We covered transportation equipment in Part 1 of this series and petroleum and coal products in Part 2 [[ ]]. Census Bureau data show that, as their incomes dropped, companies in these industries took out new, long-term debt. And that’s what we discuss here, in Part 3.
The FRED graph above shows “Long-Term Debt Due in More Than 1 Year: Other Long-Term Loans” data for both the transportation equipment manufacturing and petroleum and coal products manufacturing industries. And the graph lets us compare these industries’ debt levels now with their levels during the Great Recession of 2008-2009.
In the second quarter of 2020, transportation equipment manufacturers increased long-term debt by $30.8 billion, up from $250.2 billion in the first quarter of 2020. Petroleum and coal products also increased their debt, by $35.5 billion.
During the Great Recession, petroleum and coal products increased their debt for consecutive quarters, so their tactic of increasing debt now isn’t historic in itself—although, the amount of their debt is at an all-time high.
Transportation equipment manufacturers were able to decrease their debt load for consecutive quarters. So their significant increase in debt now helps illustrate the difference between the disruptions from the Great Recession and those from COVID-19. For example, during the Great Recession, many Americans still drove to work, sent their kids to school, and took vacations. In 2020, those activities came to a standstill.
The Quarterly Financial Report also shows that the current debt carried by transportation equipment manufacturers peaked in the second quarter but decreased in the third quarter by $10.1 billion…
Read on for more detail and calculations from the Census Bureau’s QFR
These long-term debt increases during the first and second quarters of 2020 also caused an interesting shift in each industry’s debt leverage. Petroleum and coal products reported a long-term debt to total assets ratio ((Long-term Debt, Due in More than 1 Year, From Bank Loans + Long-term Debt, Due in More than 1 Year, Other Long-term Loans)/Total Assets) of 21.54%, an increase of 6.89% from the one reported in the second quarter of 2019. The transportation equipment manufacturing industry reported a long-term debt to total assets ratio of 24.20%, an increase of 5.65 % from the same period in 2019. Along with an increase in long-term debt, several companies shifted assets toward higher amounts of cash. In the second quarter alone, transportation equipment manufacturing reported a total cash, U.S. government and other securities to total assets ratio of 10.93%. This is an increase of 5.19% from the same period in 2019. Transportation equipment manufacturing companies slowed down their borrowing in third quarter of 2020 and decreased their long-term debt to total assets ratio to 22.32%. In the third quarter of 2020, petroleum and coal products companies continued to float operations with debt, increasing long-term debt due in more than 1 year, thereby increasing their long-term debt to total assets ratio by 0.35%, increasing their long-term debt to total assets ratios.
About the U.S. Census Bureau: The U.S. Census Bureau collects data from thousands of companies to create monthly, quarterly, and annual reports for U.S. policymakers. These reports are free to the public and provide critical insight into the U.S. economy. To view all the Census Bureau economic indicator reports, visit the Briefing Room.
How this graph was created: Search for and select “Quarterly Financial Report: U.S. Corporations: Transportation Equipment: Long-Term Debt, Due in More Than 1 Year: Other Long-Term Loans, Millions of Dollars, Not Seasonally Adjusted.” From the “Edit Graph” panel, use the “Edit Line 1” tab to confirm these data fields if necessary: “Units: Millions of Dollars” and “Modify frequency: Quarterly.” Next, use the “Add Line” tab to search for the FRED series ID “QFRD319324USNO” and click on “Add data series.” To change the line colors, use the choices in the “Format” tab.
Suggested by Brooks Hurry and John Darr from the U.S. Census Bureau.