August 2020 Volume 2

COVER STORIES

Definition: United States industries that primarily engage in mining, mine site development, and beneficiating (i.e., preparing) metallic minerals and nonmetallic minerals, including coal. The term "mining" is used in the broad sense to include ore extraction, quarrying, and beneficiating (e.g., crushing, screening, washing, sizing, concentrating, and flotation), customarily done at the mine site. Source: Federal Reserve Board. NAICS Code: 212. Index, 2012 = 100, not seasonally adjusted. Ships Annual US Ships and Boats New Orders moved sharply lower off a February 2020 peak. New Orders for the month of May were down 45.4% from May of 2019. Our analysis suggests that the extremely volatile New Orders data is likely to be in a business cycle declining trend in at least the coming quarters. Nascent rate-of-change lows in the JP Morgan Global PMI and the OECD Plus Six Non-Member Economies Leading Indicator point to a first-half-of-2021 business cycle low for NewOrders.This would be consistent with our US Industrial Production outlook. China’s reopening, the associated surge in China's leading indicators, and upward movement in shipping costs are positive signals for the prospect of a 2021 recovery in NewOrders.

Definition: New orders in the United States for engines, turbines, power transmission equipment, generators, gears, motors, drives, speed changers, etc. Source: US Census Bureau. Measured in billions of dollars. Not seasonally adjusted. Mining (excluding oil and gas) Monthly US Mining Production (excluding oil and gas) in June was down 19.1% from the same month one year ago. This is the sharpest decline in Production since the early 1980s. The story does not apply across the board, however; the Coal Mining component declined 30+ percent in each of the last three months relative to one year ago, while the Metal Ore Mining component was down 1.1% in April, 1.9% in May, and 2.2% in June versus those respective months in 2019. The data suggests that being selective about your opportunities is key; the Gold and Silver Ore Mining component, for example, is expanding amid the backdrop of higher pricing for both of these commodities. Our overall outlook for the mining (excluding oil and gas) sector is for decline in the annual average into early 2021. Expect a double digit rate of decline at the trough (year-over-year basis). Recovery and rise will then extend through at least 2022, but we are unlikely to see activity levels return to the pre-pandemic level during this time.

Definition: New orders for ships and boats in the United States. Includes barges, cargo ships, container ships, dredges, drilling platforms, drydocks, ferry boats, fireboats, fishing boats, hyrofoils, naval ships, passenger ships, sailing ships, submarines, towboats, tugboats, yachts, dinghies, inflatable boats, motorboats, rowboats, hovercraft, etc. Source: US Census Bureau. Measured in billions of dollars. Not seasonally adjusted.

FIA MAGAZINE | AUGUST 2020 11