Decode US Economic Data : Invest Smarter !
Two more economic reports were released on Fri, 14 Feb 2025, resulted in a confusing picture of the current state of US economy and it's direction, when considered alongside other recent data.
Don’t believe, take a look.
US Retail Sales - January 2025.
(1) Month-over-Month report.
Most media chose to focus on the month-over-month (MoM) US retail sales data/report, painting a “gloomy” outlook. (see below)
In short, headline retail sales fell -0.9% for the month from an upwardly revised +0.7% gain in December 2024 as reported by US Commerce Department's Census Bureau.
It fared worse than the Dow Jones estimate of a -0.2% decline.
(2) Core Month-over-Month report.
Excluding the “auto” component, US Core retail sales (MoM) for January 2025 also fell but less “epic” in magnitude, comparatively speaking. (see below)
Excluding autos, prices fell -0.4%, also well off the consensus forecast for a +0.3% increase.
Similarly, December “core” sales also saw an upwards revision from -0.4% (initially reported) to +0.7%, that is actually a whooping +1.1% upwards revision.
Could the Census Bureau be any more “off” in their data collection & processing, I wonder while studying the data ?
(3) Year-over-Year report.
Thankfully, Forbes provided a more “balanced” reporting, choosing to give the YoY report a highlight, balancing media’s emphasis in the process. (see below)
For January 2025, US retail sales YoY actually fell by -0.16% from an upwardly revised December sales of +4.36%.
Initial reading for December sales was 3.92%, implying a +0.44% upwards revision subsequently.
Compared to December 2023 sales data, it is actually up by +0.23% from 2023’s initial data of 4.09%, that was subsequently revised down to 3.97% in January 2024.
Same set of data but reported differently does indeed give a very different perspective of things.
Personally I think the YoY comparison is more equitable compared to the MoM comparison, when looking at things from a 12-month perspective.
US Industrial Production - January 2025.
The other economic report out on Friday was US Industrial production report, also in the MoM and YoY flavours.
(1) Month-over-Month report.
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US industrial production increased by +0.5% in January 2025, surpassing expectations of a 0.3% rise.
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This was primarily driven by a significant +7.2% boost in utilities output due to colder winter temperatures.
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Consumer-goods production was the strongest in 5 months, followed by non-durable goods.
Report by Market Groups.
(2) Year-over-Year.
YoY, Industrial production in US rose by +2.0% in January 2025 versus market expectations of +1.2%, marking the largest annual increase since October 20224.
This growth reflects a recovery in production levels when compared to previous year, with utilities contributing significantly to the increase
YoY Manufacturing Production in US increased +1% in January 2025, (a) the biggest rise since December 2023 and (b) compared to a -0.1% fall in December 2024.
Manufacturing Production in US, averaged 3.55% from 1920 until 2025, peaking at 67.90% in July 1933 and bottoming with -39.40% in February 1946.
Another thing to note is that despite two straight months of gains, the industrial sector has shown little overall expansion since early 2022, when output plateaued following the recovery from the coronavirus pandemic.
US Economy - Latest.
Below are the economic reports out in February 2025, so far:
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ISM Service PMI (06 Feb 2025). Fell against forecast and December 2024’s data,
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Non-farm payroll (07 Feb 2025). Fell against December 2024 data and missed expectations.
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Consumer price index (12 Feb 2025). Rose against December 2024 data, missing forecast.
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Producer price index (13 Feb 2025). Rose against December 2024 data, missing forecast.
Overall US economy for January 2025 is a mixed bag of signals, definitely edging towards a “rising” price situation.
While there is cause for precaution, analysts agreed that it is still “too early” to conclude.
At the same time, the National Retail Federation (NRF) has put out a statement, appealing to Trump’s reciprocal tariff memorandum hoping that the returned President will not enact it (in April 2025) due to : (see below)
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Disruptions to US supply chain.
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Higher prices for American household.
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Reduced American citizens’ purchasing power.
Did You Realize ?
Each economic report is a mosaic of diverse components that collectively form a monthly snapshot, offering investors valuable insights into potential sectors and specific US stocks that may present promising investment opportunities.
Based on the reports out so far, below are “best” performing sectors and associated stocks :
Of all the stocks in the table above, I have covered a handful in the past and recently.
In this post, will focus on healthcare stock - $UnitedHealth(UNH)$.
This company is a compelling investment opportunity because of (a) its strong financial performance and (b) market position.
Q4 2024 Earnings.
Its Q4 2024 earnings results spoke volume:
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Earnings per share (adjusted) : came in $6.81 per share vs analyst estimates of $6.724.
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Revenue: reached $100.81 billion, demonstrating UNH’s ability to generate substantial income despite challenges4.
UNH's diversified growth strategy, focusing on expanding services through Optum and UnitedHealthcare, has led to consistent revenue increases.
Quarter Outlook.
UNH has affirmed its 2025 outlook projection:
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Earnings per share (adjusted) : estimated between $29.50 to $30 per share.
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Revenue : coming in between $450 billion - $455 billion.
Latest guidance suggests continued confidence in the company's growth trajectory and operational efficiency.
Company’s Risk.
However, investors should be aware of the potential risks associated with the tragic murder of UnitedHealthcare CEO Brian Thompson.
The incident has led to a significant stock price decline, with UNH shares falling nearly -14.29% since the event on 04 Dec 2024. (see below)
His untimely demise has contributed to broader market volatility and raised concerns about executive safety in the healthcare industry.
While the long-term impact remains uncertain, UNH's strong fundamentals and diversified business model may help mitigate these short-term challenges.
And just for the record, as of December 2024, the latest statistics on the aging population in the US and globally show a significant trend towards an older demographic:
In the US:
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There were 57.8 million adults age 65 and older in 2022, accounting for 17.3% of the total population5.
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By 2050, the number of Americans ages 65 and older is projected to increase to 82 million, representing 23% of the population7.
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Median age of the US population increased from 30.0 in 1980 to 38.9 in 2022.
Globally:
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In 2020, 13.6% of the population in Asia and the Pacific was aged 60 years or over.
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By 2050, the population in Asia and the Pacific, totaled 25%, is expected to be 60 years or older.
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Worldwide, 10% of the population is ages 65 and older, while 25% are under age 15.
All above statistics shows that healthcare will only get increasingly crucial & relevant over time, ignoring the question of affordability.
Despite a falling stock price, UNH at $520+ per share is still hard to own. Alternatively, could explore ETFs that has UNH in its holdings:
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$iShares U.S. Healthcare Providers ETF(IHF)$ - this ETF holds UNH as its largest position, comprising 23% of the fund's assets
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iShares S&P 500 Health Care Sector UCITS ETF EUR Hedged (Dist): This ETF holds 9.30% of UNH in its portfolio and is domiciled in Ireland, with lower tax on non-US citizens dividends.
With a market cap of $481.78 billion, this healthcare “giant” is not going to evaporate into thin air any time soon ? Agree ?
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Do you think inflation will rear its ugly head again in the US ?
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Do you think UnitedHealth Group or its ETF equivalent is a long-term strategic investment ?
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