COVID-19
Economic Recovery
Dashboard

The global pandemic has impacted our state, nation, and the world in extraordinary ways. Illinois is on the road to recovery, led by our state’s manufacturing sector that has helped meet every challenge in our nation’s history. The Illinois Manufacturers’ Association is a trusted partner, working side-by-side with our state’s manufacturers and businesses during the crisis, to provide accurate and timely information to ensure your business can continue operating safely and efficiently.

The IMA drafted the essential manufacturing designation in Illinois and helped develop reopening guidelines in Illinois and Chicago. Now, we are sharply focused on rebuilding and recovering our economy to move Illinois forward including working with the Administration to help with the vaccine distribution. This dashboard spotlights key indicators to help guide business investment and policy decisions by our elected officials.

Southern Storm Impacts Nationally

While media coverage of the February storm focused on the havoc in Texas and parts of southern United States, it also created an negative economic impact in Illinois and across the entire nation. With a power grid at the point of failure, Texas officials moved to rolling brownouts and blackouts for residential customers and forced refineries and petrochemical plants to shut down with little notice.
As a result of these shutdowns, the United States saw significant capacity reduction for ethylene, polypropylene, benzyne, styrene, and other similarly situated products. For most of these products, more than 70 percent of capacity was shuttered creating a domino effect resulting in tight markets and rapidly rising costs that are negatively impacting customers who are also receiving Force Majeure letters.
In central Illinois, many local governments were forced to buy natural gas on the spot market with residential and business customers seeing their heating bills skyrocket. Illinois has already provided $15 million in low interest loans to small towns in the area to help them address the costs.
Manufacturers are closely watching the Texas region as these companies attempt to restart their facilities and ramp up production.

The Illinois Department of Employment Security publishes monthly Unemployment Rates, comparing Illinois’ rate to the United States’ national rate.

The Illinois Department of Employment Security publishes Unemployment Insurance (UI) data. UI statistics are derived from administrative data collected on individuals currently applying for and those receiving Unemployment Insurance. Current and historical data is also available monthly, quarterly, semiannually and annually.

The State of Illinois Department of Employment Security (IDES) publishes monthly Current Employment Statistics (CES). CES are available in aggregate (Total Nofarm) and by industry/sector.

The State of Illinois Department of Employment Security (IDES) publishes monthly Current Employment Statistics (CES). CES are available in aggregate (Total Nofarm) and by industry/sector.

The Job Openings and Labor Turnover Survey (JOLTS) program produces experimental estimates for all 50 States and the District of Columbia at the total nonfarm level on job openings, hires, and separations.

The State of Illinois Department of Employment Security publishes Local Area Unemployment Statistics (LAUS), monthly and annual estimates of the labor force, employed, unemployed and the unemployment rate for the State, metropolitan areas, counties and municipalities that have a population of at least 25,000.

Mapped below is the current unemployment rate for each County in Illinois.

An indicator of the economic health of the manufacturing sector, the Purchasing Managers Index (PMI) is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The PMI is a measure of the prevailing direction of economic trends in manufacturing. The index is based on a survey of manufacturing supply executives conducted by the Institute of Supply Management. Participants are asked to gauge activity in a number of categories like new orders, inventories, and production and these sub-indices are then combined to create the PMI. A PMI above 50 would designates an overall expansion of the manufacturing economy whereas a PMI below 50 signifies a shrinking of the manufacturing economy.

The US Census Bureau collects and publishes data to provide broad and timely measures of combined changes in domestic retail trade, wholesale trade and manufacturers’ activities. The estimates in this report are based on data from three surveys: the Monthly Retail Trade Survey, the Monthly Wholesale Trade Survey, and the Manufacturers’ Shipments, Inventories, and Orders Survey.

  • Monthly Retail Trade: Companies with one or more establishments that sell merchandise and related services to final consumers.
  • Monthly Wholesale Trade: Companies with employment that are primarily engaged in merchant wholesale trade in the U.S. These include merchant wholesalers that take title to the goods they sell, and jobbers, industrial distributors, exporters, and importers. Excluded are non-merchant wholesalers such as manufacturers sales branches and offices; agents, merchandise or commodity brokers, and commission merchants; and other businesses whose primary activity is other than wholesale trade.
  • Manufacturers: Companies that have employees and are classified in Manufacturing. Participating companies include most with 1,000 or more employees and a sample of smaller companies; changes in their performance are assumed to represent all employers.

Note from the Census Bureau: Due to recent events surrounding COVID-19, many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in this release meet publication standards.

Published by the Chicago brand of the United State Federal Reserve Bank (Chicago Fed), this series represents the contributions of the manufacturing sector to the Midwest Economy Index (MEI). This series is a weighted average of state and regional indicators encompassing the entirety of the five states in the Seventh Federal Reserve District (Illinois, Iowa, Iowa, Michigan, and Wisconsin). The series measures the growth in nonfarm business activity in the Midwest Region based on the manufacturing sector. A zero value represents an average contribution to the MEI by the manufacturing, whereas a positive value indicates that an above-average contribution to MEI; and negative values indicate below-average contribution to MEI.

The Illinois Department of Revenue publishes monthly data on tax collections by source. Below is corporate (business) income tax collections, and individual income tax collections since January 2019.

The Illinois Department of Revenue publishes monthly data on tax collections by source. Below is retail sales tax collections, and motor fuel (gasoline) tax collections since January 2019.

The Illinois Commission on Government Forecasting & Accountability (COGFA) publishes monthly data that includes the previous month’s number of construction permits issued for new single family homes.

The Illinois Commission on Government Forecasting & Accountability (COGFA) publishes monthly data that includes the previous month’s number of new car and truck registrations.

The Illinois Commission on Government Forecasting & Accountability (COGFA) publishes monthly data that includes the previous month’s total exports from the state of Illinois.

Chips and the Dip

In the fourth quarter of 2020 news of a semiconductor shortage begun rumbling thorough the auto industry with Volkswagen AG formally warning investors on December 18th that a “massive semiconductors supply bottleneck is causing considerable disturbances for our manufacturers.” The news came as the auto industry was already struggling to keep up with a V-shaped demand recovery in the second half of the year. The announcement from Volkswagen was soon followed up with similar commentary from peers around the world who were now being forced to cut back on production due to limited availability of semiconductors. While much of the pain being felt by the auto industry is a self-inflicted wound, the shortage of semiconductors is also impacting a wider swath of manufacturers who produce everything from appliances to gaming consoles. Semiconductor suppliers are working to bring on new capacity, but it is a lengthy process which will take some time to catch up with accelerating demand.
Automakers came into 2020 with high hopes after seeing little growth in global light vehicle sales over the prior three years. Those hopes were dashed as the Covid-19 pandemic rapidly spread around the world, forcing automakers to idle plants. Several semiconductor chip suppliers note that demand from the auto sector dropped rapidly, dipping to 20% of normal levels. At the same time, government-imposed lockdowns forced parents and children alike to work from home. These mandates fueled an explosion in demand for electronic devices and broadband services as households moved from one computer to one-per-person, and consumers sought to improve the creature comforts of home with new TVs and appliances. Semiconductor suppliers, who were also impacted by Covid-19, responded as best they could by drawing down already low inventories and by reallocating what capacity they could from the auto industry to these now rapidly growing end markets.
To the surprise of many, the Auto sector saw a V-shaped recovery in demand start to take shape in Q3. Moody’s estimates that global auto sales rebounded by 40% in the second half of 2020. In the US the surge was fueled by government stimulus checks and consumer desire to drive rather than jump on public transportation. Many an auto OEM and parts supplier had not anticipated the strength of the recovery and thus did not provide semiconductor manufacturers with proper guidance on demand for chips. Semiconductors require a long lead time, taking over three months from beginning to end to manufacture. The auto sector, which generally operated on a just-in-time basis, came back begging only to find inventories had been burned down and they were now standing at the back of the queue for new supply. Looking into 2021, Moody’s forecasts that North American auto production will likely be 300,000 units or more lower than would be expected if not for this shortage of supply, while General Motors and Ford cut their combined full year 2021 EBIT guidance by $2.5B – $4.5B. As the CEO of Microchip Technologies put it, “In automotive a $1 part can prevent a $40,000 car from shipping” which is why the pain felt by the auto sector has been so acute.
After years of facing demand growth below GDP, semiconductor companies have been conservative with capacity additions, which adds to the current supply constraint. The outlook is improving though. In the back half of last year, the semiconductor sector witnessed broad-based demand growth across geographies and end markets leading to 7% year-over-year revenue growth for the industry in 2020. On a recent earnings call, capital equipment supplier Applied Materials said that semiconductor consumption is likely to increase by 15% in 2021, and that the industry is now only in the very early innings of a decade plus investment cycle. This view is echoed by many sector participants who see the semiconductor industry now stands on the precipice of a cyclical shift in demand driven by multiple mega trends which include 5G, data centers (Cloud/hyperscale), the Internet of Things (IoT), machine learning/artificial intelligence (AI), and electrification (EV)/autonomous driving. In the manufacturing sector IoT connects millions of devices which collect troves of data. Much of that data is stored in the cloud. 5G allows that data to move at a faster pace and scale with reduced latency. AI creates a step change in the ability to process data into useful information. Each of these applications is seeing an accelerating pace of adoption which is expected to drive stronger demand for semiconductors.
The auto market is viewed as one of the fastest growth end markets for semiconductors going forward. Advanced driver-assistance systems (ADAS, anti-lock brakes, collision warning, lane departure, etc.) are features consumers want – and an offering which helps boost OEM margins – but also increase semiconductor content per vehicle. General Motors intends to spend $27B through 2025 to introduce ~30 new electric vehicle models to the market and has set a goal of selling only electric vehicles (EV) by 2025. The World Economic Forum forecasts that by 2030 there will be over 215M EVs on the road vs. 7M today. Deloitte Automotive Lead Analyst Michael Woodward estimates that a light vehicle utilizing a conventional internal combustion engine (ICE) contains 1,300 semiconductor chips whereas an electric vehicle may have 3,500. Autonomous driving brings in more sensors, cameras, LIDAR, etc., which again boosts semiconductor content per vehicle. At a recent sell-side Auto Sector conference, the CEOs of Ford and General Motors both laid out the strategic importance of digital product strategies. The auto OEMs are looking to improve customer loyalty, reduce costs, and expand their revenue sources. This shift is enabled by greater connectivity, which again requires more semiconductors.
Perhaps it should come as no surprise that the world’s largest semiconductor foundry, Taiwan Semiconductor Manufacturing Corp, said on their fourth quarter earnings call that working with Auto customers to mitigate the supply shortage was a priority for the company. The US automakers cause was also likely helped when President Biden’s top economic adviser rang up the Taiwanese government officials asking for their assistance in directing more supply to General Motors and Ford. The most recent forecast from General Motors management was more upbeat, with CFO Paul Jacobson saying, “Over the last few weeks we have seen the situation get better for us.” Management is now confident that the company will hit its full-year guidance and noted that they have a higher level of conviction on that view vs. two weeks prior.
The improved situation for General Motors may well come at the expense of other manufacturing companies. On Q4 earnings calls NXP Semiconductor, Microchip Technologies, and Analog Devices each said that while there will be improvement the imbalance between supply and demand in the semiconductor market is likely to last into 2022. This would imply that if General Motors is sorted out, there is perhaps less supply available for others. Semiconductor backlogs are at record levels, and inventories remain very low which increases leverage for chip producers. The Manufacturing sector will be facing cost inflation with suppliers raising prices and introducing stricter commercial terms to ensure orders are not padded. Microchip Technologies warned customers it was shifting its cancelation/reschedule policy from 45 to 90 days and saw not a single order fall from its record orderbook.
The shortage of semiconductors has garnered the attention of the White House as reduced manufacturing activity hampers President Biden’s job creation platform. The President signed an executive order directing the government to begin a 100-day review of critical supply chains, which includes semiconductors. Biden will also put his weight behind final passage of the Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS) which looks to provide $37B in incentives for a buildout of domestic semiconductor manufacturing capacity. Today only ~12% of global semiconductor chips are produced in the United States. Semiconductor companies and governments in Europe, China, and India are all looking to increase production, but adding new greenfield capacity takes billions of dollars and several years. Meanwhile the supply situation should slowly improve as incremental brownfield capacity is added, but there is no quick fix for the current semiconductor shortage.

Additional BMO Harris Bank Insights:

For more information, please contact:
BMO Wealth Management
Michael D. Blanton, JD CPA CFA
Managing Director, BMO Private Bank
Email: michael.blanton@bmo.com
(T): 630.420.3547
wealth.bmoharris.com

 

BMO Commercial Bank
Ron Davidson, Vice President
BMO Commercial Middle Market Banking
Email: ron.davidson@bmo.com
(T): 630.420.3514
www.bmoharris.com

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