April 2020 was a historically bad month for the US economy. We saw unprecedented decline in monthly US Industrial Production and US Total Retail Sales. However, the latter months of the second quarter are showing improvement. These small green shoots bode well for the US economy’s expected transition to a recovery trend in the second half of the year.
May data for Production and Retail Sales showed post-WWII record rises relative to the respective April figures. US Crude Oil Futures Prices also rose a record $16.65, nearly doubling over the course of May. Furthermore, the stock market has generally risen off late-March lows, buoyed by the above developments as well as the massive fiscal and monetary stimulus. Nascent rise in leading indicators such as the US ISM PMI (Purchasing Managers Index) and the JP Morgan Global Purchasing Managers Index monthly rates-ofchange gives further reason for cautious optimism regarding the future recovery trend.
All of the above is not to say we are completely out of the woods; we are not. More datapoints are needed to confirm the tentative reversals exhibited in some of the May datapoints. Regardless, the US economy faces a long road to full recovery. We expect quarterly US Real Gross Domestic Product (GDP) to trend below its pre-black swan heights until around mid-2021 and annual US Industrial Production to be below pre-black swans levels through at least 2022. Nevertheless, and barring a secondary wave of COVID-19 shutdowns, the recovery will begin sooner rather than later, and the stimulus-fueled rise will be relatively robust. This means that businesses that tend to move in tandem with the US economy will need to move expediently to prepare for the next business cycle rising trend.
Ask yourself what you wish you had done differently at the bottom of the 2015-16 cycle, the 2008-09 Great Recession cycle, or, if your firm was around, the 2001-02 or early-1990s cycles. While the drivers of recessions may differ, the fact that the US economy will ultimately recover and rise remains the same. Don’t fall victim to the pessimism of the moment and fail to position yourself for the future macroeconomic growth trend.