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QUARTERLY ECONOMIC OUTLOOK Coronavirus Special Report
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SPEAKERS
Copyright 2020 Prevedere, Inc. All Rights Reserved
Nicole Flynn
Senior Director of Marketing Prevedere
Andrew Duguay
Chief EconomistPrevedere
Michelle Green
Senior EconomistPrevedere
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AGENDA
2020 US ECONOMIC OUTLOOK
CORONAVIRUS SPECIAL REPORT
US SECTORS WE ARE TRACKING
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2020 US ECONOMIC OUTLOOK
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Data points toward slower growth, possible inflection point in late 2020
Uncertainty very elevated, particularly around Covid-19
Global supply chains disrupted, impacting manufacturing and logistics
Consumer resiliency, but may face additional headwinds
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CURRENT STATE OF US ECONOMY
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GDP LEADING INDICATOR POINTS TO INFLECTION POINT
• Best evidence yet of a “slowdown,” not a recession.
• Still points to some slowing growth ahead before reaching inflection point during 2020.
• Primarily does not incorporate coronavirus impact.
Copyright 2020 Prevedere, Inc. All Rights Reserved
-15
-10
-5
0
5
10
2004 2006 2008 2010 2012 2014 2016 2018 2020
% C
hang
e, Y
ear-o
ver-y
ear,
3 M
onth
Mov
ing
Avg
Recession
Prevedere GDP Leading Indicator
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MANUFACTURING ACTIVITY
• Although still weak, manufacturing showed signs of turning around in recent months.
• Tends to lead US Economy by 4-12 months.
• Manufacturing still makes up around 20% of the US economy.
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35
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2004 2006 2008 2010 2012 2014 2016 2018 2020
Inde
x, 3
-mon
th M
ovin
g Av
erag
e
Recession
ISM Manufacturing PMI
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FIXED INVESTMENT
• Investment includes:• Buildings• Equipment• Intellectual Property
• These long-term investments set the path for future growth
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-0.5
0
0.5
1
1.5
2
2.5
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2014 2015 2016 2017 2018 2019
% C
hang
e Pe
riod
over
Per
iod
Business Investment Growth, by Quarter
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DISAPPEARING PURCHASING POWER GROWTH
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RECESSION LEADING INDICATOR SUMMARY
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Indicator Lead Time Reliability Signal
Corporate Profits – Nonfinancial Sectors 1-2 Quarters Medium to High
Consumer Sentiment 0-3 Months Medium
Retail Sales per Person (Price-adjusted) 0-6 Months Medium to High
Vehicle Sales 4-6 Months Medium to Low
Manufacturing – Purchasing Managers’ Index 4-12 Months Medium
Prevedere GDP Leading Indicator 6 Months Medium
Residential Real EstateExisting Home SalesNew Home Building Permits
3-18 Months Medium
US Government Bond Yield Curve 12-18 Months High
11Copyright 2020 Prevedere, Inc. All Rights Reserved
2020 ECONOMIC OUTLOOK
CORONAVIRUS SPECIAL REPORT
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CORONAVIRUS 2020
• Rapidly evolving disease outbreak
• Determining the economic impact
• Indicators to watch
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Source: World Health Organization
Number of Confirmed Cases as of 03/03/2020
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HOW DO DISEASE OUTBREAKS IMPACT RETAIL SALES IN CHINA?
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CHINA INDUSTRIAL PRODUCTION AND MANUFACTURING
• SARS outbreak appears to have had a modest, short-term impact on Chinese Industrial Production and Manufacturing.
• Recovery was swift (approximately 3 months)
• Other outbreaks had little to no impact
Copyright 2020 Prevedere, Inc. All Rights Reserved
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Axis
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Year
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Disease Outbreaks China Industrial Production
-3.2 pp
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IMPACT ON GDP GROWTH
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4.9 6.4
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Year
-ove
r-Yea
r %
Disease Outbreaks World GDP China GDP
H1N1 H7N9 MERS COVID-19
China makes up approx.4% of Global GDP
SARS
China makes up approx.17% of Global GDP
Though previous outbreaks have not had a significant or lasting
impact on Annual GDP Growth, the length and severity of COVID-19 poses a unique risk to the Global
Economic Outlook
OECD Projections
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WHAT’S DIFFERENT ABOUT COVID-19?
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01-2007 09-2007 05-2008 01-2009 09-2009 05-2010 01-2011 09-2011 05-2012 01-2013 09-2013 05-2014 01-2015 09-2015 05-2016 01-2017 09-2017 05-2018 01-2019 09-2019
PMI - Manufacturing PMI - New Export Orders PMI - Non Manufacturing
Worst readings on record suggest deeper impact
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03-2009 03-2010 03-2011 03-2012 03-2013 03-2014 03-2015 03-2016 03-2017 03-2018 03-2019 03-2020
CBOE Volatility Index (VIX)
FINANCIAL MARKETS RESPONDING
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Source: Chicago Board Options Exchange, Bloomberg
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2020 GLOBAL OUTLOOK
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March:
Economic Impact expected to be
localized and limited to the first quarter of 2020, followed by quick, v-shaped recovery in Q2.
US – Minimal Impact
May or later:
Elevated risk of global recession, as impact
economic impact reaches all major economies and
recovery period drags
US – Elevated Risk Implications to 2020
April:
Economic Disruptions continue into Q2 and
spread to multiple geographic regions.
Modest recovery begins in Q3 and continues into Q4.
US – Minor-Moderate Impact, Swift Recovery
3 scenarios based on containment month (peak of new infections):
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US SECTORS WE ARE TRACKING
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Important Data Release
Transportation and Tourism
Logistics and Manufacturing
BusinessInvestment
Financial
• Entertainment Spending
• Sentiment – Vacations• Hotel Occupancy
Rates
• Purchasing Managers Index
• Automotive Sectors• Electronics Sectors• Imports / Exports• Industrial Production
• New job openings• OT hours• Nonresidential
Construction
• S&P 500,• CBOE VIX• Treasury Yields
• ConsumerSentiment: 3/13
• Retail Sales: 3/17
• Trade Data: 3/6 & 3/26• Industrial Production: 3/17• US PMI: 3/24
• Jobless Claims: 3/5• Job Openings: 3/17• Construction
Spending: 4/1
Most data published daily
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2020 US Outlook
• Expecting continued slowing of growth; with elevated downside risk• Consumer spending is a key strength, need ongoing positivity from consumer sector to keep US
economy on track• Manufacturing and logistics face challenging 1H20• Construction is a bright spot• Financial signals indicate a recession threat in second half of 2020
• Coronavirus increases the downside risk to the outlook• Minimal to moderate economic risks to the U.S. in the short-term• Expect supply chain disruptions and potential shortages• Watch for signs of softening in consumer markets, domestic production, and business investment• New information coming out daily
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KEY TAKEAWAYS
For more information contact:
Nicole Flynnnflynn@prevedere.com
www.prevedere.com
Copyright 2020 Prevedere, Inc. All Rights Reserved
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