Winds of Change. Alex Chausovsky Director of Speaking Services

Transcription

1 Winds of Change Alex Chausovsky Director of Speaking Services

2 218 Preliminary Forecast Results If you heard ITR around two years prior 2 Duration Accuracy US GDP % US Ind. Production % Europe Ind. Production % Canada Ind. Production % China Ind. Production % Retail Sales % Housing (Single Family Units) % Employment (private sector) % ITR Economics provides the best economic intelligence to reduce risk and drive practical and profitable business decisions.

3 Summary February 219 Macroeconomic Slowdown for 219 US Global Global Issues Impacting Businesses Tariffs/Trade Uncertainty Leading Indicator Signals are Mixed Know which ones matter to you How to track the leading indicators

4 Macroeconomic Trends

5 2 US Economy Stalls in 219 and Into 22 US Gross Domestic Product, SAAR, Chained 212 $ US Gross Domestic Product 3-Month Moving Average 2 9 Quarter-over-Quarter Growth Rate 3/12 Rate-of-Change '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 ' '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 '21-9. $18.7 trillion Phase: B Quarter-over-Quarter: 3.% ITR Outlook 219: 22: 221:.5% 2.7% 1.1% Source: BEA 5

6 US States GDPs Ranked vs. World Country GDPs Data Sources: BEA; IMF 6

7 US and Colorado Annual GSP Growth Rate '6 '8 '1 '12 '14 '16 '18 '2 U.S. Colorado 3/12 Rate-of-Change US Bureau of Economic Analysis

8 US GDP by Consumption Government Spending 17% Business Investment 16% Personal Consumption 67% Percent Sources: BEA, ITR Economics

9 114 A More Negative Outlook for the Industrial Economy US Industrial Production Index 12-Month Moving Average US Industrial Production Index Year-over-Year Growth Rate 12/12 Rate-of-Change Annual Trend: 17.3 Phase: B Year-over-Year: 4.% ITR Outlook 219: 22: 221:.5%.7% 2.% Source: FRB

10 % 7.8% Leading Indicators Tools for Seeing the Future -3 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2-45

11 Leading Indicators Industry Data 18 May 21 May 211 Leading Indicator December Industry Data - 12/12 ITR Leading Indicator - Monthly ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 The Indicator has a 12-month lead time to the Industry Data Rates-of-Change Sources: FRB, ITR Economics

12 Leading Indicator System as a Powerful Tool US Industrial Production Index to Leading Indicators US IP, JP Morgan 15 PMI, Wilshire, G US IP - 12/ US IP Forecast G7 Indicator - 1/12 PMI - 1/12 DATACAST! -4 Wilshire Market Cap - 3/12-15 JP Morgan Indicator - 3/12-6 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 Rates-of-Change Sources: FRB, OECD, ISM, Yahoo Finance, IHS Markit

13 8 Leading Indicators Point to Global Economic Slowdown Global Leading Indicators EZ Comp PMI EU Manufacturing PMI JP Morgan Global MFG PMI -5.5% -12.% -15.2% '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 '21 ' /12 Rates-of-Change Source: Markit Economics

14 14

15 Tax Reform

16 7% 6% 5% Is Freed Up Money Going to Capex? US Corporate Tax Rate and Gross Business Investment Corporate Tax Rate % Gross Business Investment (% of GDP) Linear (Gross Business Investment (% of GDP)) 7% 6% 5% 16 4% 4% 3% 2% Atlanta Federal Reserve Survey 3% 2% 1% 1% % '6 '64 '68 '72 '76 '8 '84 '88 '92 '96 ' '4 '8 '12 '16 % Percent Sources: Tax Policy Center, FRED 16

17 R-O-C 2 Slowing Rate of Rise in CAPEX Trend US Nondefense Capital Goods New Orders w/o Aircraft A positive impact from the tax law showed up here 3/12 12/12 6.7% 4.4% MMT MMT 12MMT $ ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 5 Billions of Dollars Source: Census Bureau 17

18 Issues Government Will and Won t Tackle $3, $3, $2,625 $2,25 $1,875 $1,5 Current Tax Receipts Consumption Expenditures Current Transfer Payments Interest Payments $2,625 $2,25 $1,875 $1,5 $1,125 $1,125 $75 $75 $375 $375 $ $ Billions of Dollars Source: BEA 18

19 Total U.S. Public Debt The Long View 12.5% (% of GDP) Source: Usgovernmentspending.com 19

20 Depression Drivers 1. Demographics 2. Health Care Costs 3. Entitlements 4. Inflation 5. US National Debt

21 What to Tell the Kids 1. Live below their means 2. Learn a second language 3. Each household should have multiple or diverse income streams 4. Choose career(s) oriented toward the opportunities 5. Pay off as much debt as possible by Be ready to at the price cycle low in the depression 7. Be self-reliant buy 21

22 Tariffs & Trade

23 What is Driving the Protectionist Trade Policy? US Trade Balance for Goods and Services MMT MMT ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24-85 Billions of Dollars Source: US Census Bureau

24 Tariffs: There Will Be Winners and Losers $ Value Proposed 5 4 Proposed Auto Imports, 35 Proposed Chinese Imports, 267 Fair trade Specialization is a good thing Competition is a good thing Economics is not a zero sum game Potential disruption to supply chains Price increases Retaliation Actual 1% Tariff Sep 24th Proposed Russia, 3.2 Chinese Imports Round 2, Proposed Japan, Proposed India, % Tariff Jan 1, % Chinese Imports Round 1, 5 Aluminum, 17.4 Solar Panels, 8.5 Steel, 29 Washing Machines, 1.8 US Tariffs China Round 2, 6 China Round 1, 52.4 Reciprocal Tariffs Proposed Turkey, 1.8 Europe, 3.2 Mexico, 2.9 Canada, 12.8

25 $25 Billion of Goods Subject to Tariffs Aimed at China The US is China s Biggest Customer Exports from the US to China stand at $13.1bn, or.7% of US GDP. Exports from China to the US are a record high $436.9bn, or 3.8% of China GDP. Slowing exports to the US will hurt their economy more than ours but it is not risk free. Downstream Potential InflationUS Consequences Production Job & Profit Loss in Export Supply Chain (to China) Industry Exports US $ bn Aerospace $ 16.3 Soybeans $ 12.4 Motor Vehicles $ 1. Semiconductors $ 6.9 Oil & Gas $ 6.9 Waste & Scrap $ 5.6 Ctrl Instruments $ 5.6 Synthetic Rubbers $ 3.9 Pharmaceuticals $ 3.4 Ind l Machines $ 3.3 Source: US Census Bureau

26 US Top Goods Export by State Based on annual data, 217 Source: US Census Bureau

27 217 Exports from Colorado to the World 2.1% 23.8% 334--COMPUTER AND ELECTRONIC PRODUCTS 311--FOOD MANUFACTURES 4.3% 4.8% 5.9% 9.5% 1.2% 21.4% 333--MACHINERY, EXCEPT ELECTRICAL 325--CHEMICALS 339--MISCELLANEOUS MANUFACTURED COMMODITIES 336--TRANSPORTATION EQUIPMENT 332--FABRICATED METAL PRODUCTS All Others Percent of Total Exports Source: TradeStats Express

28 Brands That Have or Will Be Increasing Prices Due to Tariffs CATERPILLAR I can't just go to the shareholders and say, 'You're TOYOTA just going to have to accept my profit's going to be WHIRLPOOL $4 million less. It doesn't work that way COCA-COLA WINNEBAGO - Gavin Hattersley, CEO MillerCoors MILLER COORS SAMUEL ADAMS CAMPBELL SOUP LG ELECTRONICS GENERAL MOTORS KLEENEX & HUGGIES POLARIS INDUSTRIES NEWELL BRANDS (Crock-pot, Rubbermaid, Sharpie) Source: Business Insider, These popular brands say Trump's tariffs will force them to raise prices 28

29 16 14 Where are Interest Rates Headed? 12 1? '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 Source: FRB Yield on 1 Year Treasury Note

30 6 5 FOMC Member Interest Rate Projections Fed Open Market Committee December Longer Run Source: FRB

31 Summary

32 Business Cycles * Phase A - Recovery Phase B Accelerating Growth (Best) Phase C Slowing Growth (Caution) Phase D - Recession Annual Sales are BELOW Year-Ago Levels, but the Rate-of-Decline is SLOWING. Annual Sales are ABOVE Year-Ago Levels, and are GROWING at a RAPID Pace. Annual Sales are ABOVE Year-Ago Levels, BUT the Rate-of-Growth is SLOWING Annual Sales are BELOW Year-Ago Levels, and are DECLINING at a RAPID Pace.

33 Actionable Advice for Phase C 1. Focus on the segments of the business that are the most profitable in Phase C 2. Trumpet your Phase C competitive advantages and start developing your message for the next phase (B or D, depending on your industry) 3. Cash Management for proper allocation and Inventory Control if applicable 5. Ask yourself what you shouldn t be doing? (resource management and diversion to more profitable parts of the company) 8. Develop your rates-of-change so you will know when the trough is near (Using the ITR Checking Points TM ) 33

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