make your move - uli...

Urban Land Institute November 2012

Make Your Move

Brian Beaulieu ITR Economics™

www.itreconomics.com


Duration Forecast Actual

GDP 18 $13.525 $13.332 (-1.4%)

US Ind Prod. 11 93.1 (12MMA) 93.8 ( 0.8%)

EU Ind. Prod. 11 101.1 (12MMA) 101.2 ( 0.1%)

CA Ind. Prod. 21 96.0 96.0 ( 0.0%)

Retail Sales 18 $2.116 Trillion $2.106 (-0.5%)

Housing 17 579 Ths Units 607 ( 4.8%)

Employment 20 141.1 million 139.9 (-0.9%)

CPI 17 2.9% 3.2%

* End of year 12-month index estimate

Results for 2011 2


Country Duration Accuracy

Germany 12 98.0%

France 18 99.9%

Italy 18 99.9%

United Kingdom 18 99.9%

Spain 18 98.6%

China 17 96.7%

Japan 15 95.9%

Brazil 14 96.7%

EU Industries 14 94.1%

Results for 2011 3


4

• Leading indicators pointing up

• Liquidity is not an issue

• Stimulative monetary policy

• Employment rising (companies right-sized)

• Banks are lending

• Retail Sales are rising

• Construction is improving

• Deficit spending continues

US/Global Recovery


5 World GDP, Bils of US $, Current Prices

Percent of 2011 World GDP

69.659 Trillion US$ Source: IMF


Real Gross Domestic Product

6

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

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

Trillions of $


7

USIP – 12/12 Indicator - Monthly

-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

Indicator US IP

Indicator - Monthly

US IP - 12/12

US Industrial Production to ITR Leading Indicator


3/12 Rate-of-Change

= 𝐷𝑒𝑐𝑒𝑚𝑏𝑒𝑟 2011 3𝑀𝑀𝑇

𝐷𝑒𝑐𝑒𝑚𝑏𝑒𝑟 2010 3𝑀𝑀𝑇× 100 − 100

=5.3

4.8× 100 − 100 = 10.5%

Raw

Jan-10 1.4

Feb-10 1.5

Mar-10 1.5

Apr-10 1.4

May-10 1.5

Jun-10 1.3

Jul-10 1.3

Aug-10 1.6

Sep-10 1.6

Oct-10 1.5

Nov-10 1.7

Dec-10 1.6

Jan-11 1.7

Feb-11 1.7

Mar-11 1.7

Apr-11 1.6

May-11 1.7

Jun-11 1.5

Jul-11 1.5

Aug-11 1.9

Sep-11 1.7

Oct-11 1.7

Nov-11 1.9

Dec-11 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

= 𝐷𝑒𝑐𝑒𝑚𝑏𝑒𝑟 2011 12𝑀𝑀𝑇

𝐷𝑒𝑐𝑒𝑚𝑏𝑒𝑟 2010 12𝑀𝑀𝑇× 100 − 100

=20.3

18.0× 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%

Phase 1 – Data Preparation

8


Phase 3 – Generate the Quantitative Forecast

9

ITR Long Term Business Cycle Theory News and Market Observations

Leading Economic Indicators Internal Trends


Accurate Forecasts Applicable Advice

Output - Deliverables 10


3.2%

-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

GDP US IP

11

US Industrial Production to Gross Domestic Product

-14.6%

-5.3% -3.1%

-7.1%

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


Year-Over-Year Growth Rates %

12 Global Industrial Production


13

60

80

100

120

140

40

60

80

100

120

1975 1980 1985 1990 1995 2000 2005 2010 2015

Europe US

US

Europe

US to Europe Industrial Production

Annual Average Data Trends


Year-Over-Year Growth Rates %

14 Western Europe Industrial Production


Gross Domestic Product by State All Industry Total, 2011

15

Millions of current dollars


16

US, Minnesota & the Plains Annual GSP Growth Rate

-6

-3

0

3

6

9

'98 '00 '02 '04 '06 '08 '10 '12

U.S. Minnesota Plains

43.6% vs. 27.9%college educated


Unemployment Rates

2

3

4

5

6

7

8

9

10

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

US Minnesota

17


80

100

120

140

160

180

200

220

240

260

-24

-20

-16

-12

-8

-4

0

4

8

12

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

MMA R-O-C

4.3

93.450

4.3

Minnesota Construction Industry Employment

3/12

12/12

3MMA 12MMA

Thousands of Units

18


20

40

60

80

100

120

140

160

180

-60

-50

-40

-30

-20

-10

0

10

20

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

MMA R-O-C

-4.4

53.050

-1.5

Minneapolis/St. Paul Construction Industry Employment

3/12

12/12

3MMA 12MMA

Thousands of Units

19


20 Employment – Private Sector

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

Employment Mils of Jobs

Annual Data Trend


Unemployment Rate With and Without the Recover Plan


22 Total U.S. Public Debt

(% of GDP)

0

20

40

60

80

100

120

140

0

20

40

60

80

100

120

140

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

120.0


Federal Spending Without & With Sequester Cuts Annual and Cumulative, FY 2013*2021 23


Surplus/Deficit as a Percentage of GDP 24


Costs by Age Categories 25


Source: The Economist

Federal Reserve Act of 1913 32 pages

Glass-Steagall Act 37

Dodd-Frank 848

Not rules, but instructions on how to create more

regulations and bureaucracies

Caught in the Web Who can do what to whom 26


U.S. Dependence on Foreign Oil Declining Net imports as a share of domestic consumption 27

52% 49%

45%

57% 58% 60% 60%


28

Source: OECD / National Post

G7 Productivity


29

10

12

14

16

18

10

12

14

16

18

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

3MMA

11.0%

12.2%

US Manufacturing as a % of GDP (Value Added)


30 Consumer Price Index – All Items

-3

0

3

6

9

12

-3

0

3

6

9

12

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

1/1212/12

Rates-of-Change


31 Velocity of Money

-2.8

-5.2

-20

-15

-10

-5

0

5

10

-20

-15

-10

-5

0

5

10

'06 '08 '10 '12 '14

1/12

12/12

Rates-of-Change


Crude Oil Futures Prices

0

25

50

75

100

125

150

0

25

50

75

100

125

150

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

RAW

12MMA

92.19

96.17

Light & Sweet $ per Barrel, Data Trends

32


33

US Industrial Production Index Forecast Through December 2014

-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15

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

Annual Average Index


0 0

Soft Landing

34 Trends 10

Housing

Production

Medical

New Orders

Soft Landing

Financial

Retail

Wholesale Trade

Prices

Foreign

Nonresidential

Construction

Hard Landing


35

Nondefense Capital Goods New Orders w/o Aircraft

-5.0

4.3

$773.1

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

MMT R-O-C

Oct '09

Nov '09

Jul '08

Feb '11 3/12 12/12

3MMT

12MMT

Billions of $


4.9 6.5

4.3

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

-25

-20

-15

-10

-5

0

5

10

15

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

MMA R-O-C

Dec '09

Oct '09

Jul '95

Nov '10

M2 Money Supply

12/12

Actual

12MMA

1/12

Trillions of 82$

36


37 Mortgage Rates to Federal Funds

-2

2

6

10

14

18

22

-2

2

6

10

14

18

22

1975 1980 1985 1990 1995 2000 2005 2010 2015

Mortgage Rates

Federal Funds

Raw Data


US Industrial Production to Corporate Bond Prices

-40

-20

0

20

40

-16

-8

0

8

16

1975 1980 1985 1990 1995 2000 2005 2010 2015

Bonds US IP

US IP

Corporate Bonds

12/12 Rates-of-Change

38


US Government 10-Year Bond Yields to Municipal Bond Yields

39

Raw Data

0

2

4

6

8

10

0

2

4

6

8

10

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

Municipal Bonds

Long Term Bonds

3.73

1.72


60

80

100

120

60

80

100

120

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

Actual

12MMA

95.2

40 US Leading Indicator


41

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

Raw

Purchasing Managers Index

Raw Data


3 Month Moving Average

-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

3MMA

-0.4

Chicago Fed National Activity Index


-45

-30

-15

0

15

30

45

60

-45

-30

-15

0

15

30

45

60

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

12/12

3/12

12.9

46.3

12/12 Rate-of-Change

University of Michigan Consumer Expectations Index

43


44 Delinquency Rates on Consumer Loans

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

'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

Consumer Loan Delinquency Rate

Consumer Credit Card Delinquency Rate

Percentage Percentage

10 Year Average

10 Year Average

3MMA Data Trends


45 Delinquency Rates for C&I Loans

-33.7%

-41.1%

-80

-40

0

40

80

120

160

-80

-40

0

40

80

120

160

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

3/12

12/12

3/12 & 12/12 Rates-of-Change


2.0 2.5

$2.119

1.00

1.50

2.00

2.50

3.00

3.50

-21

-14

-7

0

7

14

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

MMT R-O-C

46 Retail Sales Excluding Automobiles

3/12 12/12

3MMT

12MMT

Trillions of 82-84$


47 Personal Savings

Billions of $, Annual Data Trend SAAR

0

200

400

600

800

1000

0

200

400

600

800

1000

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


Stock Prices Index

0

200

400

600

800

1000

1200

1400

1600

0

200

400

600

800

1000

1200

1400

1600

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Raw

12MMA

Data Trends

48


S&P 500 to FTSE 100

0

1000

2000

3000

4000

5000

6000

7000

8000

0

200

400

600

800

1000

1200

1400

1600

1800

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

S&P 500

FTSE 100

S&P 500 FTSE 100

Data Trends

49


S&P 500 to S&P Toronto Stock Exchange (TSX)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

200

400

600

800

1000

1200

1400

1600

1800

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

S&P 500

S&P TSX

S&P TSX S&P 500

Data Trends

50


S&P 500 to Shanghai Stock Exchange Composite Index (SSEA)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0

200

400

600

800

1000

1200

1400

1600

1800

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

S&P 500

SSEA

SSEA S&P 500

Data Trends

51


Existing Home Sales

10.3 8.1

4.5

3

5

7

9

11

13

15

17

-40

-30

-20

-10

0

10

20

30

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

MMT R-O-C

3/12 12/12

3MMT

12MMT

Millions of Units

52


53

27.7 26.2

0.731

0.2

0.7

1.2

1.7

2.2

2.7

3.2

3.7

4.2

-90

-75

-60

-45

-30

-15

0

15

30

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

MMT R-O-C

Housing Starts

3/12 12/12

3MMT 12MMT

Millions of Units


Building Permits


54

-50

-38

-25

-13

0

13

25

38

50

-50

-38

-25

-13

0

13

25

38

50

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

U.S. Minnesota


0

25

50

75

100

125

-150

-100

-50

0

50

100

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

MMT R-O-C

37.1

11.208

46.5 3/12

12/12

3MMT 12MMT

Minnesota Building Permits

Thousands of Units

55


0

20

40

60

80

100

120

-150

-100

-50

0

50

100

150

'98 '99 '00 '01 '02 '03 '04 '05 ''06 '07 '08 '09 '10 '11 '12 '13 '14

MMT R-O-C

57.1

7.722

76.6 3/12

12/12

3MMT 12MMT

Minneapolis Area Building Permits

Thousands of Units

56

Apartment vacancy low at 2.4% and rents on the rise


US to Minneapolis/St. Paul Median Home Sale Prices

Annual Data Trends

57

150

175

200

225

250

150

175

200

225

250

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

US Median Price

Minneapolis Median Price

$169.2

$158.4


Minnesota Housing Price Index

58

100

150

200

250

300

100

150

200

250

300

Raw

Year over Year % Change


Housing Starts to Multi-Family Residential Construction

-60

-48

-36

-24

-12

0

12

24

36

48

-50

-40

-30

-20

-10

0

10

20

30

40

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

Construction Starts

StartsConstruction



50

150

250

350

450

35

65

95

125

155

1975 1980 1985 1990 1995 2000 2005 2010 2015

Construction Index

Index

Construction

US Industrial Production to Non-Residential Construction

Data Trends

60


Architecture Billings Index

-36

-24

-12

0

12

24

36

-36

-24

-12

0

12

24

36

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

3/12

12/12



Private Commercial Buildings Construction to Multi-Retail Buildings Construction

-75

-60

-45

-30

-15

0

15

30

45

-50

-40

-30

-20

-10

0

10

20

30

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

Multi-Retail Commercial

Commercial

Multi-Retail


MSP retail : total value and mean price rising Vacancy rate about national average at 11.5%


Warehouse Buildings Construction

-1.6

8.5

6.7

0

5

10

15

20

25

30

35

40

-180

-150

-120

-90

-60

-30

0

30

60

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

MMT R-O-C

3/12 12/12

3MMT 12MMT

Private, Billions of Dollars


Public Educational Buildings Construction to State & Local Government Expenditures

Rates-of-Change

-4

-2

0

2

4

6

8

-20

-10

0

10

20

30

40

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

Expenditures Construction

Construction - 12/12

Expenditures - 3/12


65

13.7

8.6

24.5

10

25

40

55

70

85

100

115

-125

-100

-75

-50

-25

0

25

50

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

MMT R-O-C

Office Buildings Construction

3/12 12/12

3MMT

12MMT

Billions of $

MSP vacancy high at 18.2%; rents expected to be rising


66 2013


67 2014


68

1. Positive leadership modeling (culture turns to behavior)

2. Establish goals: tactical goals which lead to strategic achievement

3. Develop a system for measurement and accountability re:#2

4. Align compensation plans with #2 and #3

5. Be keenly aware of the BE (Break Even) point and check

it regularly

6. Judiciously expand credit

7. Check distributions systems for readiness to

accommodate increased activity

8. Review and uncover competitive advantages

9. Invest in customer market research (know what they value)

10. Improve efficiencies with investment in technology and software

2012-2013 – Recovery

Phase Management ObjectivesTM


69

2012-2013 – Recovery

Part 2

11. Start to phase out marginal opportunities

12. Add sales staff

13. Build inventories (consider lead time and turn rate)

14. Introduce new product lines

15. Determine capital equipment needs and place orders

16. Begin advertising and sales promotions

17. Hire "top" people

18. Implement plans for facilities expansion

19. Implement training programs



70 7 Must Watch Items

ITR Leading Indicator

Housing Starts

US Leading Indicator

Purchasing Managers Index

Retail Sales

Employment

Nondefense Capital Goods New Orders Available from ITR via ITR Trends Report,

the ITR Advisor, or on the web


Phase Late C - Warning


71

9. Identify and overcome any competitive disadvantages

10. Make sure you and the management team are not in denial

11. Cross train key people

12. Watch Accounts Receivable aging

13. Increase the requirements for justification of capital expenditures

14. Evaluate vendors for strength (don’t get caught honoring their

warranties with no one to accept returned goods)

15. Manage the backlog through pricing and delivery, try to fill the

funnel


Complimentary Copy of the ITR Advisor

72

• 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

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