make your move: 2013-2014 · make your move: 2013-2014 alan beaulieu . itr economics ™ . vma mow...

Make Your Move: 2013-2014

Alan Beaulieu ITR Economics™

www.itreconomics.com

VMA MOW August 2013


Duration Forecast Actuals GDP 12 $13.593 Trillion $13.648 0.4% US Ind. Prod. 31 97.2 (12MMA) 97.2 0.0% EU Ind. Prod. 12 100.4 (12MMA) 98.8 -1.6% CA Ind. Prod. 8 96.7 96.7 0.0% Retail Sales 30 $2.186 Trillion $2.131 -2.5% Housing 6 743 Ths Units 780 5.0% Employment 33 143.9 Million 142.5 -1.0% CPI 9 2.8% 2.1%

2012 Forecast Results 2


3

US Industrial Production to Gross Domestic Product

-14.6%

-5.3%

-3.1%

-7.1%

Year-over-year Quarter to Quarter (3/12)

1.9%

-16

-12

-8

-4

0

4

8

12

-16

-12

-8

-4

0

4

8

12

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

GDP US IP


Data Preparation

3/12 Rate-of-Change = 𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2013 3𝑀𝑀𝑀𝑀𝑀𝑀𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2012 3𝑀𝑀𝑀𝑀𝑀𝑀

× 100 − 100

=5.34.8

× 100 − 100 = 10.5%

Raw Aug-11 1.4 Sep-11 1.5 Oct-11 1.5 Nov-11 1.4 Dec-11 1.5 Jan-12 1.3 Feb-12 1.3 Mar-12 1.6 Apr-12 1.6 May-12 1.5 Jun-12 1.7 Jul-12 1.6

Aug-12 1.7 Sep-12 1.7 Oct-12 1.7 Nov-12 1.6 Dec-12 1.7 Jan-13 1.5 Feb-13 1.5 Mar-13 1.9 Apr-13 1.7

May-13 1.7 Jun-13 1.9 Jul-13 1.7

3MMT

4.4 4.4 4.4 4.2 4.2 4.3 4.6 4.8 4.8 4.8 4.9 4.9 5.0 5.0 5.0 4.9 4.7 4.9 5.1 5.3 5.3 5.3

12MMT

18.0 18.3 18.5 18.6 18.8 19.0 19.2 19.4 19.6 19.8 20.0 20.1 20.3

12/12

12.7%

12/12 Rate-of-Change = 𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2013 12𝑀𝑀𝑀𝑀𝑀𝑀𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2012 12𝑀𝑀𝑀𝑀𝑀𝑀

× 100 − 100

=20.318.0

× 100 − 100 = 12.7%

3/12

14.1% 13.6% 13.2% 15.1% 13.5% 14.1% 11.3% 11.5% 10.1% 10.5%

4


US Industrial Production Growth

12/12 annual growth rate

5

-15

-10

-5

0

5

10

-15

-10

-5

0

5

10

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17


Real Gross Domestic Product

6

Trillions of $

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16


7

• Leading indicators pointing up for 2013 • Liquidity is not an issue • Major producer of energy • Stimulative monetary policy, for now • Employment rising (companies right-sized) • Banks are lending –shifted to Phase C • Retail Sales • Construction spending is improving

Recovery


Employment – Private Sector

Annual Data Trend

8

85

90

95

100

105

110

115

120

85

90

95

100

105

110

115

120

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Employment Mils of Jobs


9 Mortgage Rates to Federal Funds

Raw Data

-2

2

6

10

14

18

22

-2

2

6

10

14

18

22

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Mortgage RatesFederal Funds


10 One (or many) bright spot(s): the shale ‘gale’

Source: EIA Annual Energy Outlook, 2008 to 2011


US Carbon Dioxide Emissions

4500

4700

4900

5100

5300

5500

5700

5900

6100

6300

6500

4500

4700

4900

5100

5300

5500

5700

5900

6100

6300

6500

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Dec 2012: 5289.9 MMT Oct 1995:

Source: EIA.gov

Million Metric Tons

11


10

12

14

16

18

10

12

14

16

18

'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

3MMA

12

3MMA

11.0%

11.9%

US Manufacturing as a % of GDP (Value Added)


0

100

200

300

400

500

600

'05 '06 '07 '08 '09 '10 '11 '12 '13

Steel Scrap Prices

Oil Futures Prices

Copper Futures Prices

Steel: $365 per Gross Ton

Oil: $92 per Barrel

Copper: $3.29 per Pound

Commodity Price Index

3MMA Index Dec 2009=100

13

Oil today $105.24 Sep 2013 $103.25 Dec 2013 $107.94 Mar 2014 $ 99.39 Jun 2014 $ 86.96


14

• Europe’s financial troubles … • China recession? … • Massive legislative changes… • Israel and Iran… • Fiscal Cliff… • Tax Hikes… • Massive deficit and growing nat’l debt

Areas of Concern


Europe Industrial Production to Europe Leading Indicator

-20

-15

-10

-5

0

5

10

15

-20

-15

-10

-5

0

5

10

15

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Index 12/12

Indicator 1/12

15

EU IP 2014 0.8% 2015 0.8% Recession from mid ‘14 to mid ‘15


Global Leading Indicators

1/12 Rates-of-Change

0.4

8.2 3.5

-80

-64

-48

-32

-16

0

16

32

48

64

80

-10

-8

-6

-4

-2

0

2

4

6

8

10

'07 '08 '09 '10 '11 '12 '13 '14

OECD Total

EU Manufacturing PMI

JP Morgan Global MFG PMI

16


17

Annual Year-over-Year Comparison

FTSE 100 and DAX Stock Index

-45

-30

-15

0

15

30

45

-45

-30

-15

0

15

30

45

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14

FTSE 100

DAX Stock Index


18 Sequestration

Source: John Taylor, Bloomberg


19 Big Gap


Year-Over-Year Growth Rates %

20 Western Europe Industrial Production


0 0

Soft Landing

A

B C

D

Prices

21 Trends 10

Housing Production

Medical New Orders Soft Landing

Financial Retail

Wholesale Trade

Foreign

Nonresidential Construction

Hard Landing


US Industrial Production to North America Light Vehicle Production

-60

-45

-30

-15

0

15

30

45

-16

-12

-8

-4

0

4

8

12

1975 1980 1985 1990 1995 2000 2005 2010 2015

Production Index

IndexProduction

22

9.7%

End the year @ 15.6 End next year @ 14.6


23

-14

-7

0

7

14

-50

-25

0

25

50

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

US IP Chemicals

Chemicals

US IP

US Total Industrial Production Index to Basic Chemicals Production Index


1.3%


Industrial Chemicals Producer Price Index

-3.7 -5.8

302.7

50

200

350

500

650

800

-75

-50

-25

0

25

50

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMA R-O-C

3/12 12/12

3MMA 12MMA


US Industrial Production to Plastics Products Production


25

-24

-18

-12

-6

0

6

12

18

-16

-12

-8

-4

0

4

8

12

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Plastics US IP

US IPPlastics

6.1%


Petroleum Refineries Production

N32411, 2002 = 100

1.1

-0.5

97.5

70

85

100

115

130

145

160

-28

-21

-14

-7

0

7

14

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMA R-O-C

12/12 3/12

12MMA 3MMA

26

1.4% YOY increase for 2014

Utilization Rate of 83.9% 10-yr average is 85.7%


US Industrial Production to Iron & Steel Products Production


27

-60

-45

-30

-15

0

15

30

45

-16

-12

-8

-4

0

4

8

12

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Products

US IPProducts

USIP

- 4.0%

1H14 > 2H14 - 3.2%

28

US Industrial Production to Paper & Products Production


-15

-10

-5

0

5

10

-12

-8

-4

0

4

8

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Production US IP

US IPPaper Production

- 1.7%

1H14 > 2H14 - 1.5%


4.9 0.0

$787.2

400

600

800

1000

1200

1400

1600

-80

-60

-40

-20

0

20

40

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMT R-O-C

Nondefense Capital Goods New Orders w/o Aircraft

3/12 12/12

3MMT

12MMT

Billions of $

29


30

USIP – 12/12 Indicator - Monthly

US Industrial Production to ITR Leading Indicator

-21

-14

-7

0

7

14

21

-21

-14

-7

0

7

14

21

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Indicator US IP

Indicator - MonthlyUS IP - 12/12


6 Month Moving Average

Chicago Fed National Activity Index 31

-4.7

-3.9

-3.1

-2.3

-1.5

-0.7

0.1

0.9

-4.7

-3.9

-3.1

-2.3

-1.5

-0.7

0.1

0.9

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

6MMA

-0.2


30

35

40

45

50

55

60

65

70

30

35

40

45

50

55

60

65

70

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Raw

32 Purchasing Managers Index

Raw Data


33 Ratio of Inventories to New Orders

Raw Data

0.8

0.9

1.0

1.1

1.2

0.8

0.9

1.0

1.1

1.2

'06 '07 '08 '09 '10 '11 '12 '13 '14

RIO

Dec '10

Dec '09

1.019


34 US Leading Indicator

60

80

100

120

60

80

100

120

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Actual

12MMA

94.0


22.2 16.4

1517.0

200

1000

1800

2600

3400

4200

-90

-60

-30

0

30

60

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMA R-O-C

Stock Prices Index

1/12

12/12

Actual 12MMA

S&P 500, 1941-43 = 10

35


Corporate Bond Prices

Rates-of-Change

-20

-10

0

10

20

30

40

50

-20

-10

0

10

20

30

40

50

'08 '09 '10 '11 '12 '13 '14

3/12

12/12

Aug '11

Sep '12

1.1

36


17.0 27.1

0.869

0.2

1.2

2.2

3.2

4.2

5.2

-90

-60

-30

0

30

60

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMT R-O-C

37 Housing Starts

3/12

12/12

3MMT 12MMT

Millions of Units

Housing Analysis

West 40.8% C Rise

Northeast 14.1% C Flat

South 28.0% B Rise

Midwest 24.6% C Rise

Multi Family 36.0% B Rise

New Homes Sold 25.0% B Rise

Existing Home Sales 10.4% B Rise

38


Sewer & Water Facilities Construction

Public, Billions of $

-1.0 -5.1

33.734

10

25

40

55

70

85

100

-60

-45

-30

-15

0

15

30

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMT R-O-C

3/12 12/12

3MMT 12MMT

39

1H14 > 2H14 1.9% - 1.6%

Total Water Supply Const - 5.7% A State and Local Water - 4.5% A Public S & W Disposal -5.4% A


-21

-14

-7

0

7

14

21

-30

-20

-10

0

10

20

30

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

US IP Construction

Private Construction

US IP

US Industrial Production to Private Non-Residential Construction


40


2.3

44.1

10

50

90

130

170

210

-120

-90

-60

-30

0

30

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMT R-O-C

3.9

41 Commercial Buildings Construction 3/12

12/12

3MMT 12MMT

Billions of $


-4.3 8.7

92.6

10

35

60

85

110

135

160

185

-250

-200

-150

-100

-50

0

50

100

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

MMT R-O-C

Power Construction

3/12

12/12

3MMT

12MMT

Billions of $

42


43 Construction Segments to Consider

Sector Phase Year- over-year Data Trend

Total Public Construction D - 3.2% Declining Total Federal Gov’t Const D -15.2% Declining Public Healthcare B 0.8% Mild Rise Private Healthcare C 0.3% Decline Private Education Build C 6.1% Decline Manufacturing Buildings C 5.5% Decline Private Lodging C 23.5% Rising Religious Buildings A -8.2% Declining Malls D -0.1% Decline Transportation B 13.4% Rising


Four Phases

44

0 0

A A

B B C C

D D

Expansion

Recession


Sample Annual Sales & Growth Rates

Millions of $

45

50

70

90

110

130

150

-150

-125

-100

-75

-50

-25

0

25

50

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Data Trend ROC

-3.5% -3.7%

$86.854


50

70

90

110

130

150

-150

-125

-100

-75

-50

-25

0

25

50

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

Data Trend ROC

Example Series

46

Rates-of-Change RISING – Momentum is positive

More growth ahead 3/12: 26.8% (45 month high) 12/12: 5.7% (13 month high)

Rates-of-Change FALLING – Momentum is negative

3/12: 9.4% (11 month low) 12/12: 16.5% (3 month low)

January 2010 • Annual Production: $61.1 million • 30th consecutive month of rise • Production at 21 year low

Rates-of-Change RISING – Momentum is positive 3/12: -11.7% (20 month high)

12/12 - 26.8% (rise for 2nd straight month)

July 2007 • Annual Production: $103 million • 16th consecutive month of rise • Production at 70 month high

October 2006 • Annual Production: $94 million • 7th consecutive month of rise • Production at 59 month high point

Indicator Indicator

Lead Time (in months)

Indicator Peak

When will TIPRO “PEAK” (12/12 really begins heading downward)

Company Timing

Analysis?

Corporate Bond Prices 9 Sep-12 Jun-13

ITR Leading Indicator 11 Jan-13 Dec-13

Consumer Expectations 12/12 9 Dec-12* Sep-13

CFNAI 6MMA 7 Jan-13* Aug-13

PMI Raw 9

USLI 9 Sep-12 Jun-13

Housing Starts 8 Jan-13* Sep-13

S&P 500 12/12 6

Employment 3/12 3 Nov-12 Feb-13

NDFCGXA -1

Retail Sales 1

Business Cycle Trendcast www.itreconomics.com

*=Tentative


Preparing for 2013-2014 48 Phase Management ObjectivesTM

1. Positive leadership modeling (culture turns to behavior) 2. Invest in customer market research (know what they value) 3. Training programs (people, process, internal metrics) 4. Review and uncover competitive advantages 5. Spend $ on new products, marketing, advertising 6. Improve efficiencies with investment in technology and software 7. Check systems for readiness to accommodate increased activity 8. Add Sales Staff and Hire Top People 9. Lock in costs

10. Judiciously examine credit 11. Work on “what’s next”


49 7 Must Watch Items

1. ITR Leading Indicator 2. Chicago Fed National Activity Index 3. US Leading Indicator 4. Purchasing Managers Index 5. Retail Sales 6. Employment 7. Nondefense Capital Goods New Orders

Available from ITR via ITR Trends Report, the ITR Advisor, or on the web


50

• Concise 4 Page Report

• Excellent Economic “Snap Shot"

• Consists of Current Events, Brief Industry Segments, Snap Shot Indicators, Readers' Questions, Fed Notes, ITR Opportunity Index, and more

• Delivered Monthly

Complimentary Copy of the ITR Advisor

make your move: 2013-2014 · make your move: 2013-2014 alan beaulieu . itr economics ™ . vma mow...

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