Tariffs have cost American companies $46 billion since February 2018

By | January 13, 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.

Overview

Coffee and Economic Review

World stocks set new record highs on Friday and the price of safe-haven assets such as gold pulled back as investors cheered an apparent de-escalation in U.S.-Iran tensions and looked instead to prospects of improved global growth. Markets reversed course from earlier in the week after the United States killed Iran’s most senior general believing it may lead to a full-scale military confrontation. The MSCI world equity index, which tracks shares in 47 countries, resumed its rally and added another 0.1% on Friday to hit another record high. Gold eased 0.1% to $1,550 per ounce from a seven-year high of $1,610.90 after Iran’s missile attack on Wednesday. Brent oil retreated to $ 65.20 a barrel and West Texas Intermediate fell to $59.33 a barrel, down 6% from last Friday’s close.

U.S. stocks fell from record highs on Friday, as investors took profit and data showed a slower than expected pace of job creation. Domestic employment grew by only 145,000, below the forecast for a 164,000 increase. Still, the employment gains is more than enough to keep the longest expansion on track. The Dow Jones Industrial Average fell by 133.13 points, or 0.46% to 28,823.77, while the S&P lost 9.35 points to 3,265.35. For the week, the Dow gained 0.7% and the S&P rose 0.9%. The gains followed easing tensions between the U.S. and Iran and firmer hopes for a U.S.-China trade deal. With forth quarter data starting to flow in, profits for S&P companies are expected to decline 0.6%, the second quarterly decline, according to Refinitiv IBES.

The week began on rising tensions over the killing of Iranian General Qasem Soleimani ad Iran responded with non-lethal airstrikes on U.S. facilities. President Trump said the U.S. has no plans to escalate and the Iranians have concluded their response for now. Stocks ended the week higher and oil ended the week about $2 a barrel higher.

The first report from last week on manufacturing was disappointing, with the ISM manufacturing index, which showed the fastest rate of contraction since the height of the 2008 recession. In contrast, the non-manufacturing index rose to 55.0, the fastest rate of expansion in four months. The employment component of the services ISM remained positive, but slowed from the previous month, heralding the weaker employment report. The labor market as been on a good run, but this report suggests some softening in job creation. There was potential good news coming from the narrowing of the trade deficit, which will boost fourth quarter growth. However, the declines in imports may be temporary and traced to the trade tariffs. A reversal may be expected in coming months.

Tariffs imposed by President Trump have cost American companies $46 billion since February 2018. The lions’ share came of higher tariff costs, some $37.3 billion came from China. Exports of U.S. goods hit by retaliatory tariffs hit by China and other countries fell 23% in the 12 months ending in November. Even when the tariffs were removed, exports did not bounce back. U.S. exports subject to retaliatory tariffs in China were 26% lower in the 12 months ending in November, while exports not subject to tariffs were 10% higher than 2017 levels. After Canada and Mexico rolled back tariffs, exports have not rebounded. Trade has not started growing again in the six months since the tariffs have been removed. That pours water on the expectations that sales and trade will start growing again after the tariffs go away.

This week, we get a look at the NFIB small business index, CPI and PPI data, retail sales, industrial production, housing starts and business inventories. The economy seems to be tracking near the 2% long-term trend. Not fast enough to grow imbalances in the economy but strong enough to keep the expansion growing.

Latest Data

The U.S. Economy:

The December NFIB small business confidence report will be released on Tuesday, January 14 at 6:00 AM. The index is expected to track a couple of points higher than the 104.7 reading on successful trade relationships with China.

The December CPI index will be released on Tuesday, January 14 at 8:30 AM. We expect the index to advance 0.3%, the same increase as in November. The core PI is expected to increase 0.2%, on trend.

The December PPI index will be released on Wednesday, January 14 at 8:30 AM. We expect the index to advance 0.0%, after rising 0.2% in November. The core PI is expected to increase 0.2%, on trend.

December retail sales will be released on Thursday, January 16 at 8:30 AM EDT.  After posting a decent November, we are looking for a 0.2% in sales for December. Sales excluding autos are projected to rise 0.1%.

November business inventories will be released on Thursday, January 16 at 10:00 AM EDT.  Inventories are excessive, part of the reason for the weakness in manufacturing. We look for a 0.2% rise n business stocks in November.

December industrial production will be released on Friday, January 17 at 9:15 AM EDT. Manufacturing has been volatile due to the UAW strike and Boeing’s ongoing 737 MAX issues. Production jumped in November after auto output started up, but that won’t repeat in December. After the big 1.1% jump n total IP, we see a 0.1% decline in December.

December housing starts will be released on Friday, January 17 at 10:00 AM EDT. Housing starts are projected to track slightly lower from an annual pace of 1.370 million to 1.365 million. Permits are projected to come in at 1.474 million, down from November’s 1.475 million.

Important Data Releases This Week

The December NFIB small business confidence report will be released on Tuesday, January 14 at 6:00 AM. The index is expected to track a couple of points higher than the 104.7 reading on successful trade relationships with China.

The December CPI index will be released on Tuesday, January 14 at 8:30 AM. We expect the index to advance 0.3%, the same increase as in November. The core PI is expected to increase 0.2%, on trend.

The December PPI index will be released on Wednesday, January 14 at 8:30 AM. We expect the index to advance 0.0%, after rising 0.2% in November. The core PI is expected to increase 0.2%, on trend.

December retail sales will be released on Thursday, January 16 at 8:30 AM EDT.  After posting a decent November, we are looking for a 0.2% in sales for December. Sales excluding autos are projected to rise 0.1%.

November business inventories will be released on Thursday, January 16 at 10:00 AM EDT.  Inventories are excessive, part of the reason for the weakness in manufacturing. We look for a 0.2% rise n business stocks in November.

December industrial production will be released on Friday, January 17 at 9:15 AM EDT. Manufacturing has been volatile due to the UAW strike and Boeing’s ongoing 737 MAX issues. Production jumped in November after auto output started up, but that won’t repeat in December. After the big 1.1% jump n total IP, we see a 0.1% decline in December.

December housing starts will be released on Friday, January 17 at 10:00 AM EDT. Housing starts are projected to track slightly lower from an annual pace of 1.370 million to 1.365 million. Permits are projected to come in at 1.474 million, down from November’s 1.475 million.


FTR is the leader in economic analysis and forecasting for the commercial freight and transportation equipment markets. For more information: Click here

Category: Monday Morning Coffee Tags:

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.