Industrial Supply Association Winds of Change

Transcription

1 Industrial Supply Association Winds of Change Dr. Alan Beaulieu President

2 217 Forecast Results If you heard ITR around two years ago 2 Duration Accuracy US GDP % US Ind. Prod % Europe Ind. Prod % Canada Ind. Prod % China Ind. Prod % Retail Sales % Housing % Employment % ITR Economics provides the best economic intelligence to reduce risk and drive practical and profitable business decisions.

3 US Industrial Production to Gross Domestic Product US IP 12 GDP % % -2.9% -5.2% % '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 GDP US IP Year-over-Year, Quarter-to-Quarter (3/12) Sources: FRB, BEA

4 US Industrial Production Index 114 US Industrial Production Index 12-Month Moving Average Year-over-Year Growth Rate 12/12 Rate-of-Change Annual Trend: 14.4 Phase: B Year-over-Year: 2.3% ITR Outlook 218: 2.9% 219: -1.2% 22: 2.3% Source: FRB

5 US Real Gross Domestic Product Sep '15 Forecast Aug '17 Forecast GDP - 3MMA '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 ' MMA Source: BEA 5

6 % 7.8% Rate-of-Change & How They Work Tools for Seeing the Future ' ' ' ' ' ' ' ' ' ' ' ' '

7 Data Preparation Raw Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar MMT /12 12MMT /12 DATACAST! 15.9% 13.6% 13.6% 14.3% 14.6% 16.7% 13.3% 12.8% 1.4% 1.4% 26.7% 25.5% 25.2% 22.4% 2.% 18.3% 15.4% 12.7% 3/12 Rate-of-Change = March 218 3MMT March 217 3MMT 1 1 = = 1.4% /12 Rate-of-Change = March MMT March MMT 1 1 = = 12.7% 18.

8 US Manufacturing Production to US Industrial Production Durable Goods Manufacturing Production Index 12-Month Moving Average Year-over-Year Growth Rate 12/12 Rate-of-Change US IP % Durable US IP Annual Trend: Phase: Year-over-Year: Durable Goods Industry Outlook 216: 217: '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 ' : 12/12 Rates-of-Change Source: FRB

9 US Durable Manufacturing Production Index R-O-C 2 1 3/12 12/12 2.7% 1.8% MMT Dec 18 12MMT high % MMT 12MMT '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 ' = 1 Source: FRB

10 US IP 15 1 US IP Wholesale US Industrial Production to US Wholesale Trade Nondurable Goods 1 Wholesale % /12 above the 12/12 Only a slower rate of $ rise in '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 12/12 Rates-of-Change Sources: FRB, US Census Bureau -24

11 US IP 1 Wholesale Trade Chemicals & Allied Products to US Industrial Production Index Wholesale % 2.3% US IP Wholesale NAICS 4246, which includes 42469: Welding gases merchant wholesalers Tentative Dec 17 12/12 high $125.3 bn Milder rate of rise in '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 12/12 Rates-of-Change Sources: Census Bureau, FRB -3 11

12 Tariffs and other fun things

13 Ease of Doing Business NZ 1 Singapore 2 Denmark 3 Korea 4 Hong Kong 5 US 6 UK 8 Germany 21 Japan 35 Russia 36 China 75 India 1 Brazil 125 Source: The World Bank

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15 US Raw Steel Production % B US Steel - 12MMT 25 12MMT Source: World Steel Association

16 US Steel Mill Employment R-O-C 1 MMA /12 12/12 3.9% 2.4% MMA 12MMA Steel Jobs: Highest in over 25 yrs 14-2 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 Thousands Source: BLS 12

17 Exports 4 US Trade in Goods with World: Exports to Trade Weighted Exchange Rate Index Exchange Rate % 6.1% Exports Exchange Rate '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 12/12 Rates-of-Change Sources: Census Bureau, FRED 15 2

18 US Top Goods Export by State Based on annual data, 217 Source: US Census Bureau

19 Mexico Manufacturing Production Index R-O-C 15 3/12 MMA 18 12/12 2.9% 1.8% MMA 12MMA % -3 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 28 = 1 Source: CEIC 6

20 Leveling the Manufacturing Field Around the Globe Years of 15% to 2% per annum labor cost increases in China without corresponding productivity increases Cheap and readily available energy in North America Aggressive reengineering and automation 24: 15 Percentage Point Advantage The China Advantage? 216: Only 1 Percent Point Difference

21 Leveling the Manufacturing Field Around the Globe Years of 15% to 2% per annum labor cost increases in China without corresponding productivity increases Cheap and readily available energy in North America 24: 15 Percentage Point Advantage Moving Forward Robotics Protectionism Politics & Economic Stability The China Advantage? 216: Only 1 Percent Point Difference

22 $5 Billion in New Tariffs Aimed at China Trade War? US: Punitive for Theft of IT China: Responds 25% tariffs China: Soybeans Autos Aircraft CHINA LOSES? The US is China s Biggest Customer Exports from the US to China stand at $13.1bn, or.7% of US GDP. Exports from China to the US are a record high $436.9bn, or 3.8% of China GDP. Source: US Census Bureau

23 $6 Billion in New Tariffs Aimed at China Trade War Ahead? The US is China s Biggest Customer Exports from the US to China stand at $13.1bn, or.7% of US GDP. Exports from China to the US are a record high $436.9bn, or 12.3% of China GDP. Slowing exports to the US will hurt their economy more than ours but it is not risk free. Downstream Potential InflationUS Consequences Production Job & Profit Loss in Export Supply Chain (to China) Industry Exports US $ bn Aerospace $ 16.3 Soybeans $ 12.4 Motor Vehicles $ 1. Semiconductors $ 6.9 Oil & Gas $ 6.9 Waste & Scrap $ 5.6 Ctrl Instruments $ 5.6 Synthetic Rubbers $ 3.9 Pharmaceuticals $ 3.4 Machines $ 3.3 Source: US Census Bureau

24 Net Migration Between States, July 216-July ,58 +16,854 Does not include immigration into the US Source: Census Bureau

25 State Population Growth Rates Percent Change from Population Estimates 21 to 217 Source: Census Bureau

26 US Federal Government Current Tax Receipts to Consumption Expenditures to Current Transfer Payments to Federal Government Interest Payments Tax/Exp/Paym $3, $2,625 $2,25 $1,875 Current Tax Receipts Consumption Expenditures Current Transfer Payments Interest Payments Interest $3, $2,625 $2,25 $1,875 $1,5 $1,125 $75 $375 $ $1,5 $1,125 $75 $375 $ Billions of Dollars Source: BEA

27 Real GDP Growth Rate US Tax Rates and Real GDP Growth 8.% 1.% 9.% 6.% 4.% 2.% 8.% 7.% 6.% 5.% 4.% 3.% 2.% Top Marginal Tax Rate 1.%.%.% Real GDP Growth Rate Top Marginal Tax Rate Sources: Tax Foundation, BEA,

28 6% 5% 4% 3% 2% Percent of Total US Tax Receipts by Source to Real Gross Domestic Product Will the tax reform generate additional Individual Income cash? Taxes 35%, 21%, and 18.4% Businesses in America already cash rich Immediate expensing? A Help. Inducement to invest more than they need and/or can implement? Pulling in from the future? 8 yrs to pay the tax on repatriated funds. No big influx of cash to the Treasury. Apple $4.5b/year. Corporate Income Taxes 48.8% 28 6% 5% 4% 3% 2% 1% % 8.8% 1.8% GDP 3/12 Growth Rate -1% Taxes: Percent, GDP: 3/12 Rate-of-Change, December Value Sources: Tax Policy Center, BEA 1% % -1%

29 ATLANTA FED IS WATCHING On business investment, roughly two-thirds of respondents to our national survey indicated that the reform wouldn't affect their capital expenditures at all. Just 15 percent said they would increase their capital spending by 1 percent or more, and those responses came mostly from smaller firms. ~ Raphael Bostic Atlanta Federal Reserve Chair Rotary Club of Atlanta January 8, 218

30 ISA and Related Industry Trends

31 North America Light Vehicle Production 12/12 Phase Annual Trend (mu) Direction United States -8.3% A 1.87 Down Canada -7.4% A 2.15 Down Mexico 12.6% C 3.95 Up

32 US Industrial Machinery Production Index R-O-C 4 3/12 New Orders 3/12 3.1% C MMA /12 4.6% 2.6% MMA 12MMA 12MMA rise to Sep % ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 ' = 1 Source: FRB 65

33 Electrical Equipment Production w/o Appliances R-O-C 15 3/12 12/12 1.3%.3% MMA MMA 12MMA Shifting cyclical momentum '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 212 = 1 N3351,3,9, 5

34 R-O-C 1 12/12 US Chemicals & Products Production Index 3/12 Chemical Activity Barometer is rising Capacity Utilization Rate 73.93%, equaling the 1-yr average 3.% 1.6% MMA Basic.8% B Synthetic.9% B Industrial Gas 2.8% B Organic 3.3% B Agriculture 19.2% C Inorganic -6.6% A 3MMA 12MMA Highest 12MMA in 4 yrs % 96. '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 212 = 1 Source: FRB

35 US Civilian Aircraft Equipment Production Index 35 R-O-C 4 3/12 12/12 MMA MMA 12MMA -4.9% -8.5% Sep 18 12MMA low % 85-8 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 ' = 1 Source: FRB 6

36 US Farm Machinery Shipments R-O-C 66 MMT /12 12/ % 13.6% MMT '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 12MMT Billions of Dollars Source: Census Bureau 5

37 U.S. Oil & Gas Extraction Production Index R-O-C 2 1 Projecting a June 18 12/12 high Record high output Dec % Dec % 3/12 12/12 As seen in 11.9% 6.2% MMA MMA 12MMA 9-3 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 212 = 1 Source: FRB 5

38 US Private Nonresidential Construction R-O-C 6 MMT 7-6 3/12 12/12 3MMT 12MMT.2% -.1% '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 Milder-than-normal seasonal decline Mild rise in 12MMT to Dec 19 high % Billions of Dollars Source: Census Bureau 1 38

39 US Private Nonresidential Construction to ITR Leading Indicator Construction 45 3 ITRLI Leads by 2 Indicator Construction -3 Construction Forecast Indicator Indicator Forecast -45 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 ' Rates-of-Change Sources: US Census Bureau, ITR Economics

40 General Economic Trends

41 Global Economy is Set to Slow Down Global Leading Indicators EZ Comp PMI EU Manufacturing PMI JP Morgan Global MFG PMI.9%.7% -2.1% '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 '21 '22 1/12 Rates-of-Change Source: Markit Economics

42 US Industrial Production Index to Leading Indicators US IP, G7 15 PMI, Wilshire, Profits, JP Morgan US IP - 12/12-2 US IP Forecast G7 Indicator - 1/12-1 PMI - 1/12-4 Wilshire Market Cap - 3/12 Corporate Profits - 12/12-15 JP Morgan Indicator - 3/12-6 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 Rates-of-Change Sources: FRB, OECD, ISM, Yahoo Finance, BEA, IHS Markit

43 US IP 15 Early Indication of Slower Growth Ahead Reported in ITR Trends Report ITR Advisor Indicator Tentative Jan 18 high Indicator - Monthly US IP - 12/12 As seen in '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 USIP 12/12 Indicator - Monthly Sources: FRB, ITR Economics -1-15

44 Downward pressure Ahead on Copper Prices Copper Prices 9 Indicator Copper Prices - 12/12 Copper Prices Forecast - 12/ '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 Indicator - Monthly Rates-of-Change Sources: Wall Street Journal, ITR Economics

45 US IP 1 A Positive Risk to the Forecast US Total Industry Capacity Utilization Rate 12/12 Utilization Rate 2 5 1/ US IP US IP Forecast Utilization Rate -15 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 Rates-of-Change Source: FRB -2-3

46 US Stock Prices Index R-O-C 5 MMA /12 12/ % 16.% MMA 12MMA ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 ' =1 Source: Wall Street Journal

47 US Purchasing Managers Index says Downward Pressure Ahead Stock 6 PMI % ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 1/12 Rates-of-Change Sources: WSJ, Institute for Supply Management -4

48 US Domestic Corporate Profits are a Problem for Stocks Prices 4 Profits % % -2-4 Prices Profits ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 ' /12 Rates-of-Change Sources: Wall Street Journal; Bureau of Economic Analysis

49 Cyclically Adjusted Price Earnings (CAPE) Ratio January 19 December 217 Source: Robert Shiller Yale University Analysis prepared by : Baird Family Wealth Group 1/4/18

50 R-O-C 2 US Nondefense Capital Goods New Orders w/o Aircraft A positive impact from the tax law will show up here 3/12 12/12 8.4% 5.8% MMT MMT 12MMT $ MMT rise to Sep % ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 ' Billions of Dollars Source: Census Bureau

51 US Nondefense Capital Goods New Orders (excl. Aircraft) to US Machinery Manufacturing Capacity Utilization New Orders 3 Utilization Rate 3 2 1/12 12/ Utilization Rate -3 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 New Orders New Orders Forecast Rates-of-Change Sources: Census Bureau, FRB -2-3

52 Copper 1 US Copper Futures Prices are Signaling Downward Pressure on B2B Activity Capital Goods % 24.7% CBSA Copper Futures Prices Capital Goods '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 12/12 Rates-of-Change Sources: WSJ, Census Bureau -2-3

53 Wholesale Trade of Nondurable Goods are also Signaling Downward Pressure on B2B Activity Wholesale 3 New Orders % Wholesale New Orders % -2-3 New Orders Forecast '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 12/12 Rates-of-Change : -3

54 R-O-C 5 US Single Unit Housing Series Good News for Now As seen in MMT /12 12/12 9.2% 6.7% MMT 12MMT Projected Sep 18 12MMT high % ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 Millions of Units Source: Census Bureau

55 US Housing Starts to National Association of Home Builders Housing Market Index Housing Starts 45 Index /12 12/12 4.9% 2.% month lead time Housing Starts - 12/12 Housing Market Index - 3/12 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 Rates-of-Change Sources: Census Bureau, NAHB

56 US Total Retail Sales Consumers are Doing Well! R-O-C /12 12/12 4.4% 4.3% MMT MMT ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 12MMT 12MMT rise through % Trillions of Dollars Source: Census Bureau 4 2

57 Wholesale 3 Wholesale Trade of Nondurable Goods to US Consumer Nondurable Goods New Orders New Orders Nov 17 high Wholesale New Orders '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 ' /12 Rates-of-Change

58 Sales 12 ITR US Retail Sales Leading Indicator Signaling a Slowing in Retail Sales Rate of Rise Indicator Sales - 12/12 Sales Forecast - 12/12 Indicator - Monthly '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 '21 '22 '23 '24 Retail Sales = 12/12, ITR Retail Sales = Monthly Sources: Census Bureau and ITR Economics

59 Sales 12 Personal Savings are Signaling a Slowing in US Total Retail Sales Index Sales - 12/12 Sales Forecast - 12/12 Index - 12MMA '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 '15 '16 '17 '18 '19 '2 '21 '22 '23 ' /12 Rates-of-Change Sources: Census Bureau, BEA

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61 US Consumer Price Index to US Producer Price Index % 2.4% Consumer Price Producer Price ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 1/12 Rate-of-Change Source: BLS -1

62 Copper Future Prices The Cyclical Momentum is Shifting R-O-C 14 3/12 MMA / % 15.3% MMA $ MMA ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 '22 '24 Dollars per Pound Source: Wall Street Journal.5

63 '82 '84 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 '18 '2 Source: FRB Yield on 1 Year Treasury Note 63

64 6 FOMC Member Interest Rate Projections December 217 Fed Open Market Committee March Longer Run Source: FRB

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