Winds of Change - MARINE LEADERSHIP ALLIANCE · 2018-04-27 · Winds of Change Connor Lokar...
Transcript of Winds of Change - MARINE LEADERSHIP ALLIANCE · 2018-04-27 · Winds of Change Connor Lokar...
Winds of Change
Connor Lokar
Economist
Marine Leadership Alliance
First in Forecasts Since 1948
ITR Economics provides the best economic intelligence to reduce
risk and drive practical and profitable business decisions.
Duration Accuracy
US GDP 24 99.7%
US Ind. Prod. 24 96.8%
Europe Ind. Prod. 27 99.9%
Canada Ind. Prod. 24 96.7%
China Ind. Prod. 30 97.8%
Retail Sales 25 98.0%
Housing 27 99.5%
Employment 23 99.5%
2017 Forecast ResultsIf you heard ITR around two years ago… 2
First in Forecasts Since 1948
12-Month Moving Average 12/12 Rate-of-ChangeYear-over-Year Growth Rate
• Annual Trend:
• Phase:
• Year-over-Year:
2018:
2019:
2020:
ITR
Outlook
US Gross Domestic ProductSAAR, Chained 2009 $
US Gross Domestic Product
$17.3 trillion
B
2.5%
1.6%
1.2%
2.8%
Source: BEA 3
12
14
16
18
20
12
14
16
18
20
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
-9
-6
-3
0
3
6
9
-9
-6
-3
0
3
6
9
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
First in Forecasts Since 1948
State Gross Domestic Product
Source: BEA 4
Billions of Dollars, Q2 2017
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US States Renamed for Countries with Similar GDPs
Data Sources: BEA; IMF 5
First in Forecasts Since 1948
US Corporate Tax Rate and Gross Business Investment
Percent
6
6
Sources: Tax Policy Center, FRED
0%
10%
20%
30%
40%
50%
60%
70%
0%
10%
20%
30%
40%
50%
60%
70%
'60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16
Corporate Tax Rate %
Corporate Tax Revenue (% of Corp Profits)
Gross Business Investment (% of GDP)
Linear (Gross Business Investment (% of GDP))
First in Forecasts Since 1948
Real Gross Domestic Product
Source: BEA
3/12 Rate-of-Change
-8
-4
0
4
8
12
16
1950 1960 1970 1980 1990 2000 2010 2020
Republican Democrat GDP 3/12
7
First in Forecasts Since 1948
12-Month Moving Average 12/12 Rate-of-ChangeYear-over-Year Growth Rate
• Annual Trend:
• Phase:
• Year-over-Year:
2018:
2019:
2020:
ITR
Outlook
US Industrial Production Index
US Industrial Production Index
104.7
B
2.5%
2.9%
-1.2%
Source: FRB
2.3%
84
89
94
99
104
109
114
84
89
94
99
104
109
114
-15
-10
-5
0
5
10
-15
-10
-5
0
5
10
First in Forecasts Since 1948
Raw
Apr-16 1.4
May-16 1.5
Jun-16 1.5
Jul-16 1.4
Aug-16 1.5
Sep-16 1.3
Oct-16 1.3
Nov-16 1.6
Dec-16 1.6
Jan-17 1.5
Feb-17 1.7
Mar-17 1.6
Apr-17 1.7
May-17 1.7
Jun-17 1.7
Jul-17 1.6
Aug-17 1.7
Sep-17 1.5
Oct-17 1.5
Nov-17 1.9
Dec-17 1.7
Jan-18 1.7
Feb-18 1.9
Mar-18 1.7
3/12 Rate-of-Change
= 𝑀𝑎𝑟𝑐ℎ 2018 3𝑀𝑀𝑇
𝑀𝑎𝑟𝑐ℎ 2017 3𝑀𝑀𝑇× 100 − 100
=5.3
4.8× 100 − 100 = 10.4%
3MMT
4.4
4.4
4.4
4.2
4.1
4.2
4.5
4.7
4.8
4.8
5.0
5.0
5.1
5.0
5.0
4.8
4.7
4.9
5.1
5.3
5.3
5.3
12MMT
18.0
18.2
18.4
18.6
18.8
19.0
19.2
19.4
19.7
19.8
20.0
20.2
20.3
12/12
26.7%
25.5%
25.2%
22.4%
20.0%
18.3%
15.4%
12.7%
12/12 Rate-of-Change
= 𝑀𝑎𝑟𝑐ℎ 2018 12𝑀𝑀𝑇
𝑀𝑎𝑟𝑐ℎ 2017 12𝑀𝑀𝑇× 100 − 100
=20.3
18.0× 100 − 100 = 12.7%
3/12
15.9%
13.6%
13.6%
14.3%
14.6%
16.7%
13.3%
12.8%
10.4%
10.4%
Data Preparation
First in Forecasts Since 1948
Phase A - Recovery
Annual Sales are BELOW
Year-Ago Levels, but the
Rate-of-Decline is SLOWING.
Phase B –
Accelerating
Growth (Best)
Annual Sales are ABOVE
Year-Ago Levels, and are
GROWING at a RAPID
Pace.
Phase C – Slowing
Growth (Caution)
Annual Sales are ABOVE
Year-Ago Levels, BUT the
Rate-of-Growth is
SLOWING
Phase D -
Recession
Annual Sales are BELOW
Year-Ago Levels, and are
DECLINING at a RAPID
Pace.
Business Cycles
10
First in Forecasts Since 1948
US Industrial Production to ITR Leading Indicator™
Sources: FRB, ITR Economics
USIP – 12/12 Indicator - Monthly
11
Reported in ITR Trends Report – ITR Advisor
As seen in
-15
-10
-5
0
5
10
15
-15
-10
-5
0
5
10
15
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
IndicatorUS IP
Indicator - MonthlyUS IP - 12/12
First in Forecasts Since 1948
US Boat Building Production Index
Source: FRB
2012 = 100
12
13.7%
13.6%
145.4
50
125
200
275
350
425
500
-100
-75
-50
-25
0
25
50
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
MMAR-O-C
12MMA3MMA
12/123/12
Definition: watercraft not built in shipyards and typically of the type suitable or intended for
personal use. Included in this industry are establishments that manufacture heavy-duty
inflatable rubber or inflatable plastic boats (RIBs).
RV Production +10.1%
First in Forecasts Since 1948
US Industrial Production Index to Leading Indicators
Sources: FRB, OECD, ISM, Yahoo Finance, BEA, IHS Markit
Rates-of-Change
-60
-40
-20
0
20
40
60
-15
-10
-5
0
5
10
15
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
US IP - 12/12US IP ForecastG7 Indicator - 1/12PMI - 1/12Wilshire Market Cap - 3/12Corporate Profits - 12/12JP Morgan Indicator - 3/12
PMI, Wilshire, Profits, JP MorganUS IP, G7
First in Forecasts Since 1948
Applying Leading Indicators at the Company Level
12/12 Rates-of-Change
-90
-60
-30
0
30
60
90
-45
-30
-15
0
15
30
45
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Sales
New Orders
7 Month Lead Time to Company
Indicator SnapshotCorrelation: 0.83
Lead Time: 9 Months
Direction: UP
New OrdersHousing Starts, Retail Sales, Leading Indicators etc
Sales
14
First in Forecasts Since 1948
First in Forecasts Since 1948
What does this mean for you?
A ‘Great Recession’ can undermine the best laid plans.
What Phase are you in now? What Phase are your key customer
segments in? What can you watch for in your business to help you
know if you are moving into phase X?
If the next six months moves from X to Y, what is your
plan? Economic intelligence is the difference between
Proactive vs. Reactive decision making
First in Forecasts Since 1948
On the positive side…
Well positioned consumer, robust consumer spending
Leading indicators have previewed rise into mid-2018
Consistent growth in the single family residential market
Year-over-year rise in commodity prices lifting industrials
Weaker USD pushing up Exports
Nonresidential Construction expansion in 2018
First in Forecasts Since 1948
US Boat Building Production Index to US Industrial Production Index
Source: FRB
12/12 Rates-of-Change
18
-15
-10
-5
0
5
10
-45
-30
-15
0
15
30
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Index
Index Forecast
US IP
US IP Forecast
US IPIndex
Coincident Relationship to CompanyCorrelation: 0.85
First in Forecasts Since 1948
State Population Growth Rates
Source: Census Bureau
Percent Change from Population Estimates 2010 to 2016
First in Forecasts Since 1948
US Boat Building Production Index to ITR Leading IndicatorTM
Sources: FRB; ITR Economics
Rates-of-Change
20
-12
-8
-4
0
4
8
12
-45
-30
-15
0
15
30
45
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Index - 12/12
Indicator - Monthly
IndicatorIndex
8 Month Lead Time to CompanyCorrelation: 0.88
Monthly
12/12
First in Forecasts Since 1948
US Boat Building Production Index toUS Total Industry Capacity Utilization Rate
Sources: FRB
Rates-of-Change
21
-15
-10
-5
0
5
10
15
-45
-30
-15
0
15
30
45
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Index - 12/12
Utilization Rate - 1/12
Utilization Rate Forecast -1/12
Utilization RateIndex
6 Month Lead Time to CompanyCorrelation: 0.73
1/12
12/12
First in Forecasts Since 1948
US Boat Building Production Index to US Total Retail Sales
Sources: FRB; US Census Bureau
12/12 Rates-of-Change
22
-12
-8
-4
0
4
8
12
-45
-30
-15
0
15
30
45
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Index
Retail Sales
Retail Sales Forecast
Retail SalesIndex
Coincident Relationship to CompanyCorrelation: 0.85
First in Forecasts Since 1948
US Total Retail Sales
Source: Census Bureau
Trillions of Dollars
23
4.8%4.4%
5.818
2
4
5
7
8
10
11
-24
-18
-12
-6
0
6
12
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
MMTR-O-C
3/1212/12
3MMT
12MMT
First in Forecasts Since 1948
US Boat Building Production Index to US Personal Consumption Expenditures for Pleasure Boats
Sources: FRB; US Dept of Commerce BEA
12/12 Rates-of-Change
24
-30
-20
-10
0
10
20
30
-45
-30
-15
0
15
30
45
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24
Index
Boat Expenditures
Boat ExpendituresIndex
Coincident Relationship to CompanyCorrelation: 0.64
First in Forecasts Since 1948
US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales
Source: US Census Bureau
Billions of Dollars25
7.2%
14.0%
77.5
0
40
80
120
160
200
-75
-50
-25
0
25
50
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
MMTR-O-C
3/1212/12
3MMT 12MMT
Definition: This industry comprises establishments primarily engaged in
retailing new and used motorcycles, boats, and other vehicles (except
automobiles, light trucks, and recreational vehicles).
First in Forecasts Since 1948Source: US Census Bureau,
Rates-of-Change
26
US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales to US Total Retail Sales
-18
-12
-6
0
6
12
18
-30
-20
-10
0
10
20
30
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Sales
Retail Sales
Retail Sales Forecast
Retail SalesSales
First in Forecasts Since 1948
US Total Retail Sales (includes food services) to ITR US Consumer Activity Leading Indicator
Sources: US Census Bureau, ITR Economics
Retail - 12/12, Indicator - Monthly
27
3.7%
4.4%
-12
-8
-4
0
4
8
12
-12
-8
-4
0
4
8
12
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
IndicatorRetail Sales
Total Retail - 12/12
Indicator - Monthly
2H18 slower growth risk
First in Forecasts Since 1948
US Personal Consumption Expenditures for Pleasure Boats
Source: BEA
Billions of Dollars
28
6.2%
14.1%
$20.4
0
10
20
30
40
50
-75
-50
-25
0
25
50
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
MMAROC
3/12
12/12
3MMA12MMA
First in Forecasts Since 1948
US Consumer Price Index to US Producer Price Index
Source: FRB
1/12 Rate-of-Change
2.4%
3.0%
-10
-5
0
5
10
-10
-5
0
5
10
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
Consumer Price
Producer Price
First in Forecasts Since 1948
United States Overview Weekly Oil Price & Rig Count
Sources: EIA, Baker Hughes
Rigs: Weekly Count WTI: Average Weekly Price
815
$63.10
$0
$20
$40
$60
$80
$100
$120
0
250
500
750
1000
1250
1500
1750
Jan 2014 Aug 2014 Mar 2015 Oct 2015 May 2016 Dec 2016 Jul 2017 Feb 2018 Sep 2018
USD/bblRig Count
Oil Rigs
WTI Price - Shifted 13 Weeks
30
First in Forecasts Since 1948
US Private Sector Employment
Source: BLS
Annual Data Trend
31
88
98
108
118
128
85
95
105
115
125
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
Employment Mils of Jobs
Private Sector Employment Growth
Job Openings
Quit Rate – Rising
5.6% B1.8% B
First in Forecasts Since 1948
US Median Weekly Earnings (deflated)
Source: BLS
Constant (1982-84) Dollars
32
$347.0
300
310
320
330
340
350
360
300
310
320
330
340
350
360
1979 1984 1989 1994 1999 2004 2009 2014 2019 2024
Median Earnings - Raw Data
First in Forecasts Since 1948
Source: Census Bureau
Does not include immigration into the US
33
+207,155-191,367
Net Migration Between States, July 2016-July 2017
First in Forecasts Since 1948
US Nonfarm, Total Private, and Manufacturing Quit Rates
Source: BLS
Data Trends
2.4%
2.2%
1.6%
0
1
2
3
0
1
2
3
'02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Private
Nonfarm
Manufacturing
First in Forecasts Since 1948
Labor Market Transparency and Liquidity
Data Source: Pew Research Center/Social Trends
2016 Study (Deloitte):
~66% of millennials plan
to change job in next 5
years
2008: 75% expected to have between 2-5 employers
in their lifetime, just 10% thought 6+
Now: just 54% think 2-5, more than 25% say 6 or more
Add in: historically low home ownership, marriage rates
First in Forecasts Since 1948
The Generations Defined
Data Source: Pew Research Center
The Millennial Generation
Born: After 1980
Age of adults in 2014: 18 to 33*
Share of adult population: 27%
Share non-Hispanic white: 57%
Ind 50%; Dem 27%; Rep 17%
The Baby Boom Generation
Born:1946 to 1964
Age in 2014: 50 to 68
Share of adult population: 32%
Share non-Hispanic white: 72%
Ind 37%; Dem 32%; Rep 25%
Generation X
Born:1965 to 1980
Age in 2014: 34 to 49
Share of adult population: 27%
Share non-Hispanic white: 61%
Ind 39%; Dem 32%; Rep 21%
The Silent Generation
Born:1928 to 1945
Age in 2014: 69 to 86
Share of adult population: 12%
Share non-Hispanic white: 79%
Ind 34%; Dem 32%; Rep 29%
*The youngest Millennials are in their teens. No chronological end point has been set for this group.
Note: The “Greatest Generation”, which includes those born before 1928, is not included in the analysis due to the small sample size.
Share of total population and share non-Hispanic white are based on adults only in 2013; 85-year-old Silents are not included due to
data limitations.
Source: March 2013 Current Population Survey (IPUMS) and Pew Research surveys, January and February 2014
First in Forecasts Since 1948
US Labor Force by Generation
Data Source: Pew Research Center
Millions
First in Forecasts Since 1948
Negative Risk Factors
Inflation, International Trade and NAFTA
US Stock Market – correction or more?
Declining savings - denting consumer cushion
Rising interest rates – consumer debt, housing
US Debt
First in Forecasts Since 1948
US Trade Balance for Goods and Services
Source: US Census Bureau
Billions of dollars
-566.0
-850
-750
-650
-550
-450
-350
-250
-850
-750
-650
-550
-450
-350
-250
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
3MMT
12MMT
First in Forecasts Since 1948
US Top Goods Export by State
Source: US Census Bureau
Based on annual data, 2017
First in Forecasts Since 1948
Commodity Prices
Source: WSJ, London Metal Exchange, Steel Market Update
3/12 Rates-of-Change
41
26.4% Zinc22.0% Alum
3.3% Steel20.8% Copper
-60
-30
0
30
60
90
120
150
-60
-30
0
30
60
90
120
150
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24
All Others Copper & SteelAluminum: Import tariffs +
sanctions on Russian Rusal
pushed Prices ~$2400/ton
Likely to moderate toward
$2000/ton during 2018
First in Forecasts Since 1948
S&P500 Stock Prices Index
Source: Wall Street Journal
Data Trends
42
0
500
1000
1500
2000
2500
3000
0
500
1000
1500
2000
2500
3000
1980 1985 1990 1995 2000 2005 2010 2015 2020
Raw
12MMA
First in Forecasts Since 1948Sources: US Census Bureau; Wall Street Journal
Rates-of-Change
43
US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales to US Stock Prices Index
-45
-30
-15
0
15
30
45
-30
-20
-10
0
10
20
30
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Sales - 12/12
Prices - 3/12
PricesSales
First in Forecasts Since 1948
S&P500 Stock Prices Index to US Personal Savings (inverted)
Sources: Wall Street Journal, BEA
12/12 Rates-of-Change
-40
-20
0
20
40
60-45
-30
-15
0
15
30
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Savings (inverted)Stock Prices
Stock Prices Index
Personal Savings
44
First in Forecasts Since 1948
Sources: US Census Bureau; Bureau of Economic Analysis
Rates-of-Change
45
US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales to US Personal Savings
-90
-60
-30
0
30
60
90-30
-20
-10
0
10
20
30
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Sales
Index
IndexSales
First in Forecasts Since 1948
US Treasury 10-Year Bond
Source: US Dept of the Treasury
Daily Treasury Yield Curve Rates
46
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
Oct-'16 Dec-'16 Feb-'17 Apr-'17 Jun-'17 Aug-'17 Oct-'17 Dec-'17 Feb-'18 Apr-'18
10-Year Bond
First in Forecasts Since 1948
Mortgage Rates to Federal Funds
Sources: Federal Reserve Board, WSJ
Raw Data
47
-2
2
6
10
14
18
22
-2
2
6
10
14
18
22
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Mortgage RatesFederal Funds
48
0
2
4
6
8
10
12
14
16
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Yield on 10 Year Treasury NoteSource: FRB
First in Forecasts Since 1948
0
1
2
3
4
5
6
2018 2019 2020 Longer Run
FOMC Member Interest Rate Projections
Source: FRB 49
Fed Open Market Committee
March 2018December 2017
First in Forecasts Since 1948
Phase A - Recovery
Annual Sales are BELOW
Year-Ago Levels, but the
Rate-of-Decline is SLOWING.
Phase B –
Accelerating
Growth (Best)
Annual Sales are ABOVE
Year-Ago Levels, and are
GROWING at a RAPID
Pace.
Phase C – Slowing
Growth (Caution)
Annual Sales are ABOVE
Year-Ago Levels, BUT the
Rate-of-Growth is
SLOWING
Phase D -
Recession
Annual Sales are BELOW
Year-Ago Levels, and are
DECLINING at a RAPID
Pace.
Business Cycles2017-1H18
2H18
2019
DATACAST
2020
First in Forecasts Since 1948
ITR Management Objectives™
Actionable Takeaways
1. Plan for continued overall expansion during 2018
2. Invest in operational efficiency – productivity has to match wage increases
3. Be willing to take risks!
4. Sell the business in climate of maximum goodwill – or be ready to hold on through 2019
5. Budget for higher wages and input costs – Raise your prices!
6. Follow the Must Watch Leading Indicators PMI, ITRLI, Housing Starts, etc.
7. Know where you and your markets are in the business cycle
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