the pit and the pendulum - energy.gov 2015... · 2015-04-14 · source: international monetary...
TRANSCRIPT
By: Anirban Basu Sage Policy Group, Inc.
March 25th, 2015
The Pit and the Pendulum
On Behalf of
U.S. Department of Energy
Acquisition and Project Management Workshop
Dawn of the Dead
Real GDP Growth, 20 Fastest and Slowest Growing Countries Projected 2014, Annual Percent Change (for available nations)
Rank Country Region % Rank Country Region %
1 Turkmenistan Central Asia 10.1 169 Netherlands Europe 0.6
2 Chad Africa 9.6 170 France Europe 0.4
3 Mongolia Asia 9.1 171 Brazil South America 0.3
4 Democratic Republic of the Congo Africa 8.6 172 Russia Eastern Europe 0.2
5 Côte d'Ivoire Africa 8.5 173 Solomon Islands Pacific Islands 0.1
6 Myanmar Southeast Asia 8.5 174 San Marino Europe 0.0
7 Mozambique Africa 8.3 175 Italy Europe -0.2
8 Ethiopia Africa 8.2 176 Finland Northern Europe -0.2
9 Sierra Leone Africa 8.0 177 Serbia Eastern Europe -0.5
10 China Asia 7.4 178 Barbados Caribbean -0.6
11 Lao P.D.R. Southeast Asia 7.4 179 Croatia Eastern Europe -0.8
12 The Gambia Africa 7.4 180 St. Lucia Caribbean -1.1
13 Tanzania Africa 7.2 181 Argentina South America -1.7
14 Cambodia Southeast Asia 7.2 182 Equatorial Guinea Africa -2.5
15 Uzbekistan Central Asia 7.0 183 Iraq Middle East -2.7
16 Sri Lanka Southeast Asia 7.0 184 Venezuela South America -3.0
17 Nigeria Africa 7.0 185 Cyprus Europe -3.2
18 Mauritania Africa 6.8 186 Ukraine Eastern Europe -6.5
19 Burkina Faso Africa 6.7 187 South Sudan Africa -12.3
20 Panama Central America 6.6 188 Libya Middle East -19.8
Source: International Monetary Fund, October 2014 WEO Database
Estimated Growth in Output by Select Global Areas 2015 Projected*
3.2% 0.3%
1.3% 3.3%
6.3% 6.8%
6.4% -3.0%
2.9% 4.9%
4.3% 3.6%
2.3% 2.7%
0.6% 2.0%
0.4% 1.3%
0.9% 1.2%
2.4%
-5.0% -3.0% -1.0% 1.0% 3.0% 5.0% 7.0% 9.0%
MexicoBrazil
Latin America and CaribbeanMiddle East, North Africa, Afghanistan, & Pakistan
India***China
Developing AsiaRussia
Central/eastern EuropeSub-Saharan Africa
Emerging/developing countries**United States
CanadaUnited Kingdom
JapanSpain
ItalyGermany
FranceEuro area
Advanced economies
Annual % Change
Source: International Monetary Fund, January 2015 WEO Update
*Real effective exchange rates are assumed to remain constant at the levels prevailing during December 8, 2014–January 5, 2015.
**The quarterly estimates and projections account for approximately 80 percent of the emerging market and developing economies.
***For India, data and forecasts are presented on a fiscal year basis and output growth is based on GDP at market prices.
Corresponding growth rates for GDP at factor cost are 5.6 and 6.3 percent for 2014/15 and 2015/16, respectively.
Jobs 0.3%
Incomes 4.7%
Profits 61.0%
Housing -6.8%
Stocks 33.5%
-70%
-50%
-30%
-10%
10%
30%
50%
70%
2008 2009 2010 2011 2012 2013 2014
Per
cen
t ch
ange
sin
ce e
nd
of
200
7
What Lies Beneath
Source: BEA, BLS, S&P Case-Shiller, Yahoo! Finance
*Through June 2014
Source: U.S. Bureau of Labor Statistics
Median Weekly Earnings, Full-Time U.S. Workers* 2000Q4 through 2014Q4
*SA, Constant 1982-1984 dollars (adjusted to CPI-U) Wage and salary workers ages 16+
$320
$325
$330
$335
$340
$345
$350
200
0Q
4
200
1Q2
200
1Q4
200
2Q2
200
2Q4
200
3Q2
200
3Q4
200
4Q
2
200
4Q
4
200
5Q2
200
5Q4
200
6Q
2
200
6Q
4
200
7Q2
200
7Q4
200
8Q
2
200
8Q
4
200
9Q
2
200
9Q
4
2010
Q2
2010
Q4
2011
Q2
2011
Q4
2012
Q2
2012
Q4
2013
Q2
2013
Q4
2014
Q2
2014
Q4
Source: Bureau of Labor Statistics
Construction Employment Cost Index
12-Month Percent Change (NSA)
*Private industry workers in construction. Total compensation includes wages, salaries, and employer costs for employee benefits.
0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%
200
1Q2
200
1Q4
200
2Q2
200
2Q4
200
3Q2
200
3Q4
200
4Q
2
200
4Q
4
200
5Q2
200
5Q4
200
6Q
2
200
6Q
4
200
7Q2
200
7Q4
200
8Q
2
200
8Q
4
200
9Q
2
200
9Q
4
2010
Q2
2010
Q4
2011
Q2
2011
Q4
2012
Q2
2012
Q4
2013
Q2
2013
Q4
2014
Q2
2014
Q4
Total Compensation Wages & Salaries
Source: Moody’s Economy
Recession Watch as of December 2014
Industrial Production February 2001 through February 2015
Source: Federal Reserve
The industrial production index measures the real output of the manufacturing, mining, and electric and gas utilities industries.
80
85
90
95
100
105
110
Feb
-01
Jun
-01
Oct
-01
Feb
-02
Jun
-02
Oct
-02
Feb
-03
Jun
-03
Oct
-03
Feb
-04
Jun
-04
Oct
-04
Feb
-05
Jun
-05
Oct
-05
Feb
-06
Jun
-06
Oct
-06
Feb
-07
Jun
-07
Oct
-07
Feb
-08
Jun
-08
Oct
-08
Feb
-09
Jun
-09
Oct
-09
Feb
-10
Jun
-10
Oct
-10
Feb
-11
Jun
-11
Oct
-11
Feb
-12
Jun
-12
Oct
-12
Feb
-13
Jun
-13
Oct
-13
Feb
-14
Jun
-14
Oct
-14
Feb
-15
Ind
ex
(20
07
= 1
00
)
(Base year: 2007)
Gross Domestic Product 1990Q1 through 2014Q4*
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%19
90
Q1
199
0Q
419
91Q
319
92Q
219
93Q
119
93Q
419
94
Q3
199
5Q2
199
6Q
119
96
Q4
199
7Q3
199
8Q
219
99
Q1
199
9Q
420
00
Q3
200
1Q2
200
2Q1
200
2Q4
200
3Q3
200
4Q
220
05Q
120
05Q
420
06
Q3
200
7Q2
200
8Q
120
08
Q4
200
9Q
320
10Q
220
11Q
120
11Q
420
12Q
320
13Q
220
14Q
120
14Q
4
Pe
rce
nt
Ch
an
ge
fro
m P
rece
din
g P
eri
od
(S
AA
R)
2014Q4: +2.2%
Source: Bureau of Economic Analysis
*2nd estimate
Contributions to GDP Growth by Component 2013Q4 – 2014Q4*
Source: Bureau of Economic Analysis
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
PersonalConsumption
GovernmentSpending
Net Exports Gross Investment
2.5
-0.7
1.1
0.6 0.8
-0.2
-1.7
-1.1
1.8
0.3
-0.3
2.9
2.21
0.80 0.78
1.18
2.83
-0.32
-1.15
0.84
SA
AR
(%
)
Q4-13 Q1-14 Q2-14 Q3-14 Q4-14
*2nd estimate
Invasion of the Body Snatchers
-1,000
-800
-600
-400
-200
0
200
400
600Ja
n-0
2
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Th
ou
san
ds
Source: U.S. Bureau of Labor Statistics
February 2015: +295K
Net Change in U.S. Jobs, BLS January 2002 through February 2015
National Nonfarm Employment by Industry Sector February 2014 v. February 2015
22
59
87
89
150
208
321
527
539
634
660
0 200 400 600 800
Mining and Logging
Information
Government
Other Services
Financial Activities
Manufacturing
Construction
Leisure and Hospitality
Education and Health Services
Trade, Transportation, and Utilities
Professional and Business Services
Thousands, SA
All told 3,296K Jobs gained
Source: U.S. Bureau of Labor Statistics
February-15: +29K
-200
-150
-100
-50
0
50
100
Feb
-00
Jun
-00
Oct
-00
Feb
-01
Jun
-01
Oct
-01
Feb
-02
Jun
-02
Oct
-02
Feb
-03
Jun
-03
Oct
-03
Feb
-04
Jun
-04
Oct
-04
Feb
-05
Jun
-05
Oct
-05
Feb
-06
Jun
-06
Oct
-06
Feb
-07
Jun
-07
Oct
-07
Feb
-08
Jun
-08
Oct
-08
Feb
-09
Jun
-09
Oct
-09
Feb
-10
Jun
-10
Oct
-10
Feb
-11
Jun
-11
Oct
-11
Feb
-12
Jun
-12
Oct
-12
Feb
-13
Jun
-13
Oct
-13
Feb
-14
Jun
-14
Oct
-14
Feb
-15
Mo
nth
ly N
et
Ch
an
ge
(th
ou
san
ds)
National Construction Employment Monthly Net Change February 2000 through February 2015
Source: U.S. Bureau of Labor Statistics
Industry Sector 15-Feb 15-Jan 14-Feb 1-net 12-net 12-%
Construction 6,353.0 6,324.0 6,032.0 29.0 321.0 5.3
Residential Building 687.9 688.4 642.6 -0.5 45.3 7.0
Nonresidential Building 722.4 716.7 690.8 5.7 31.6 4.6
Heavy & Civil Engineering Construction 935.4 939.1 899.7 -3.7 35.7 4.0
Specialty Trade Contractors 4,007.1 3,979.9 3,798.5 27.2 208.6 5.5
State-by-state Growth in Construction Jobs January 2014 v. January 2015
Source: U.S. Bureau of Labor Statistics
*Construction, Mining, and Logging are included in one industry.
STATE Year-over-
year Ch.
(‘000)
STATE Year-over-
year Ch.
(‘000)
STATE Year-over-
year Ch.
(‘000)
TEXAS 49.6 KENTUCKY 4.6 MISSOURI 0.8
CALIFORNIA 37.8 IDAHO 4.4 NEW MEXICO 0.8
FLORIDA 31.8 NORTH DAKOTA 4.3 HAWAII* 0.8
WASHINGTON 17.3 MARYLAND* 4.0 MONTANA 0.7
NEW YORK 16.4 LOUISIANA 3.9 RHODE ISLAND 0.6
COLORADO 13.5 VIRGINIA 3.9 VERMONT 0.6
MICHIGAN 13.2 ARKANSAS 3.2 KANSAS 0.5
NEW JERSEY 12.3 ARIZONA 2.8 SOUTH DAKOTA* 0.5
NORTH CAROLINA 11.3 OREGON 2.8 DISTRICT OF COLUMBIA* 0.3
ILLINOIS 11.1 OHIO 2.7 WYOMING 0.2
WISCONSIN 9.3 GEORGIA 2.6 DELAWARE* -0.1
UTAH 7.4 CONNECTICUT 2.3 NEBRASKA* -0.2
IOWA 6.5 SOUTH CAROLINA 1.7 MAINE -0.5
PENNSYLVANIA 5.7 OKLAHOMA 1.6 MINNESOTA -0.7
TENNESSEE* 5.7 ALABAMA 1.3 WEST VIRGINIA -0.7
NEVADA 5.4 NEW HAMPSHIRE 1.2 INDIANA -1.9
MASSACHUSETTS 4.7 ALASKA 1.0 MISSISSIPPI -6.6
U.S. Year-over-year Percent Change: 2.3%
Employment Growth, U.S. States (SA) January 2014 v. January 2015 Percent Change
RANK STATE % RANK STATE % RANK STATE %
1 NORTH DAKOTA 4.3 18 INDIANA 2.2 35 KANSAS 1.3
2 UTAH 4.0 18 KENTUCKY 2.2 35 LOUISIANA 1.3
3 FLORIDA 3.6 20 MASSACHUSETTS 2.0 35 VERMONT 1.3
3 NEVADA 3.6 21 ALABAMA 1.8 38 ALASKA 1.2
5 TEXAS 3.5 21 NEW YORK 1.8 38 NEBRASKA 1.2
6 OREGON 3.3 21 OHIO 1.8 38 NEW JERSEY 1.2
6 WASHINGTON 3.3 24 DELAWARE 1.6 41 ILLINOIS 1.1
8 CALIFORNIA 3.2 24 DISTRICT OF COLUMBIA 1.6 41 PENNSYLVANIA 1.1
8 GEORGIA 3.2 24 IOWA 1.6 43 MINNESOTA 1.0
10 IDAHO 3.1 24 MISSOURI 1.6 44 MISSISSIPPI 0.8
11 COLORADO 2.9 24 NEW MEXICO 1.6 44 MONTANA 0.8
12 ARIZONA 2.7 24 WYOMING 1.6 46 HAWAII 0.7
12 SOUTH CAROLINA 2.7 30 CONNECTICUT 1.5 46 NEW HAMPSHIRE 0.7
14 NORTH CAROLINA 2.6 30 MARYLAND 1.5 46 SOUTH DAKOTA 0.7
14 TENNESSEE 2.6 30 OKLAHOMA 1.5 46 VIRGINIA 0.7
16 MICHIGAN 2.4 30 WISCONSIN 1.5 50 WEST VIRGINIA 0.4
17 ARKANSAS 2.3 34 RHODE ISLAND 1.4 51 MAINE -0.1
Source: U.S. Bureau of Labor Statistics
U.S. Unemployment Rate January 2015: 5.7% February 2015: 5.5%
Unemployment Rates, U.S. States (SA) January 2015 RANK STATE % RANK STATE % RANK STATE %
1 NORTH DAKOTA 2.8 18 DELAWARE 5.0 35 ILLINOIS 6.1
2 NEBRASKA 2.9 18 WISCONSIN 5.0 36 ALASKA 6.3
3 SOUTH DAKOTA 3.4 20 MASSACHUSETTS 5.1 36 CONNECTICUT 6.3
3 UTAH 3.4 20 OHIO 5.1 36 MICHIGAN 6.3
5 MINNESOTA 3.7 20 PENNSYLVANIA 5.1 36 NEW JERSEY 6.3
6 OKLAHOMA 3.9 23 MAINE 5.2 36 OREGON 6.3
7 NEW HAMPSHIRE 4.0 24 NORTH CAROLINA 5.4 41 GEORGIA 6.4
7 WYOMING 4.0 25 KENTUCKY 5.5 41 WASHINGTON 6.4
9 HAWAII 4.1 25 MARYLAND 5.5 43 RHODE ISLAND 6.5
9 IDAHO 4.1 25 MISSOURI 5.5 44 ARIZONA 6.6
9 VERMONT 4.1 28 ARKANSAS 5.6 44 SOUTH CAROLINA 6.6
12 COLORADO 4.2 29 FLORIDA 5.7 46 TENNESSEE 6.7
12 IOWA 4.2 30 NEW YORK 5.8 47 CALIFORNIA 6.9
12 KANSAS 4.2 31 NEW MEXICO 5.9 48 LOUISIANA 7.0
15 MONTANA 4.4 31 WEST VIRGINIA 5.9 49 MISSISSIPPI 7.1
15 TEXAS 4.4 33 ALABAMA 6.0 49 NEVADA 7.1
17 VIRGINIA 4.7 33 INDIANA 6.0 51 DISTRICT OF COLUMBIA 7.7 Source: U.S. Bureau of Labor Statistics
Unemployment Rates, 20 Largest Metros (NSA) January 2015
Rank MSA UR Rank MSA UR
1 Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area 4.1 10
San Diego-Carlsbad, CA Metropolitan Statistical Area 5.8
2 Dallas-Fort Worth-Arlington, TX Metropolitan Statistical Area 4.4 12
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metropolitan Statistical Area 6.0
3 Houston-The Woodlands-Sugar Land, TX Metropolitan Statistical Area 4.5 12
St. Louis, MO-IL Metropolitan Statistical Area1 6.0
4 San Francisco-Oakland-Hayward, CA Metropolitan Statistical Area 4.8 14
Atlanta-Sandy Springs-Roswell, GA Metropolitan Statistical Area 6.2
5 Boston-Cambridge-Nashua, MA-NH Metropolitan NECTA 4.9 14
Baltimore-Columbia-Towson, MD Metropolitan Statistical Area 6.2
5 Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area 4.9 16
New York-Newark-Jersey City, NY-NJ-PA Metropolitan Statistical Area 6.5
7 Miami-Fort Lauderdale-West Palm Beach, FL Metropolitan Statistical Area 5.5 17
Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area 6.9
7 Seattle-Tacoma-Bellevue, WA Metropolitan Statistical Area 5.5 18
Riverside-San Bernardino-Ontario, CA Metropolitan Statistical Area 7.3
9 Tampa-St. Petersburg-Clearwater, FL Metropolitan Statistical Area 5.7 19
Detroit-Warren-Dearborn, MI Metropolitan Statistical Area 7.4
10 Phoenix-Mesa-Scottsdale, AZ Metropolitan Statistical Area 5.8 19
Los Angeles-Long Beach-Anaheim, CA Metropolitan Statistical Area 7.4
Source: U.S. Bureau of Labor Statistics
Nightmare on Elm Street
15-Year & 30-Year Fixed Mortgage Rates February 1995 through March 2015*
Source: Freddie Mac
3.06%
3.78%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Feb
-95
Oct
-95
Jun
-96
Feb
-97
Oct
-97
Jun
-98
Feb
-99
Oct
-99
Jun
-00
Feb
-01
Oct
-01
Jun
-02
Feb
-03
Oct
-03
Jun
-04
Feb
-05
Oct
-05
Jun
-06
Feb
-07
Oct
-07
Jun
-08
Feb
-09
Oct
-09
Jun
-10
Feb
-11
Oct
-11
Jun
-12
Feb
-13
Oct
-13
Jun
-14
Feb
-15
Rat
e
15-yr 30-yr
*Week ending 3/19/2015
U.S. New Home Sales January 1999 through February 2015
Source: U.S. Census Bureau
February 2015 539K
0
200
400
600
800
1,000
1,200
1,400
1,600
Th
ou
san
ds,
SA
AR
Source: U.S. Census Bureau
U.S. Private New Multifamily Construction January 1993 through January 2015
$0
$10
$20
$30
$40
$50
$60Ja
n-9
3
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Jan
-08
Jan
-09
Jan
-10
Jan
-11
Jan
-12
Jan
-13
Jan
-14
Jan
-15
$ B
illi
on
s (S
AA
R)
Source: U.S. Census Bureau
U.S. Homeownership
2014 Q4: 63.9%
60%
62%
64%
66%
68%
70%Q
4-1
98
0Q
4-1
98
1Q
4-1
98
2Q
4-1
98
3Q
4-1
98
4Q
4-1
98
5Q
4-1
98
6Q
4-1
98
7Q
4-1
98
8Q
4-1
98
9Q
4-1
99
0Q
4-1
99
1Q
4-1
99
2Q
4-1
99
3Q
4-1
99
4Q
4-1
99
5Q
4-1
99
6Q
4-1
99
7Q
4-1
99
8Q
4-1
99
9Q
4-2
00
0Q
4-2
00
1Q
4-2
00
2Q
4-2
00
3Q
4-2
00
4Q
4-2
00
5Q
4-2
00
6Q
4-2
00
7Q
4-2
00
8Q
4-2
00
9Q
4-2
010
Q4
-20
11Q
4-2
012
Q4
-20
13Q
4-2
014
U.S. Housing Building Permits February 1999 through February 2015
Source: U.S. Census Bureau
0
500
1,000
1,500
2,000
2,500
Feb
-99
Jun
-99
Oct
-99
Feb
-00
Jun
-00
Oct
-00
Feb
-01
Jun
-01
Oct
-01
Feb
-02
Jun
-02
Oct
-02
Feb
-03
Jun
-03
Oct
-03
Feb
-04
Jun
-04
Oct
-04
Feb
-05
Jun
-05
Oct
-05
Feb
-06
Jun
-06
Oct
-06
Feb
-07
Jun
-07
Oct
-07
Feb
-08
Jun
-08
Oct
-08
Feb
-09
Jun
-09
Oct
-09
Feb
-10
Jun
-10
Oct
-10
Feb
-11
Jun
-11
Oct
-11
Feb
-12
Jun
-12
Oct
-12
Feb
-13
Jun
-13
Oct
-13
Feb
-14
Jun
-14
Oct
-14
Feb
-15
Th
ou
san
ds,
SA
AR
1 Unit 5 units or more
February 2015: 1 Unit: 620K 5 Units or more: 445K
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1.4% 1.5% 1.9%
2.8%
3.8% 4.5%
5.1% 5.5%
6.9% 7.5%
8.1% 8.4%
9.4%
12-M
on
th %
Ch
ange
S&P/Case-Shiller Home Price Indices for Select Metros December 2014, 12-Month Percentage Change
Source: Standard & Poor’s
Source: The American Institute of Architects
Architecture Billings Index January 2008 through February 2015
30
35
40
45
50
55
60
Jan
-08
Mar
-08
May
-08
Jul-
08
Sep
-08
No
v-0
8
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-0
9
Jan
-10
Mar
-10
May
-10
Jul-
10
Sep
-10
No
v-10
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
No
v-11
Jan
-12
Mar
-12
May
-12
Jul-
12
Sep
-12
No
v-12
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-13
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-14
Jan
-15
February 2015: 50.4
Nonresidential Construction Put-in-Place December 2006 through January 15
0
100
200
300
400
500
600
700
800D
ec-0
6
Mar
-07
Jun
-07
Sep
-07
Dec
-07
Mar
-08
Jun
-08
Sep
-08
Dec
-08
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Jun
-12
Sep
-12
Dec
-12
Mar
-13
Jun
-13
Sep
-13
Dec
-13
Mar
-14
Jun
-14
Sep
-14
Dec
-14
SA
AR
($b
illi
on
s)
Public
Private
Source: U.S. Census Bureau
Dec. 08: $697.4 billion Jan. 15: $614.1 billion
-11.9%
National Nonresidential Construction Spending by Subsector January 2014 v. January 2015
-14.5
-13.2
-12.4
-2.5
-1.5
-0.4
3.3
8.7
8.9
12.7
14.0
16.0
18.2
19.3
22.5
25.6
-20 -10 0 10 20 30
Public safety
Power
Religious
Health care
Communication
Educational
Water supply
Highway and street
Transportation
Office
Commercial
Sewage and waste disposal
Lodging
Amusement and recreation
Manufacturing
Conservation and development
12-month % Change
Source: U.S. Census Bureau
Inputs to Construction PPI January 2001 – January 2015
-10%
-5%
0%
5%
10%
15%
Jan
-01
May
-01
Sep
-01
Jan
-02
May
-02
Sep
-02
Jan
-03
May
-03
Sep
-03
Jan
-04
May
-04
Sep
-04
Jan
-05
May
-05
Sep
-05
Jan
-06
May
-06
Sep
-06
Jan
-07
May
-07
Sep
-07
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
12-m
on
th P
erc
en
t C
ha
ng
e
Source: U.S. Bureau of Labor Statistics
Construction Materials PPI 12-month % Change as of January 2015
Source: U.S. Bureau of Labor Statistics
-70% -60% -50% -40% -30% -20% -10% 0% 10%
Crude petroleum
Crude energy materials
Natural gas
Iron and steel
Nonferrous wire and cable
Steel mill products
Softwood lumber
Fabricated structural Metal Products
Plumbing fixtures and Fittings
Prepared asphalt and tar roofing & siding products
Concrete products
-54.8%
-38.4%
-29.3%
-6.7%
-6.4%
-1.5%
-0.6%
1.2%
3.9%
4.2%
4.8%
Source: ENR, “Owners Take Rap for Big Project Fails” 02/26/2015 By Scott Blair
Megaprojects: High Risk of Failure
• IPA considered a project a failure if it met at least one of four criteria: • Its costs grew by 25 percent or more relative to expectation; • The schedule slipped by at least 25 percent (one year, on average, for
mega-projects); • The project overspent compared to the industry average; or • There were severe and continuing operational problems lasting more
than two years after startup. • An ongoing, multiyear study conducted by Independent Project Analysis
(IPA) Inc., with the participation of nearly 100 of the largest owners of global industrial project found a strong correlation between failure rate and size. • Around 37% of projects under $750 million fail. But megaprojects over
$750 million tend to fail nearly two-thirds of the time (the study examined more than 3,700 projects).
• According to IPA’s study, the engineering error rate has doubled since 2006. Merrow describes some of them as "Chemical Engineering 101-type errors.”
Problems with Megaprojects
• Causes of Megaproject Inefficiency (1) • Inadequate planning and analysis prior to
construction • Incomplete detail design engineering prior to
construction • Lack of unified construction partnerships between
owners and contractors • Ineffective project controls, which impact decision
making and risk management throughout the project lifecycle.
Source: 1. Aconex.com “Managing Construction Megaprojects” May 2014;
2. PWC “Correcting the course of capital projects. Plan ahead to avoid time and cost overruns down the road” April 2013
Megaprojects & Cost Overruns
Source: PWC “Correcting the course of capital projects. Plan ahead to avoid time and cost overruns down the road” April 2013
The cost of projects gone awry • “A PwC analysis of six nuclear
plants found an average cost overrun of 157%.
• Of 47 mega-projects analyzed by PwC, the average cost overrun was 88%.
• For a refinery project budgeted at $4 billion, the final forecast was $12 billion.
• Incorrect contracting to build ships and infrastructure led to a $2 million tax loss.
• In litigation, a project owner sought €2.4 billion in damages for a three-year delay on a turnkey, €3 billion power project.”
Analysis of industry research conducted by PwC found that mega-projects often exceed their budgets by 50% or more.
Psycho
-23.0%
0.8%
0.9%
3.3%
3.5%
3.6%
3.9%
4.8%
4.8%
5.4%
5.8%
7.7%
8.6%
-30.0% -20.0% -10.0% 0.0% 10.0% 20.0%
Gasoline Stations
General Merchandise Stores
Electronics & Appliance Stores
Clothing & Clothing Accessories Stores
Sporting Goods, Hobby, Book & Music Stores
Food & Beverage Stores
Building Material & Garden Supplies Dealers
Health & Personal Care Stores
Miscellaneous Store Retailers
Motor Vehicle & Parts Dealers
Furniture & Home Furn. Stores
Food Services & Drinking Places
Internet, etc. Retailers
12-month % change
Sales Growth by Type of Business February 2014 v. February 2015*
Source: U.S. Census Bureau
*February 2015 advanced estimate
Conference Board Leading Economic Indicators Index August 2007 through February 2015
Source: Conference Board
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%A
ug
-07
No
v-0
7
Feb
-08
May
-08
Au
g-0
8
No
v-0
8
Feb
-09
May
-09
Au
g-0
9
No
v-0
9
Feb
-10
May
-10
Au
g-1
0
No
v-10
Feb
-11
May
-11
Au
g-1
1
No
v-11
Feb
-12
May
-12
Au
g-1
2
No
v-12
Feb
-13
May
-13
Au
g-1
3
No
v-13
Feb
-14
May
-14
Au
g-1
4
No
v-14
Feb
-15
On
e-m
on
th P
erc
en
t C
ha
ng
e
February 2015 = 121.4 where 2010 = 100
Tell-Tale Heart
• Economy gained momentum over the course of last year;
• Tailwinds included booming stock market, lower gasoline prices, stabilizing global economy, and consumer expenditures on interest rate sensitive durable goods like autos;
• The current year is associated with greater certainty regarding monetary policy – that helps;
• The world is not perfect - black swan threats remain: (1) Iran (2) Israel/Iran (3) Europe (4) contagion (5) cyber (6) EMP;
• Market is nervous, but perhaps for the wrong reasons (there is at least one reason for anxiousness among equity investors); and
• More people benefit from lower oil prices than are hurt – more contractors and developers are helped than hurt – frankly, low oil prices just don’t make me that nervous.
Thank You
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