So far, there isn’t much evidence that Europe’s troubles are slowing the US economy. There’s no recession in my forecast for the US, just “muddling” growth. I continue to expect that real GDP will be up by about 2% during both Q3 and Q4. While I expect that there may be earnings disappointments in the coming reporting season for Q3 results, I also see some industries that should have good news:
(1) Construction equipment and farm machinery industries are rolling along. Shipments and exports in US capital goods industries are a bright spot for the US economy. Much of that strength is attributable to construction equipment and farm machinery. Orders for these goods along with heavy trucks rose 70% (saar) during the three months through August (using the three-month moving average). That’s the best growth rate in the history of the series dating back to 1992. It augurs well for the Q3 profits of these industries.
(2) The auto industry is back on the highway. During September, retail auto sales totaled 13.1 million units (saar). That’s up from a recent low of 11.5 million units during June, and back near its high for the year of 13.2 million units in February. The industry’s production is recovering from parts shortages following Japan’s earthquake during March. In addition, the national average pump price of a gallon of gasoline was back down to $3.50 a gallon during the final week of September from a high this year of $3.96 in mid-May. That might explain why light truck sales jumped to 6.0 million units during September, the best rate since March 2008.
(3) Retailers doing well despite weak consumer macro numbers. September saw strong sales as the 23 retailers tracked by Thomson Reuters reported a 5.1% y/y rise in stores open at least a year for the month, beating expectations, for a gain of 4.6%. Both large discounters and high-end retailers beat expectations. This may reflect survivor bias, as they have less competition. The average vacancy rate at malls in the top 80 US markets ticked up to 9.4% in Q3 from 9.3% in Q2, according to data released Friday from real-estate research company Reis Inc. The vacancy rate marked the highest that Reis had on record since the firm started tracking mall data in 2000. September’s Monster Employment Index of online job ads showed the retail industry’s index edging up to the best reading since September 2008 (chart above). Retailers’ payrolls rose 13,600 during September.
(4) The transportation and warehousing industries are preparing for a good holiday season. September’s Monster Employment Index showed the transportation and warehousing index rising to the highest since October 2007. Payrolls were little changed during September in these two industries. Railcar loadings rose to a new cyclical high during the week of October 1, led by a new record high for intermodal containers (chart below).
(5) Help is wanted in the IT industry. The macroeconomic indicators on orders, shipments, and production for the Information Technology industries are mixed. During August, orders for computers and electronic products remained in a flat trend, which started late last year. Industrial output of computer and peripheral equipment during the month rebounded back to the record high at the beginning of this year. However, production of both communications equipment and semiconductors have been flat for several months. Yet September’s Monster Employment survey showed a sharp increase in the IT industry’s index, to the best reading since October 2008.