ASA Advisor: Build a backlog of work for 2019
ASA’s Advisor, produced by ITR Economics for ASA members, shows a revised forecast for U.S. total industrial production following better-than-expected activity in the business-to-business sector, ITR notes.
ITR says recent tax-law changes appear to be contributing to the elongated business-cycle rising trend by encouraging investment and consumer spending. ITR adds it does not expect those factors to mitigate the upcoming cyclical declining trend.
ITR reports acceleration in U.S. mining production (11%), U.S. utilities (3.8%) and U.S. manufacturing production (2.3%). However, ITR says production will rise through the first half of 2019 and then activity will decline into early 2020 before a rise resumes and persists through the remainder of 2020.
ITR adds that in addition to a stronger-than-anticipated economy fueling more purchases, tariffs and tax cuts are increasing inflation, which is driving up the dollar-dominated value of retail sales. ITR expects retail sales to rise through at least 2020. It adds accelerating growth here likely will persist into early next year, later than previously anticipated before a slowing growth trend takes hold in 2019.
ITR says that although it is calling for a longer rising trend than before, 2019 will be weaker than 2018. ITR suggests preparing for this by building a backlog to keep your company busy through the mild recession in the second half of 2019.
ITR is observing wholesale trade of both durable and nondurable goods rising at an accelerating pace. ITR says wholesale trade will rise in 2019 at a slower pace than in 2018. However, total wholesale trade will not enter recession during this business cycle, but some segments may contract.
On the PVF side, the Rotary Rig Count in the 12 months through September was up 25.6% from one year ago. The Rig Count, ITR notes, is rising at a diminishing rate. ITR notes oil prices will fall later this year, which suggests the Rig Count will face further downward pressure.