QUARTERLY ECONOMIC OUTLOOK - Prevederego.prevedere.com/rs/626-HMJ-058/images/2020-US-Economic... · 2020. 6. 22. · Index • Automotive Sectors • Electronics Sectors • Imports

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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.


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% C

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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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2004 2006 2008 2010 2012 2014 2016 2018 2020

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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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DISAPPEARING PURCHASING POWER GROWTH


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RECESSION LEADING INDICATOR SUMMARY


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


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


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IMPACT ON GDP GROWTH


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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

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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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CBOE Volatility Index (VIX)

FINANCIAL MARKETS RESPONDING


Source: Chicago Board Options Exchange, Bloomberg

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2020 GLOBAL OUTLOOK


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


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


KEY TAKEAWAYS

For more information contact:

Nicole [email protected]

www.prevedere.com


Documents

QUARTERLY ECONOMIC OUTLOOK - Prevederego.prevedere.com/rs/626-HMJ-058/images/2020-US-Economic... · 2020. 6. 22. · Index • Automotive Sectors • Electronics Sectors • Imports