Despite weak growth in the US on a macroeconomic basis toward the end of 2012, we have continued to see very promising signs from an industry perspectiv e, particularly in the housing, manufacturing , shipping and oil & gas sectors, key theme s we have been highlighting for several quarters ( see: ' Key Sectors To Drive Growth Over The Forecast Period ', December 03 ) .
Regular readers will know that we have been bullish the US housing sector since October 2011, and remain so as several dynamics continue to provide support. First, the residential housing market hit a cyclical low following the crisis, and still has much more room to rebound. Second, the sharp price declines in previous years, combined with record low financing costs, mean that affordability continues to improve. Third, while cheap by historical standards, house prices are now firmly in positive growth territory, providing a tailwind for homebuilders' profitability and household ( see RHS chart) and bank balance sheets, which are still healing from the financial crisis. While the rate of growth in the housing sector is likely to slow and become more uneven over the coming months, we believe that the residential construction sector will continue to improve.
|Housing Recovery On Track|
|US - NAHB Housing Confidence & Starts (LHS) & Household Net Worth (RHS)|
The manufacturing outlook is also positive . A fter hitting 49.9 in November, manufacturing PMI has been in expansionary territory for the last three months (a reading over 50 means expansion). This chimes well with data compiled by our Autos team . C ar and light truck production grew by 20% in 2012 , as pent up demand from during the crisis re sulted in much higher car sales. W e forecast production to rise by approxim ately 7.0% in 2013 and expect sales to return to the 16mn units per annum (for light vehicles) mark well within our five-year forecast period. W e believe that interest-rate sensitive goods like autos should benefit from record -low borrowing costs , a s well as continued improvem ents in consumer credit growth, rising wages , and household wealth.
|Manufacturing A Comeback|
|US - PMI Indices (LHS) & Cars & Light Truck Production (RHS)|
Freight And Shipping
The shipping and freight sectors are also booming , as the US economy begins re-orienting towards the external sector . T otal container throughput at the P ort of Long Beach in California continues to rise dramatically, growing by 34 .0 % y-o-y in February. This also chimes well with what we are seeing in the mining sector, where the US i s exporting increasing ly large amounts o f coal to Asia as rising domestic production and lower consumption result in a dramatic increase in surplus production ( see RHS chart ) . Also, w ith many companies relocating manufactur ing facilities back in the US, manufactured goods exports will increase over the coming years . Lastly, we believe the US will become a n exporter of natural gas, with the development of Cheniere 's liquefied natural gas export terminal in Sabine Pass , providi ng yet another tailwind to the export sector in 2015-2016 .
|US - Port Of Long Beach Containers, TEU, (LHS) & Coal Trade (000 Short Tons)|
Oil And Gas
Following on from the last point, the oil and gas sector in the US will continue to expand rapidly . Oil production growth averaged 16 .0% y-o-y in H212, a trend we believe will remain in place as the implementation of fracking technologies boost s output. W e forecast US production to rise from 11.2mn barrels per day (bpd) in 2012 to 14.3mn bpd over the next 10 years , and these forecasts are actually somewhat conservative relative to consensus forecasts. Not only will this increase in output help reduce the large oil-related import bill, but the surge in local production has eased domestic energy prices, providing US industry with a significant cost advantage compared to their Europe an and Asia n counterparts .
|Surging Production To Continue|
|US - Oil Production|