most of you have been paying attention to all of the news stories that are focused on the surgeon case counts in places like California and Oregon, Texas, Florida, Georgia, the Carolinas. That's obviously something that's worth keeping an eye out on, but we have not seen a corresponding surge in deaths. Really at the end of the day, when you think about the COVID-19 pandemic and its economic implications, I think that it really comes down to not just the healthcare aspect of it, but rather how do we react to what's going on both in the counts and in the deaths. Now in the absence of very reliable, short-term data on the economic front, what we have done is started to track some weekly indices that are indicative of the performance of the economy on a shorter term basis.

Those are throwing up some favorable signals as well. When we look at the Redbook weekly retail sales data, when we look at the Intermodal rail traffic data, which represents movement of goods within the country, when we look at housing market statistics as represented by realtor.com, all of those are pointing to rising trends coming off of mid-April 2020 lows. That is the initial sign of good news that the economy is at least starting its path taking its first steps towards recovery. But of course we have relied on a proven system of leading indicators for quite a long time, and we are having some positive news emerge in our main leading indicators as well. In fact, the core group of 12 leading indicators, they were all in rising trends at the beginning of this year, pointing to our previously expected rising trend in the second half of 2020. Obviously, both the COVID-19 pandemic black swan and the oil price crash black swan that happened in the first quarter of this year, derailed all of those rising trends. We had most of the indicators, save a few, really go into new declining trends.

But we're starting to see some green shoots in the evidence from those leading indicators. In fact, just today, we had the first confirmation of statistically significant evidence that things are starting to potentially recover. We have six leading indicators now in tentative rising trends coming off of April 2020 lows. Those six indicators include the ITR Financial Leading Indicator, the JP Morgan Global PMI, the US Purchasing Managers Index, Wilshire Total Market Cap, which is a stock market related indicator and more importantly, from an industrial perspective, the total industry capacity utilization trend. All six of those are now in tentative April 2020 lows, and that six also includes the G7 Leading Indicator as well. That is clearly some encouraging news, which we can all use at this point that say if these tentative rising trends that we saw emerge with the May data hold, then that really aligns well for our expectations of that low point in the economy occurring in GDP this year, in industrial production next year and then that rising trend that we're expecting to carry us through into 2021.

We're going to continue to monitor these. We're going to continue to keep you updated and make sure that those rising trends are confirmed with several more months of additional rise. But in the meantime, we're taking a very positive outlook based on the data that we're seeing related to COVID-19, especially when it comes to the deaths and the signals from the six leading indicators that are now indicating rising trends as a sign that our forecast remains valid and that we should have that rising trend emerge in 2021. I hope you found that helpful. I hope that gives you a little bit of encouragement, that positive spin on things, and certainly hope that you will join us again on the next edition of Trend Stock with ITR. Thank you so much for joining us today and have a great day.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.