Sustainable Water Management Conference
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Transcript of Sustainable Water Management Conference
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Sustainable Water Management Conference
Denver, ColoradoMarch 31, 2014
Presentation by Jack C. Kiefer, PhD
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Water Demand Forecasting in Uncertain Times: Isolating the Effects of the Great
Recession
WRF Project #4458
Jack C. Kiefer, PhD
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Overview• Project goals, objectives, and principal tasks• Progress and selected findings to date
—Great Recession—Utility Survey—Analysis of utility data
• Next steps
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Principal Research Themes and Objectives
Economic Reasoning and Water Demand Pathways
Assess how water demand is affected by short-term economic shocks and through which economic channels1. Prepare White Paper on Macro-Economic Linkages to
Water Demand2. Conduct Survey of Utility Experiences
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Principal Research Themes and Objectives
Enhancing the Quality and Effectiveness of Water Demand Forecasts
Analyze how water utilities may be better able to anticipate, adapt to, and minimize impacts of future economic cycles on water demand planning
1. Formulate Models for Use in Forecasting2. Recommend Methods and Future Research
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What do we know about the economy and water use?
• Water use is influenced by economic factors
• Municipally-supplied water is a “normal good” — higher (lower) household incomes increase (decrease) demand
• Production of goods and services requires water as a direct or indirect input
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Direct Economic Pathways of Influence
Source: original construct by Jack C. Kiefer (2013)
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Defining a Recession• The National Bureau of Economic Research (NBER) Business Cycle
Dating Committee:“A significant decline in economic activity spread across the
economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-
retail sales.”
Two consecutive quarters of negative growth in gross domestic product sufficient but not necessary condition
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Qualities and Characteristics of the “Great Recession”
• “Great Recession” lasted 18 months from peak to trough— December 2007 — June of 2009— Longest in official duration and (arguably) the most severe
recession since the Great Depression (which lasted 43 months)
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Qualities and Characteristics of the “Great Recession”
• Real GDP 5.1%• Unemployment rate 100%• Under-employment rate
100%
• Real household mean income 11.1%
• Real household median income 7.7%
• Median family net worth 38.8%
Source of statistics: Federal Reserve System Board of Governors (2012)
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Qualities and Characteristics of the “Great Recession”
13110907050301999795939189878583817977
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0
2.5
2.0
1.5
1.0
0.5
0.0
Recessions and the Housing MarketGray Bars Indicate Recessions
FHFA Housing Prices, 1980 Q1=100Housing Starts
Source of statistics: Federal Housing and Finance Agency; Department of Commerce, US Census Bureau
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Qualities and Characteristics of the “Great Recession”
131211100908070605040302
105.0
100.0
95.0
90.0
85.0
80.0
Industrial Production(2007=100)
Industrial ProductionSource of statistics: Federal Reserve System Board of Governors
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Qualities and Characteristics of the “Great Recession”
Source of statistics: Federal Reserve System Board of Governors
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Qualities and Characteristics of the “Great Recession”
131211100908070605040302
100.0
90.0
80.0
70.0
60.0
50.0
Consumer Confidence
University of Michigan Consumer SentimentSource of statistics: Thomson Reuters/University of Michigan Surveys of Consumers
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Macroeconomic Pathways and Indicators
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Majority of survey sample experienced declines in water
use
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Reported decreases in use suggest a considerable range
of impacts
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Observed declines in demand associated with many factors
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Majority of utilities reporting a decrease in water use have not
fully recovered
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The recent economic downturn affected planned investments for some utilities
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Majority of respondents expect flat or continuing
declines in demand
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Trends in use prior to the Great Recession
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~15% drop
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Interim Observations• Firm conceptual basis for linking economic activity to
water use• Water use was impacted (reduced) during and after
the recession for many water providers• Some declines in water sales were large in some
places• There were multiple reported manifestations of
impacts (on revenue, customer base and other) • Historical time series data show the association of
declining sales with recession and economic indicators• Must attempt to differentiate or account for the effects
of other factors
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Current and Future Activities
• Search for and collect additional data for economic indicators—Especially “leading” indicators—Regional indicators where available
• Statistical modeling—Regression—Time-series econometrics
• Reporting• Communication
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Thanks!• Utilities
—Tampa Bay Water—San Diego County Water
Authority—Fairfax Water (VA)—San Antonio Water System—New York City Department
of Environmental Protection
—City of Phoenix—Miami-Dade County—Anderson Regional Joint
Water System (SC)
• American Water Works Association
• Maureen Hodgins, Water Research Foundation
• Other research team members— Grace Johns (Hazen and
Sawyer)— Snaith Economic Advisory
Services— Ben Dziegielewski
Jack C. Kiefer, [email protected]
618.889.0498