"Revving Up: Predicted Rebound of US Industrial Economy in Second Half of 2023"

 

The industrial economy in the United States is expected to pick up momentum later this year, according to top CEOs in the sector who attended the Goldman Sachs Industrial and Materials conference in New York City. The CEOs were described as "super bullish" about the prospects for the industry, with some suggesting that the country was on the brink of a manufacturing renaissance.

There are several reasons for the optimistic outlook, including unprecedented government investment in the form of the Inflation Reduction Act (IRA). This is expected to fuel a significant infrastructure build across the country, which will create opportunities for businesses in the industrial sector. In addition, there are re-shoring initiatives underway, such as the Chips and Science Act, that aim to boost domestic output by strengthening the labor market.

Already, these factors appear to be driving a rebound in the fortunes of industrials in the second quarter. Clean Harbors (CLH) co-CEO Michael Battles said that demand from larger customers was picking up, with more production being done in North America. Similarly, the CEO of truck broker RXO (RXO) Drew Wilkerson said that retail and e-commerce customers were restocking inventory and looking to get orders out to consumers.

However, the U.S. economy is coming off a slow first quarter, with GDP growth at just 1.1%. In 2022, GDP expanded by 2.1%. Investors are beginning to position for a no-recession scenario, with Clean Harbors stock up 22% year-to-date and RXO up 11%. The industrial sector also recorded its first inflows in more than a month, according to new data from Bank of America.

Despite the positive sentiment, the closely watched Dow Transportation Average (^DJT) has underperformed the broader market over the past six months, with a decline of more than 5%. Big-name industrials like Caterpillar (CAT) and John Deere (DE) have also fallen by more than 10% in the past six months.

In conclusion, the industrial economy in the United States is poised for a rebound in the second half of 2023, driven by government investment in infrastructure and re-shoring initiatives. The early signs of a rebound are already visible, with demand from larger customers picking up. However, investors should remain cautious and keep an eye on the performance of the Dow Transportation Average and major industrial companies in the coming months.