August 12, 2024

Taylor St. Germain:
Hi everyone, my name is Taylor St. Germain with ITR Economics, and welcome to this edition of TrendsTalk. We at ITR, you’re unbiased and apolitical source of economic intelligence. And today I wanted to talk about markets of opportunity.

And we’ve been talking a lot about economic weakness, about some mild contraction for certain industries in 2024. Recently, earlier this week, we saw the stock market go through a bit of an equity sell-off. And so there’s a lot of questions around weakness in the economy. Is there still areas of opportunity to be focusing on? And there sure are. And that’s why I wanted to focus on some of the positives today. Some of those end markets that we at ITR expect to continue to grow in 2024 in the face of some of this economic weakness that we might be seeing across the board.

So just as a reminder, we do have some mild contraction in the industrial economy overall in 2024. And we do expect that GDP continues to slow down into the back half of ’24. But that doesn’t mean every market’s going to be in the negative growth rate territory by the end of the year. And that’s why I wanted to focus on some of the positives here today. Some of the areas you might see more opportunity from at least during the second half of the year compared to others.

A great way to understand some of these areas of opportunities are to look at our at-a-glance dashboards in our Trends Reports. Because they highlight year-end growth rates and you can see which growth rate will be positive and which growth rates will likely be negative. Now, first off, I’d like to call out the service sector.

The service sector while slowing in growth is still positive. So it’s important for retailers and for professional services to understand that activity might not be as robust as what we saw. But most of those service sector segments are not contracting year over year. So it’s just a slower pace of growth but remaining in that positive growth rate territory.

When we look at the industrial economy, that’s where some of this contraction comes in in 2024. But again, given how mild we expect this industrial downturn to be, not every end market will be contracting.

So let’s call out a few of the positives. First, we expect the Defense Industry to remain positive when comparing ’24 to 2023, finishing up about 2.7% this year. So you might still continue to see some increased opportunities in the defense sector, especially given some of the investment as of late in the constant geopolitical tensions that we’re seeing around the world that might bolster some of those new orders from the defense industry.

We do also see Light Vehicle Production slowing down through the second half of the year, but not falling below that zero line. So there’s still some opportunities related to automotive, again, not as robust, but not in that negative growth rate territory like several other industrial segments.

I’ll continue to highlight Oil and Gas. Oil and Gas Extraction Production is one of our data series that again remains in that positive territory. Higher oil prices are helping profitability for most of the drillers around the country. So still seeing some opportunities there.

And then I’d like to call up the life sciences space. We forecast a dataset called Medical Equipment and Supplies Production. And there’s still a lot of demand from the healthcare sector, from the life sciences sector. And that’s another one of those areas that we would expect to stay positive year over year while several other segments are down.

Now, some of the segments that we expect to finish down this year – Machinery New Orders, Construction Machinery New Orders, Computer and Electronics New Orders, Mining Production – excluding oil and gas – and Chemical Production. So those are industries are all expected to finish down year over year. So focus on some of the segments that I mentioned previously that will be slowing but positive. That might give you some more opportunity here in the near term.

Now the good news is as we look to ’25 and ’26, almost every sector that I mentioned today, whether it’s positive or negative for ’24 is expected to be positive in ’25 and ’26. So we really just need to make it through this later half of ’24 and into early ’25 before we really see broad demand across the board accelerating in ’25 and continuing to grow in ’26.

So it’s all about those near-term opportunities, focus your resources and your efforts on some of those markets that will be up to offset some of the general weakness in the industrial economy, but don’t lose sight of ’25 and ’26 when most all of these markets are growing. We really need to take the second half of the year to be preparing for all this, what I’d call very attractive growth in 2025 and 2026.

I felt like we needed to focus on some positives today. So I wanted to give you some of the good news related to some of these end markets. Thanks for joining me on this episode of TrendsTalk. As a reminder, please like and subscribe to TrendsTalk wherever you listen to your podcast. And I look forward to seeing you all in the next one. Take care for now.