As 2021 looms ahead, plenty of signals are emerging from the US economy to give cause for optimism. Our dashboard of leading indicators suggests that, barring widespread shutdowns, the US industrial sector will transition to a business cycle rising trend in the coming months. We also expect a more inflationary environment in 2021 as recovering industrial activity yields higher demand for inputs. The distribution of a COVID-19 vaccine will likely aid in the bourgeoning recovery.

Further cause for optimism stems from US Nondefense Capital Goods New Orders (excluding aircraft); quarterly New Orders are already up 7.8% compared to the same time period in 2019. We expect business- to-business spending to generally rise through at least 2021. Within the B2B sector, US Computers and Electronics New Orders and US Nondefense Communications Equipment New Orders are driving recent positivity as employees and firms procure equipment to facilitate remote work and investment related to the 5G rollout occurs. In contrast, the US Machinery New Orders segment of the B2B world is having a more sluggish recovery, with quarterly New Orders 0.6% below the year-ago level. Those tied to this sector may still experience some weakness heading into 2021, but that weakness will give way to strength as 2021 progresses.