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Light at the End of the Tunnel

July 10, 2020

Are we finally seeing a light at the end of the tunnel? Catch our newest TrendsTalk episode with ITR President and Speaker Alan Beaulieu to learn how the global economy is faring and what the leading indicators say for the future.


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Transcript by Rev

Hi, this is Alan Beaulieu, president of ITR Economics. Thank you for joining us for today's TrendsTalk. A lot of things going on, as I'm sure you have noticed, and most of them are actually quite good. Of course, we're watching for that second wave and that's been discussed in previous TrendsTalks and we're not going to talk about that here. We do watch the numbers every day. We're looking for the relationship and the timing relationship between new cases and those trends, and deaths in hospitals. We'll keep you up to date on that. That's not the point of today's TrendsTalk. Today's TrendsTalk is a look around, is what I think of it as.

We're going to touch on various things, and most of them are actually quite good. And then one of the things that jumps out at me is that the world, not just the United States, is seeing some light at the end of the tunnel, should trends continue. Now, I'm sure you're aware that cases in the United States and the concern of the world relative to the United States in COVID-19 means that the rest of the world may be a little ahead of us, in terms of dealing with it, in terms of their ability to get their economies back on their feet. Balance that off with the fact that we are the United States, the strongest, most agile economy on the planet.

So, agile, in terms of that we can pivot, we can change, we can do things that perhaps, other countries are not as able to do. With that having been said, I looked at the leading indicators for a lot of countries, and let me just mention them. China, Canada, Japan, France, Germany, Italy, Mexico, the United Kingdom, and South Korea. As we looked at all those, or I looked at all of those, there's only one whose leading indicator, one collaborative change is still in decline, and that's Japan. The others are rising off of tentative April 2020 lows. That, my friends, is good news. That certainly means that there's a sign of economic stirring and a return to upward momentum in these countries.

I also look at the Purchasing Managers' Index for each of those countries, and without exception, they're all rising off of April or May tentative lows in the 1/12 rates-of-change. For China, it began in February of 2020, both in terms of new orders and in terms of production. So on the industrial side, we're seeing some good things going on, too. The lead indicator speaks to a broader measure. The PMI, Purchasing Managers' Index leads to the more industrial side. That's certainly good news. Now, it's not showing up yet in most nations' industrial production 1/12 rate-of-change, because the data simply doesn't extend that far yet.

A lot of it, the foreign data ends in April. Some goes into May. Germany, for instance, has a tentative 1/12 rate-of-change low in industrial production in April 2020. Good news. Go Germany. There was a lot of talk not too long ago about the recession in Germany. This is an early indication, but combined with the leading indicators we just mentioned, a good indication that things are beginning to turn the corner there. And China established an industrial production 1/12 low in February 2020, and it's already above year ago levels at 4.4%. The 3/12 is rising above that.

The United States has a tentative 1/12 industrial production low in April 2020. I mean, these are all good things. And on top of that, I look at the Truck Freight Recovery Index, and as we look at that, it's back into normal operating areas. It's been rising since the third week, middle of the third week of April, and it's out of that recovery back into normal operations. And, if you look at the freight indices this week, we're up 45% year over year, or from the week before, excuse me. So what we're looking at here is some good news. The trucks are rolling and people want freight, and the intermodal shipment activity is above year ago levels, as well.

The rates of change is certainly on the rise. So, that's good news and we're happy to report that. Now, there is one thing that's not great news. And that is that, when we look at the Johnson Redbook Retail Sales Index, we're not seeing as much rise as we would like there. Some of that is the shutdowns have ... Well, let me rephrase that. The reopenings have not all happened to the same extent. Some of that is still the fear of what's going on. Some of that is the surge in cases in California, Florida, and Texas, where that might keep some people back. We're still above the trough that we had before, but we're not back to health there.

And that's an important part of the economy, but it is an improvement, so we'll go with that. I think the most amazing thing to me today, is the fact that the employment numbers are looking so good. That's right, looking good. We had a low in employment in the United States of 108.2 million people. In June, that's up to 117.36 million. 9.2 million people have got their jobs back. I mean, how wonderful is that? That's certainly great news, and hopefully that lights you up. The unemployment rate is come down, which we all take as good news, I'm sure. And when we look at what is happening in terms of the number of people who are unemployed, that's coming down, as well.

It had a record high in April of 22 1/2 million, but the June unemployment, in terms of the amount of people, is down to just a skosh over 18 million people, so down 4.4 million people. Certainly good news. And welcome news, at that. So, while we are not anywhere as close to the record high number of employment that we had before of 130 million people, we're climbing off of 108 million low, which was a nine-year low. So, good news. Jobs seem to be coming back. Freight is moving, which means demand. The world seems to be picking up speed, and the one thing we're waiting for is for the second wave to come or not come, and for retail sales to show some more strength. Are we on the right path? Looks that way. It's a good beginning to July. Stay tuned. We'll have more data for you down the road. Thank you for joining us today. We wish you the best.



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