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brian@itreconomics.com www.itreconomics.com Presented by ITR ® Brian Beaulieu September 2011
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www.itreconomics.com 2 The U.S. economy remains almost comatose. The current slump already ranks as the longest period of sustained weakness since the Great Depression. Once-in-a-lifetime dislocations will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the banking collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit. September 1992
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www.itreconomics.com 3 US Industrial Production to Gross Domestic Product Year-over-year Quarter to Quarter (3/12) -14.6% -5.3% -3.1% -7.1%
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www.itreconomics.com Leading indicators pointing up Liquidity is not an issue Exports are up Simulative monetary policy Employment rising (companies right-sized) Banks are lending Normal seasonal rise in Retail Sales $447 bils stimulus program Recovery
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www.itreconomics.com Europe’s financial troubles might… China’s housing/inflation bubble could… International banking crisis becomes… Oil prices could break through $120 … USD could lose all credibility causing… Recession in 2012
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www.itreconomics.com 6 US Total Industrial Production Index 2002 = 100, S.A. 3/1212/12 3MMA 12MMA ITR Trends Report
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www.itreconomics.com 7 Global Industrial Production Indices 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 8 US Industrial Production to China Industrial Production 12/12 Rates-of-Change
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www.itreconomics.com 9 US Industrial Production to Japan Industrial Production 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 10 US Industrial Production to Canadian Industrial Production 12/12 Rates-of-Change
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www.itreconomics.com 11 US Industrial Production to India Industrial Production 12/12 Rates-of-Change
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www.itreconomics.com 12 US, Colorado, & Rocky Mountains Annual GSP Growth Rate
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www.itreconomics.com 13 Unemployment Rates
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www.itreconomics.com 14 Colorado 4 th Opportunity Index Score: 66.6 National Average: 50.9
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www.itreconomics.com 15 2010 Exports from Colorado to the World Billions of USD
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www.itreconomics.com 16 Example: Revenue 12MMT Monthly Sept Oct Nov Dec 10 3MMT = 4.63 Jan Feb Mar 11 3MMT = 5.14 Apr May June 11 3MMT = 4.98 July Aug Sept 11 3MMT = 4.22 3MMT = 3.95 3MMT = 4.24 12MMT = 18.70 12MMT = 18.97 12MMT = 17.54 8.2%
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www.itreconomics.com 17 RATE-OF-CHANGE ACTUAL MONTHLY DATA AS OF 8/11 ACTUAL MONTHLY DATA AS OF 8/10 3-MOS MOVING TOTAL (3MMT) AS OF 8/11 3-MOS MOVING TOTAL (3MMT) AS OF 8/10 ANNUAL MOVING TOTAL (12MMT) AS OF 8/11 ANNUAL MOVING TOTAL (12MMT) AS OF 8/10 = 1/12 = 3/12 = 12/12
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www.itreconomics.com 18 3/12 12/12 3MMT 12MMT Colorado Construction Industry Employment Thousands of Units
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www.itreconomics.com 19 3/12 12/12 3MMT 12MMT Denver Construction Industry Employment Thousands of Units
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www.itreconomics.com 20 Employment – Private Sector Annual Data Trend ITR Trends Report
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www.itreconomics.com 21
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www.itreconomics.com 22 OMB’s 10-Year Deficit Projections (Baseline of Current Policy) Billions of Dollars
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www.itreconomics.com 23
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www.itreconomics.com 24 Unemployment Rate to Consumer Price Index Data Trends to Rates-of-Change
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www.itreconomics.com 25 US Industrial Production Index 2007 = 100 Forecast Through December 2012 Annual Average Index
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www.itreconomics.com 26 Consumer Loan Delinquency Rates 3MMA and 12MMA
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www.itreconomics.com 27 Delinquency Rates for C&I Loans 3/12 & 12/12 Rates-of-Change
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www.itreconomics.com 28 Commercial & Industrial Loans at Commercial Banks Rates-of-Change
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www.itreconomics.com 29 Corporate Profits – 1 st Quarter Billions of $ Source: BEA
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www.itreconomics.com 30 US Industrial Production to Fabricated Metal Products Production 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 31 US Industrial Production to Plastics Products Production 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 32 US Industrial Production to Equipment & Software Investment 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 33 Retail Sales for Eating Places to US Industrial Production 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 34 US Industrial Production to Hotel & Motel Expenditures 12/12 Rates-of-Change
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www.itreconomics.com 35 Trends 10 Housing Foreign New Orders Retail Soft Landing Financial Production Wholesale Trade Prices Medical Nonresidential Construction Hard Landing ITR Trends Report
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www.itreconomics.com 36 Nondefense Capital Goods New Orders w/o Aircraft Billions of $ 3/12 12/12 3MMT 12MMT ITR Trends Report
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www.itreconomics.com 37 Ratio of Inventories to New Orders Raw Data
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www.itreconomics.com 38 M2 Money Supply Trillions of 82$ 12/12 3MMA 12MMA 3/12 ITR Trends Report
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www.itreconomics.com 39 Mortgage Rates to Federal Funds Raw Data
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www.itreconomics.com 40 Crude Oil Futures Prices Light & Sweet $ per Barrel 3/12 12/12 12MMA3MMA ITR Trends Report
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www.itreconomics.com 41 Short-Term Interest Rates to US Gov’t Long-Term Bond Yields Raw Data Trends
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www.itreconomics.com 42 US Industrial Production to Corporate Bond Prices 12/12 Rates-of-Change ITR Trends Report
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www.itreconomics.com 43 US Leading Indicator 1996 = 100 3/12 12/12 3MMA 12MMA ITR Trends Report
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www.itreconomics.com 44 Purchasing Managers Index to US Industrial Production 12/12 Rate-of-Change
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www.itreconomics.com 45 Stock Prices Index S&P 500, 1941-43 = 10 3/12 12/12 3MMA 12MMA ITR Trends Report
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www.itreconomics.com 46 Stock Prices Index Data Trends
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www.itreconomics.com 47 Retail Sales Excluding Automobiles Trillions of 82-84$ 3/12 12/12 3MMT 12MMT ITR Trends Report
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www.itreconomics.com 48 Personal Savings Billions of $, Annual Data Trend SAAR
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www.itreconomics.com 49 Retail Sales Excluding Autos to Building Materials & Supplies Dealers 12/12 Rates-of-Change
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www.itreconomics.com 50 Education Expenditures to Retail Sales excluding Autos 12/12 Rates-of-Change
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www.itreconomics.com 51 Housing Starts Millions of Units 3/12 12/12 3MMA 12MMT ITR Trends Report
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www.itreconomics.com 52 Existing Home Sales Millions of Units 3/12 12/12 3MMT 12MMT
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www.itreconomics.com 53 Building Permits 12/12 Rates-of-Change
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www.itreconomics.com 54 3/12 12/12 3MMT 12MMT Colorado Building Permits Thousands of Units
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www.itreconomics.com 55 3/12 12/12 3MMT 12MMT Denver Building Permits Thousands of Units
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www.itreconomics.com 56 US to Denver Median Home Sale Prices Annual Data Trends
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www.itreconomics.com 57 Colorado Housing Price Index Year over Year % Change
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www.itreconomics.com 58 US Industrial Production to Non-Residential Construction Data Trends
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www.itreconomics.com 59 3/12 12/12 3MMT 12MMT Colorado – Total Value of Commercial Construction B illions of $
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www.itreconomics.com 60 Public & Private Educational Buildings Construction Data Trends
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www.itreconomics.com 61 Company L to US Industrial Production 12/12 Rates-of-Change
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www.itreconomics.com 62 Four Phases A A B B C C D D Expansion Bankrupt ITR Trends Report
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www.itreconomics.com 63 Gold Prices to Copper Futures Prices Raw Data
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www.itreconomics.com 64 Managing Inflationary Pressures Phase B… raise prices (as justified) Consider real cost of living vs. nominal CPI Highlight quality, content, service ~ competitive advantage Borrow now – fixed as long as possible o Inflation favors debtors o Purchase land/property – leasing rises with inflation o Build in efficiencies for long-term cost savings Lower fixed costs ~ increase variable costs for increased flexibility Re-assess domestic sources (inflation will be imported) Rigorous cost controls – hire the best accountant/CFO R & D ~ substitute products and materials Move liquid assets off shore Hire now and/or lock in labor rates Select price indices that magnify inflation negotiating with customers Select price indices that minimize inflation negotiating with vendors o Get Vendors to agree to longer-term price commitments Sell overseas
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www.itreconomics.com 65 Phase Late A – Recovery 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 Phase Management Objectives TM : ITR Trends Report
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www.itreconomics.com 66 Phase Late A – 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 Phase Management Objectives TM : ITR Trends Report
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www.itreconomics.com 67 Phase Early B – Growth 1.Accelerate training 2.Check the process flow for possible future bottlenecks 3.Continue to build inventory 4.Increase prices 5.Consider outside manufacturing sources if internal pressures becoming tight 6.Find the answer to “What next?” 7.Open distribution centers 8.Use improved cash flow to improve corporate governance 9.Use cash to create new competitive advantages 10.Watch your debt-to-equity ratio and ROI 11. Maintain/pursue quality: don’t let complacency set in Phase Management Objectives TM : ITR Trends Report
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www.itreconomics.com 68 Phase Late B Early C – Prosperity 1.Stay in stock on A items, be careful with C items 2.Consider selling the business in a climate of maximum “goodwill” 3.Penetrate new selected accounts 4.Develop plan for lower activity in traditional, mature markets 5.Freeze all expansion plans (unless related to “what is next”) 6.Spin off undesirable operations 7.Consider taking on subcontract work if the backside of the cycle looks recessionary 8.Stay realistic – beware of linear budgets 9.Begin missionary efforts into new markets 10.Communicate competitive advantages to maintain margins Phase Management Objectives TM : ITR Trends Report
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www.itreconomics.com 69 Reagan Bush ClintonBush Carter Obama National Defense Expenditures to Defense Capital Goods N.O. 12/12 Rates-of-Change
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www.itreconomics.com 70 Energy Green Water Canada/Exports Higher Education Health Care Practices Food Pets Funeral Services Alcohol Security Legal Services (Diversified) Find a way to do business in the “counter-cyclical” or largely unaffected areas:
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www.itreconomics.com 71 Net Migration
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www.itreconomics.com 72 Net Migration – Top 15
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www.itreconomics.com 73 Net Migration – Bottom 15
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www.itreconomics.com 74 USA ~ 300 million grows to 400 – 500 million India Indonesia Australia Spain Mexico Brazil Demographics Winning Demographics Negative Demographics China Europe Japan Russia (13% want to leave) Source: United Nations
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www.itreconomics.com 75 United States China Japan Germany France United Kingdom Brazil Italy Canada India Russia Spain Australia Mexico South Korea Source: IMF World GDP, Bils of US $, Current Prices Percent of World GDP
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www.itreconomics.com 76 To learn how incorporating economic data into your planning process can increase your profitability, please contact kristen@itreconomics.com 603-796-2500 Clients and Subscribers may call at any time to ask questions.
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www.itreconomics.com 77 Be sure to tune in to “Make Your Move” with Alan & Brian Beaulieu Mondays at 4 PM Eastern Time on the VoiceAmerica Business Channel Listen live at www.voiceamerica.com
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www.itreconomics.com 78 Total U.S. Public Debt (% of GDP)
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