Economic and Financial Resources

Ten Key Insights from the Q2 2024 Report: “Divergent Outcomes Are Likely in 2024”

1. US Material Handling Equipment New Orders in the 12 months through February were 5.5% above the year-ago level.
2. ITR expects slowing growth for US Real GDP in 2024, with the potential for one quarter of mild decline. The retail and services sectors are likely to see slowing growth.
3. Businesses are showing hesitance towards capex amid the slowing macroeconomy, high borrowing costs, and tight credit conditions. Total Manufacturing New Orders have plateaued and existing manufacturing capacity is being utilized at a lower rate.
4. ITR revised the forecast for US Industrial Production to reflect a milder downturn in 2024.
5. Extra inventory will likely be absorbed in 2024. Tight labor conditions will likely put upward pressure on wages, which will improve the financial health of consumers and allow them to buy more goods, ultimately benefiting the industrial sector.
6. US Private Warehouse Construction in the 12 months through February came in 6.0% above the year-ago level at $70.4 billion. Annual Construction tentatively reached a peak in January; expect decline through the first half of 2025.
7. Retail Sales continue to slow in growth as consumers are still impacted by previously high inflation. In recent months, inflation has been stubborn in coming down despite efforts by the Federal Reserve to tame it toward their 2% target rate. We are seeing mild deflation in US. Consumer Prices for Durable Goods, which are down 2.1% over the last 12 months, as the business cycle weakens.
8. Annual US Light Vehicles Retail Sales are up 11.8% from one year ago, but are slowing in growth.
9. Consumers are the bedrock of the US economy, and middle-to-upper-income demographics are proving resilient. Consumers are buying a record dollar-value and volume of goods and services, funded through rising income, lower savings, and in some cases more debt.
10. Food manufacturing corporate cash holdings are mildly rising and above pre-pandemic levels, which could be put to use by investing in new capacity. However, the decline in existing capacity utilization may stunt capex.

Takeaways for Your Business:

• Downward pressure is likely to last for much of 2024 but will be relatively mild. It is important to start preparing now for the next cyclical rising trend in 2025 and 2026, keeping implementation times in mind. What can you do to improve efficiency and margins? What can you do to reduce the impacts of a tight labor market on your business? What new markets or products might you want to move into?
• Try to keep an extra cash buffer this year to help you mitigate the current high interest rates and to provide both security and flexibility.
• This year will also be a good time to try to improve efficiencies and cut back on discretionary spending to help offset the impacts of wage pressures.

Ten Key Insights from the Q1 2024 Report: “Economic Overview”

1. US Material Handling Equipment New Orders in the 12 months through November were 6.4% above the year-ago level. We anticipate decline in annual New Orders in the near term as financial pressures mount and spending on goods decreases.
2. For many markets, mild decline will be the predominant trend in 2024. Consumers, who are a driving force of the US economy, are facing budget challenges.
3. On the business side, corporate profits are below the year-ago level, corporate bond yields are elevated, and bank lending standards are tightening.
4. The US is still a great place to do business, and we expect the economy to resume its ascent in 2025 and rise through at least 2026. A shift in monetary policy to something more accommodative will likely be a contributing factor.
5. Annual US Industrial Production in November came in at roughly the same level as one year ago. We anticipate that the recent months of mild decline will give way to more pronounced decline this year, extending through year-end.
6. Businesses are likely hesitant to invest in capital goods as financing costs remain high and economic uncertainty prevails.
7. US Private Warehouse Construction in the 12 months through November came in 8.7% above the year-ago level at $70.2 billion. Annual Construction spending will peak in the near term.
8. The majority of 2024 will be characterized by decline for annual Production as consumers contend with affordability constraints, illustrated by rising auto loan delinquency rates. While the average consumer is in a relatively stable financial position going into this macroeconomic recession, many will forgo purchasing big-ticket items such as cars during this time as economic uncertainty impacts consumption.
9. Annual US Food Production in November came in 1.5% below the year-ago level. Annual Production will decline for about another two quarters.
10. US E-Commerce Retail Sales in the 12 months through September totaled $1.097 trillion, 7.5% above the year-ago level. Growth has been slowing since early 2021.

Takeaways for Your Business:

• Many indicators point to decline in industrial activity in the quarters ahead.
• The sustained inversion of the yield curve remains a downside risk, and we foresee consumer weakness on the horizon.
• Evaluate your cash position periodically as we head into a mild macroeconomic recession and lead with optimism, as downturns are temporary.