ASA Advisor: Remainder of 2018 outlook
ASA’s Advisor, exclusively produced for ASA members by ITR Economics, shows U.S. industrial production during the 12 months through May was up 2.8% compared to a year ago. ITR says activity is expanding throughout the industrial economy with U.S. mining production leading the way at a 9.9% increase from a year ago.
ITR says industrial production in the country is growing at an accelerating pace and expansion will persist through the remainder of 2018, but the pace of growth will slow late this year. ITR suggests using the remainder of the year to build a backlog of work to keep your company busy when activity declines in 2019. ITR anticipates a return to growth in 2020.
ITR notes costs for certain commodities, including steel and oil will decline by the end of 2018, “making now an inopportune time to lock in these prices,” it says. “Beware of the threat that trade disputes could pose to your business. Tariffs on steel and a variety of Chinese products could lift prices, posing an upside risk to our inflation expectations and a threat to your budget.”
ITR offers two additional pieces of advice in the near-term. “Ensure that you have the right price escalators to pass on increasing prices to your customers as inflation persists,” it says. “However, if costs for some of your other inputs fall, as we expect with oil and steel, consider passing on these reductions to your customers to keep your prices competitive.”
ITR notes the S&P 500 is in a slowing growth trend. “Be cautious,” it warns. “The current exuberance in the market will not endure forever.”
ITR reports wholesale trade is in an accelerating growth trend. “Pan for slowing growth to take hold in the latter half of this year,” it says. “Build your brand so you can use it as a competitive advantage.”
ITR also notes the Rotary Rig Count is expanding at a slowing pace. “As the global economy loses momentum, anticipate a slowing rate of growth in the demand for oil, placing downward pressure on the number of rigs needed,” it says. “Plan for the rig count to grow at a slowing pace in 2019.”