President Trump Tested Positive for the COVID-19 Virus

By | October 5, 2020

Welcome to FTR’s “Monday Morning Coffee “ blog. The following article is designed to keep busy executives up to date with the latest economic data releases. Released every Monday, this blog promises to keep our clientele updated with the latest weekly economic news and developments, highlighting its impact on the transportation, freight, and equipment markets. Hopefully, this will be an informative addition to the fine body of work associated with FTR.


U.S. stocks closed lower on Friday as news that U.S. President Trump tested positive for COVID-19 put investors in a risk-off mood and added to uncertainties. The Dow Jones Industrial Average fell 134.09 points, or 0.48% to 27,682.81 on Friday, the S&P lost 32.36 points to 3,348.44 and the Nasdaq Composite dropped 251.49 points, or 2.22% to 11,075.02. Trump tweeted late Thursday that he had contracted the virus and would be placed under quarantine, compounding the unknowns of an already volatile market. Stocks pared losses after the White House provided assurances that Trump, while experiencing mild symptoms, is not incapacitated. Equities got a boost after U.S. House of Representatives Speaker Nancy Pelosi’s announcement that an agreement to provide another $25 billion to the aircraft industry was “imminent.” Uncertainty has grown in the last few days as the news spread across the world.

In a busy week off economic data, the jobs report, prospects of additional fiscal stimulus and the president’s positive COVID-19 test result commanded the financial market’s attention. The labor market recovery continues to slow. Employers added 661K jobs in September, which would signal a sharp improvement in normal times, but less than half the jobs created in August. The unemployment rate slid to 7.9%, but twice as many people left the labor force. In short, the labor market continues to recover, but the future has become more uncertain. Recent layoff announcements among household companies has raised the issue that despite the torrid pace of economic growth in recent months, activity remains well below pre-virus levels in many industries. Since there is no end of the pandemic in sight, businesses are adjusting staffing needs, which threaten the recovery’s gains. Millions of Americans are still in a fragile financial shape. The prospects of additional fiscal stimulus surfaced this week. But another fiscal stimulus package remains unsettled and it is unlikely another stimulus bill will pass until after the election.

Personal incomes stumbled in August, but that was almost entirely due to the expiration of the supplemented unemployment benefits at the end of July. Incomes fell 2.6% in August, but spending rose 1.6%, a noted slowdown from July. Consumer spending details show the pandemic pattern, that is, spending on goods is preforming well but spending on services continues to falter. The rebound in services is expected to be slow as the pandemic and restrictions are still affecting the consumer and businesses. The fiscal stimulus helped boost spending in the early stages, without it, the outlook is more uncertain. In a sign, confidence has not faltered, auto sales jumped from 14.9 million annualized units to 16.6 million. It is a good sign for the auto industry, but the kinds of people that buy new cars still have jobs and overall spending is still threatened.

The biggest news of the week was the announcement that President Trump tested positive for the COVID-19 virus, which will dampen both consumer and market sentiment. Despite the economy is still on the toad to recovery, the President’s diagnosis serves as a reminder that the economic rebound is still highly dependent on the trajectory of the virus.

Next week, we get a look at the ISM services index, JOLTS data, wholesale inventories and trade balance. 

Latest Data

The U.S. Economy:

The advance U.S. nominal goods deficit widened from a revised $80.1 billion in July to $82.9 billion in August. Nominal goods exports increased 2.8% in August, boosted by a gain in industrial supplies. Within exports, industrial supplies exports increased 10.6% after increasing 7.7% in July.  Food feed and beverage exports rose 9.8% in August. Nominal goods imports increased 3.1%. The increase in imports was broad based, with only industrial supplies falling. Food, feed and beverage imports posted a solid increase. The rise in the deficit could cut into Q3 GDP growth. Trade is trying to normalize after the COVID-19 crisis caused a global recession.

Personal income fell 2.7% in August, following a 0.5% advance in July. Incomes jumped 12.2% in April because of the CARES Act but as that program faded away, incomes have struggled. The August decline was caused by the end of the $600/week unemployment benefit. Compensation of employees posted a 1.2% gain. Real spending rose 1.6% in August, a noted slowdown from the 5.7% surge in July. The savings rate fell to a still remarkable 17.8% in August from 19.2% in June. Spending remains below where it was in February. Unemployment is high and government support is fading. There is still 11 million less employed people than there were in February. The savings rate is high, but consumers are likely to only increase spending at an increasingly modest pace. Inflation is modest with the GDP deflator only increasing 0.3% in August and was up 1.4% from a year earlier and the core rate was up 1.6%. This means low interest rates for a prolonged period.

U.S. construction spending surprised to the upside in August, following a 0.7% advance in July. Private residential construction spending increased 3.7% in August and was up 6.7% from a year earlier. New single-family construction spending increased 5.5% in August, while the multi-family sector increased only 0.1%. On a year ago basis, single family construction spending was up 2.9% and the multi-family is up 8.9%. Nonresidential construction spending decreased 0.3% from July and was down 4.3% y/y. Public construction spending only inched up 0.1% from July but is up s solid 5.5% from a year earlier. Following a string of losses early in the year, U.S. construction spending has increased three consecutive months. Residential construction spending is being helped by low interest rates. Nonresidential construction spending has fallen for three out of four consecutive months. There is decreased need for new office buildings and the travel industry is still very weak. The future for that sector is weak in the near term. Public construction is supported largely by spending on highway and street spending. We look for modest increases in residential ad public construction spending and weakness in the nonresidential sector.

The ISM manufacturing index step backed in September to 55.4 from 56 in August but remains well above the expansionary 50 mark. The details were generally weaker than in August. The production index back stepped to 61 from 63.3 Fourteen out of 18 industries reported growth in production. The new orders index declined from 67.6 to 60.2 Twelve out of 18 industries reported growth in new orders. The employment index increased from 46.4 to 49.6. The supplier deliveries index increased from 58.2 to 59. There are still ongoing supply chain disruptions causing problems for manufacturers. The inventories index rose from 44.4 to 47.1. This is the third consecutive month that inventories have been below 50. Inventories likely fell in the third quarter but not as much as in the second. The price index increased to 62.8 from 59.5. Commodities in short supply were aluminum, cable assemblies, capacitors and lumber. After posting solid gains for a few months, the ISM index stepped back. Factory conditions will be tested, as COVID-19 cases are continuing to climb and there will be so stimulus until after the election. Some industries will face challenges, such as nondefense aircraft. The newest auto sales report suggest that sector will trending upwards, perhaps faster than expected. Overall, manufacturing will be positive but modest going forward.

U.S. auto sales came in well above expectations, rising from 14.9 million in August to 16.6 million seasonally adjusted, a monthly increase of 11.%. September sales were striking 6.4% above year earlier levels. Unit sales of light trucks rose 12.3% from August and were up 12.6% from September 2019. Car sales were up 9.5% from August and down 9.8% from a year earlier. The jump in sales in September suggest the August slowdown was a aberration. Interestingly, the September sales pace was the same as the final third of 2019. By this measure, vehicle sales have regained their pre-recession trend. The year-over year increase was the first since February and only the third in the last 13 months. Following the Great Recession, it took five years to reach this level. The September sales pace suggest that the August slowdown was an aberration. The next two months will be important for 2021, as some analysts say sales will fall because of new coronavirus infections will slow sales and others speculate we will see 17 million.

Factory orders edged higher by 0.7% in August, a significant deceleration from the growth of 6.4% increase in June and 6.5% in July. Durable goods orders edged up 0.5% in August, after a 11.8% advance in July and a 7.7% increase in June.  12 out of 25 industries within durable goods manufacturing registered month-over-month declines in new orders in August, up from three in July. Nondurable goods orders rose 0.8% in August, a noted slow down from the 1.8% advance in July and the 5.3% increase in June. The important nondefense capital goods excluding aircraft segment rose 1.9% in August, following a 2.6% advance in July and a 4.3% increase in June. The report provides additional evidence that the economy’s recovery has been slowing since the initial bounce from reopening in June and July. The factory sector will face stiffer headwinds in coming months but is still expected to remain positive.

Payrolls increased by 661,000 in August, a noted slowdown from the 1.89 million addition in August and further evidence the recovery is slowing as the pandemic persists. Government was responsible for most of the downshift. After adding 467,000 in August thanks to temporary census hiring, that sector swung to a loss of 216,000 mostly because of a decline in local government payrolls as many school districts decided to maintain remote learning. Similarly, education payrolls declined by 68,500. Service sector payrolls slowed from 977,000 to 784,000. The slowing was concentrated in retail as the burst of rehiring in June and July began to taper off amid the reality of online platforms, the persistence of COVID-19 and stressed incomes. Goods producing industries payroll gains improved from 45,000 to 93,000, driven by additions to durable golds manufacturing. Leisure/hospitality increased hiring from 143,000 to 318,00, as restaurants have been slowly increasing capacity and opening indoor dining. The unemployment rate declined to 7.9% from 8.4% but this mainly happened because of a contraction of nearly 700,000 in the labor force. This drove the participation rate down to 61.45% from 61.7% and compares with 63.2% a year earlier. Household employment slowed to an addition of 275,000 following the gain of 3.8 million in August, an unsustainable rate. Given the large decline in the labor force, it appears many workers that have been unemployed since the pandemic began are giving up. Despite the large gains in payrolls of 11.4 million since May, 10.7 million are out of work. With the economy and employment growth slowing, it will take years to reach February levels.


China’s factory sector extended solid growth in September, as the nation’s crucial export engine shifted to a higher gear on improving overseas demand. The official Purchasing Manager’s Index (PMI) rose to 51.3 in September from 51 in August, according to the National Bureau of Statistics export segment increased to 50.8 in September, up from 49.1 in August, snapping eight months of declines.  A private survey also painted a similar picture, with the index rising to 53. The new orders index was at the highest level since 2011. The export subindex was at the highest level in three years. China’s industrial sector is steadily returning to the levels seen before the pandemic, as pent-up demand, stimulus driven infrastructure expansion and rising exports propelling the recovery. Domestic demand is also showing signs of recovery, with industrial output accelerating the most in eight months in August and retail sales growing for the first time this year. China’s economy grew 3.2% in the second quarter on a year-to-year basis and is set to grow 2.2% this year. While this will be the weakest advance in over three decades, it will be the only major industrial economy to post a positive advance this year.

Important Data Releases This Week

The September ISM services index will be released on Monday, October 5 at 10:00 AM. The re-opening bump in the service sector seems to be losing velocity somewhat. The index came in at 56.9 in August, down slightly from the 58.1 reading in July, but well above the 41.8 reading for April. The August details point to further slowing ahead, New orders fell ten points to 56.8. We see a further retreat in September for the index to 56.3.

The August openings report will be released on Tuesday, October 6 at 10:00 AM. The Job Opening and Labor Turnover Survey (JOLTS) revealed that job openings rose to 6.62 million in July from 6.0 million in June, the third consecutive monthly increase. It is still far from the 7.24 million openings for the same time last year. Furthermore, there are still twice (2.46 million) as many unemployed as there are vacant positions. We think that job openings will rise to 6.5 million in August, indicating the slower trend in employment reflected in the payroll report.

The August international trade report will be released on Tuesday, October 6 at 8:30 AM. The trade deficit widened to $63.6 billion in July, the largest since 2008. The deficit grew as the growth in imports (+10.9%) outpaced exports (+8.1%). Imports have been supported by the soaring growth in consumer durables. Exports are lagging as the global economy is still soft and the pandemic is still alive, reflected by the increased cases in Europe. We think the deficit will widen to $66.5 billion for August.

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About Steve Graham

Steve is one of the premier analysts in the transportation equipment industry. On a monthly basis Steve tracks and analyzes in detail the trailer and heavy-duty truck industry. Aside from following these two sectors he is also instrumental in helping our customers analyze the economy and its impact on transportation and transportation equipment.