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Rising Indicators Versus Rising Cases

July 2, 2020

COVID-19 cases are rising - so what does that mean for our outlook? Catch our newest TrendsTalk episode with ITR Economist and Speaker Connor Lokar to learn how we're monitoring the situation.


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Transcript by Rev

Hello everyone. It's Connor Lokar with ITR Economics, checking in for our latest Trends Talk. Today, we're going to be talking about some rising trends that we're observing here at ITR. Some great and some not so great.

We all managed to get through the first half of 2020, and as we break into the second half of the year we're observing these two conflicting trendlines. On the positive side of the ledger, we're seeing a litany of economic leading indicators in nascent rising trends, which is great to see. On the not so good side of things, we see similar nascent rising trends in COVID-19 case numbers here in the US. So, I'm going to go ahead and unpack what we at ITR think that those mean.

On the COVID side of the equation, the three-day rolling average of COVID-19 case numbers is trending mildly upward here in early July as we head into the holiday with a handful of states even posting new daily highs in case numbers in the last several days. But fortunately for now, the three-day rolling average for death has maintained a general downward slope. And we find that the death data points are a little bit more reliable than the case figures, a little firmer data points, if you will, and certainly more impactful as it relates to governor decision making around the country in terms of pausing or rolling back economic reopenings that are underway all over the United States. And this is an important note, because our forecast is not driven by the pure case or death numbers, but rather by the actual decisions made by governors across the country.

As of right now, we do see some States, like California, Florida, and Texas, which are certainly economically relevant States, they are pausing or reversing some aspects of their reopening. Again, this is concerning but not a forecast-breaker at this point in time. I mean, look around, you can clearly see from the traffic, the activity, the number of businesses open, that we are light years ahead of where we were in terms of reopening, relative to where we were in, say, late March or April. Most of the reversals we've found in reopening, seem to be largely confined to indoor dining, indoor drinking, strictly indoor entertainment establishments, which seems to be a much more targeted approach than the blanket shutdowns that we saw in March and April. So, for now, the situation has yet to reach that critical mass necessary to undermine our expectation of the onset of macroeconomic recovery in US GDP, as we transition here to this third quarter.

So, we will be certainly watching. We will be watching very closely. We're watching them every day, updating these every day, the rolling death trends, and any subsequent orders that that may generate from governors around the country in the weeks ahead. And, certainly, if things change, we're going to be getting word out quickly. I'd certainly recommend checking in on Brian and Alan Beaulieu's Special Edition Webinar coming up on July 22nd, which is going to cover those latest developments and certainly brief any changes that those may yield in terms of our forecast.

So, enough of the negative. Enough of the negative. On the positive side of things, there's plenty to talk about. COVID cases aren't the only rising trend in town. In fact, we are gaining more rising trends in our leading indicators and our leading indicator dashboard by the week it seems. I'm not going to rattle them all off to you, and those of you who are subscribers or signed up for recent ITR webinars, you know that dashboard that I'm referring to, and one big one from that dashboard I will single out because it was such an encouraging data point is the US ISM Purchasing Managers Index 112 rate of change, which delivered its second straight month of rise serving to a positive 1.9% in the latest data point, which we just received on July 1st. It was a considerable jump from the May data point, which is not exactly surprising, but certainly a great empirical confirmation of the recovering economic activity and buzz that we are seeing and hearing about all around us in the last month.

At present, we have eight of our favorite leading indicators in nascent rising trends that are either one or two months off of their early spring lows. So, not necessarily statistically significant, but certainly encouraging. It's unlikely. I'll certainly admit it's unlikely that all of them, every single one of them, is going to hold and continue consistently upward on a linear track. But should we emerge from the end of this third quarter with at least five, at least five, that's the magic number we look for, five of those leading indicators holding those lows in an upward trend, we're on track as it relates to our forecast. And with eight currently on the board, I'd certainly say we're off to a good start and that's definitely something to feel good about.

Thanks for checking in. I'll see you next time.


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.