Winds of Change - MARINE LEADERSHIP ALLIANCE · 2018-04-27 · Winds of Change Connor Lokar...

Winds of Change

Connor Lokar

Economist

Marine Leadership Alliance

First in Forecasts Since 1948

ITR Economics provides the best economic intelligence to reduce

risk and drive practical and profitable business decisions.

Duration Accuracy

US GDP 24 99.7%

US Ind. Prod. 24 96.8%

Europe Ind. Prod. 27 99.9%

Canada Ind. Prod. 24 96.7%

China Ind. Prod. 30 97.8%

Retail Sales 25 98.0%

Housing 27 99.5%

Employment 23 99.5%

2017 Forecast ResultsIf you heard ITR around two years ago… 2


12-Month Moving Average 12/12 Rate-of-ChangeYear-over-Year Growth Rate

• Annual Trend:

• Phase:

• Year-over-Year:

2018:

2019:

2020:

ITR

Outlook

US Gross Domestic ProductSAAR, Chained 2009 $

US Gross Domestic Product

$17.3 trillion

B

2.5%

1.6%

1.2%

2.8%

Source: BEA 3

12

14

16

18

20

12

14

16

18

20

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

-9

-6

-3

0

3

6

9

-9

-6

-3

0

3

6

9

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21


State Gross Domestic Product

Source: BEA 4

Billions of Dollars, Q2 2017


US States Renamed for Countries with Similar GDPs

Data Sources: BEA; IMF 5


US Corporate Tax Rate and Gross Business Investment

Percent

6

6

Sources: Tax Policy Center, FRED

0%

10%

20%

30%

40%

50%

60%

70%

0%

10%

20%

30%

40%

50%

60%

70%

'60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16

Corporate Tax Rate %

Corporate Tax Revenue (% of Corp Profits)

Gross Business Investment (% of GDP)

Linear (Gross Business Investment (% of GDP))


Real Gross Domestic Product

Source: BEA

3/12 Rate-of-Change

-8

-4

0

4

8

12

16

1950 1960 1970 1980 1990 2000 2010 2020

Republican Democrat GDP 3/12

7


12-Month Moving Average 12/12 Rate-of-ChangeYear-over-Year Growth Rate

• Annual Trend:

• Phase:

• Year-over-Year:

2018:

2019:

2020:

ITR

Outlook

US Industrial Production Index

US Industrial Production Index

104.7

B

2.5%

2.9%

-1.2%

Source: FRB

2.3%

84

89

94

99

104

109

114

84

89

94

99

104

109

114

-15

-10

-5

0

5

10

-15

-10

-5

0

5

10


Raw

Apr-16 1.4

May-16 1.5

Jun-16 1.5

Jul-16 1.4

Aug-16 1.5

Sep-16 1.3

Oct-16 1.3

Nov-16 1.6

Dec-16 1.6

Jan-17 1.5

Feb-17 1.7

Mar-17 1.6

Apr-17 1.7

May-17 1.7

Jun-17 1.7

Jul-17 1.6

Aug-17 1.7

Sep-17 1.5

Oct-17 1.5

Nov-17 1.9

Dec-17 1.7

Jan-18 1.7

Feb-18 1.9

Mar-18 1.7

3/12 Rate-of-Change

= 𝑀𝑎𝑟𝑐ℎ 2018 3𝑀𝑀𝑇

𝑀𝑎𝑟𝑐ℎ 2017 3𝑀𝑀𝑇× 100 − 100

=5.3

4.8× 100 − 100 = 10.4%

3MMT

4.4

4.4

4.4

4.2

4.1

4.2

4.5

4.7

4.8

4.8

5.0

5.0

5.1

5.0

5.0

4.8

4.7

4.9

5.1

5.3

5.3

5.3

12MMT

18.0

18.2

18.4

18.6

18.8

19.0

19.2

19.4

19.7

19.8

20.0

20.2

20.3

12/12

26.7%

25.5%

25.2%

22.4%

20.0%

18.3%

15.4%

12.7%

12/12 Rate-of-Change

= 𝑀𝑎𝑟𝑐ℎ 2018 12𝑀𝑀𝑇

𝑀𝑎𝑟𝑐ℎ 2017 12𝑀𝑀𝑇× 100 − 100

=20.3

18.0× 100 − 100 = 12.7%

3/12

15.9%

13.6%

13.6%

14.3%

14.6%

16.7%

13.3%

12.8%

10.4%

10.4%

Data Preparation


Phase A - Recovery

Annual Sales are BELOW

Year-Ago Levels, but the

Rate-of-Decline is SLOWING.

Phase B –

Accelerating

Growth (Best)

Annual Sales are ABOVE

Year-Ago Levels, and are

GROWING at a RAPID

Pace.

Phase C – Slowing

Growth (Caution)


Year-Ago Levels, BUT the

Rate-of-Growth is

SLOWING

Phase D -

Recession



DECLINING at a RAPID

Pace.

Business Cycles

10


US Industrial Production to ITR Leading Indicator™

Sources: FRB, ITR Economics

USIP – 12/12 Indicator - Monthly

11

Reported in ITR Trends Report – ITR Advisor

As seen in

-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22

IndicatorUS IP

Indicator - MonthlyUS IP - 12/12


US Boat Building Production Index

Source: FRB

2012 = 100

12

13.7%

13.6%

145.4

50

125

200

275

350

425

500

-100

-75

-50

-25

0

25

50

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMAR-O-C

12MMA3MMA

12/123/12

Definition: watercraft not built in shipyards and typically of the type suitable or intended for

personal use. Included in this industry are establishments that manufacture heavy-duty

inflatable rubber or inflatable plastic boats (RIBs).

RV Production +10.1%


US Industrial Production Index to Leading Indicators

Sources: FRB, OECD, ISM, Yahoo Finance, BEA, IHS Markit

Rates-of-Change

-60

-40

-20

0

20

40

60

-15

-10

-5

0

5

10

15

'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22

US IP - 12/12US IP ForecastG7 Indicator - 1/12PMI - 1/12Wilshire Market Cap - 3/12Corporate Profits - 12/12JP Morgan Indicator - 3/12

PMI, Wilshire, Profits, JP MorganUS IP, G7


Applying Leading Indicators at the Company Level

12/12 Rates-of-Change

-90

-60

-30

0

30

60

90

-45

-30

-15

0

15

30

45

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Sales

New Orders

7 Month Lead Time to Company

Indicator SnapshotCorrelation: 0.83

Lead Time: 9 Months

Direction: UP

New OrdersHousing Starts, Retail Sales, Leading Indicators etc

Sales

14


What does this mean for you?

A ‘Great Recession’ can undermine the best laid plans.

What Phase are you in now? What Phase are your key customer

segments in? What can you watch for in your business to help you

know if you are moving into phase X?

If the next six months moves from X to Y, what is your

plan? Economic intelligence is the difference between

Proactive vs. Reactive decision making


On the positive side…

Well positioned consumer, robust consumer spending

Leading indicators have previewed rise into mid-2018

Consistent growth in the single family residential market

Year-over-year rise in commodity prices lifting industrials

Weaker USD pushing up Exports

Nonresidential Construction expansion in 2018


US Boat Building Production Index to US Industrial Production Index

Source: FRB


18

-15

-10

-5

0

5

10

-45

-30

-15

0

15

30

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Index

Index Forecast

US IP

US IP Forecast

US IPIndex

Coincident Relationship to CompanyCorrelation: 0.85


State Population Growth Rates

Source: Census Bureau

Percent Change from Population Estimates 2010 to 2016


US Boat Building Production Index to ITR Leading IndicatorTM

Sources: FRB; ITR Economics

Rates-of-Change

20

-12

-8

-4

0

4

8

12

-45

-30

-15

0

15

30

45

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Index - 12/12

Indicator - Monthly

IndicatorIndex

8 Month Lead Time to CompanyCorrelation: 0.88

Monthly

12/12


US Boat Building Production Index toUS Total Industry Capacity Utilization Rate

Sources: FRB

Rates-of-Change

21

-15

-10

-5

0

5

10

15

-45

-30

-15

0

15

30

45

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Index - 12/12

Utilization Rate - 1/12

Utilization Rate Forecast -1/12

Utilization RateIndex

6 Month Lead Time to CompanyCorrelation: 0.73

1/12

12/12


US Boat Building Production Index to US Total Retail Sales

Sources: FRB; US Census Bureau


22

-12

-8

-4

0

4

8

12

-45

-30

-15

0

15

30

45

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Index

Retail Sales

Retail Sales Forecast

Retail SalesIndex



US Total Retail Sales


Trillions of Dollars

23

4.8%4.4%

5.818

2

4

5

7

8

10

11

-24

-18

-12

-6

0

6

12

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMTR-O-C

3/1212/12

3MMT

12MMT


US Boat Building Production Index to US Personal Consumption Expenditures for Pleasure Boats

Sources: FRB; US Dept of Commerce BEA


24

-30

-20

-10

0

10

20

30

-45

-30

-15

0

15

30

45

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Index

Boat Expenditures

Boat ExpendituresIndex



US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales

Source: US Census Bureau

Billions of Dollars25

7.2%

14.0%

77.5

0

40

80

120

160

200

-75

-50

-25

0

25

50

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMTR-O-C

3/1212/12

3MMT 12MMT

Definition: This industry comprises establishments primarily engaged in

retailing new and used motorcycles, boats, and other vehicles (except

automobiles, light trucks, and recreational vehicles).

First in Forecasts Since 1948Source: US Census Bureau,

Rates-of-Change

26

US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales to US Total Retail Sales

-18

-12

-6

0

6

12

18

-30

-20

-10

0

10

20

30

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Sales

Retail Sales

Retail Sales Forecast

Retail SalesSales


US Total Retail Sales (includes food services) to ITR US Consumer Activity Leading Indicator

Sources: US Census Bureau, ITR Economics

Retail - 12/12, Indicator - Monthly

27

3.7%

4.4%

-12

-8

-4

0

4

8

12

-12

-8

-4

0

4

8

12

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

IndicatorRetail Sales

Total Retail - 12/12

Indicator - Monthly

2H18 slower growth risk


US Personal Consumption Expenditures for Pleasure Boats

Source: BEA

Billions of Dollars

28

6.2%

14.1%

$20.4

0

10

20

30

40

50

-75

-50

-25

0

25

50

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMAROC

3/12

12/12

3MMA12MMA


US Consumer Price Index to US Producer Price Index

Source: FRB

1/12 Rate-of-Change

2.4%

3.0%

-10

-5

0

5

10

-10

-5

0

5

10

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Consumer Price

Producer Price


United States Overview Weekly Oil Price & Rig Count

Sources: EIA, Baker Hughes

Rigs: Weekly Count WTI: Average Weekly Price

815

$63.10

$0

$20

$40

$60

$80

$100

$120

0

250

500

750

1000

1250

1500

1750

Jan 2014 Aug 2014 Mar 2015 Oct 2015 May 2016 Dec 2016 Jul 2017 Feb 2018 Sep 2018

USD/bblRig Count

Oil Rigs

WTI Price - Shifted 13 Weeks

30


US Private Sector Employment

Source: BLS

Annual Data Trend

31

88

98

108

118

128

85

95

105

115

125

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Employment Mils of Jobs

Private Sector Employment Growth

Job Openings

Quit Rate – Rising

5.6% B1.8% B


US Median Weekly Earnings (deflated)

Source: BLS

Constant (1982-84) Dollars

32

$347.0

300

310

320

330

340

350

360

300

310

320

330

340

350

360

1979 1984 1989 1994 1999 2004 2009 2014 2019 2024

Median Earnings - Raw Data



Does not include immigration into the US

33

+207,155-191,367

Net Migration Between States, July 2016-July 2017


US Nonfarm, Total Private, and Manufacturing Quit Rates

Source: BLS

Data Trends

2.4%

2.2%

1.6%

0

1

2

3

0

1

2

3

'02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Private

Nonfarm

Manufacturing


Labor Market Transparency and Liquidity

Data Source: Pew Research Center/Social Trends

2016 Study (Deloitte):

~66% of millennials plan

to change job in next 5

years

2008: 75% expected to have between 2-5 employers

in their lifetime, just 10% thought 6+

Now: just 54% think 2-5, more than 25% say 6 or more

Add in: historically low home ownership, marriage rates


The Generations Defined

Data Source: Pew Research Center

The Millennial Generation

Born: After 1980

Age of adults in 2014: 18 to 33*

Share of adult population: 27%

Share non-Hispanic white: 57%

Ind 50%; Dem 27%; Rep 17%

The Baby Boom Generation

Born:1946 to 1964

Age in 2014: 50 to 68



Ind 37%; Dem 32%; Rep 25%

Generation X

Born:1965 to 1980

Age in 2014: 34 to 49



Ind 39%; Dem 32%; Rep 21%

The Silent Generation

Born:1928 to 1945

Age in 2014: 69 to 86



Ind 34%; Dem 32%; Rep 29%

*The youngest Millennials are in their teens. No chronological end point has been set for this group.

Note: The “Greatest Generation”, which includes those born before 1928, is not included in the analysis due to the small sample size.

Share of total population and share non-Hispanic white are based on adults only in 2013; 85-year-old Silents are not included due to

data limitations.

Source: March 2013 Current Population Survey (IPUMS) and Pew Research surveys, January and February 2014


US Labor Force by Generation

Data Source: Pew Research Center

Millions


Negative Risk Factors

Inflation, International Trade and NAFTA

US Stock Market – correction or more?

Declining savings - denting consumer cushion

Rising interest rates – consumer debt, housing

US Debt


US Trade Balance for Goods and Services


Billions of dollars

-566.0

-850

-750

-650

-550

-450

-350

-250

-850

-750

-650

-550

-450

-350

-250

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

3MMT

12MMT


US Top Goods Export by State


Based on annual data, 2017


Commodity Prices

Source: WSJ, London Metal Exchange, Steel Market Update


41

26.4% Zinc22.0% Alum

3.3% Steel20.8% Copper

-60

-30

0

30

60

90

120

150

-60

-30

0

30

60

90

120

150

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

All Others Copper & SteelAluminum: Import tariffs +

sanctions on Russian Rusal

pushed Prices ~$2400/ton

Likely to moderate toward

$2000/ton during 2018


S&P500 Stock Prices Index

Source: Wall Street Journal

Data Trends

42

0

500

1000

1500

2000

2500

3000

0

500

1000

1500

2000

2500

3000

1980 1985 1990 1995 2000 2005 2010 2015 2020

Raw

12MMA

First in Forecasts Since 1948Sources: US Census Bureau; Wall Street Journal

Rates-of-Change

43

US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales to US Stock Prices Index

-45

-30

-15

0

15

30

45

-30

-20

-10

0

10

20

30

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Sales - 12/12

Prices - 3/12

PricesSales


S&P500 Stock Prices Index to US Personal Savings (inverted)

Sources: Wall Street Journal, BEA


-40

-20

0

20

40

60-45

-30

-15

0

15

30

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Savings (inverted)Stock Prices

Stock Prices Index

Personal Savings

44


Sources: US Census Bureau; Bureau of Economic Analysis

Rates-of-Change

45

US Motorcycles, Boats and Other Motor Vehicle Dealers Retail Sales to US Personal Savings

-90

-60

-30

0

30

60

90-30

-20

-10

0

10

20

30

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Sales

Index

IndexSales


US Treasury 10-Year Bond

Source: US Dept of the Treasury

Daily Treasury Yield Curve Rates

46

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

Oct-'16 Dec-'16 Feb-'17 Apr-'17 Jun-'17 Aug-'17 Oct-'17 Dec-'17 Feb-'18 Apr-'18

10-Year Bond


Mortgage Rates to Federal Funds

Sources: Federal Reserve Board, WSJ

Raw Data

47

-2

2

6

10

14

18

22

-2

2

6

10

14

18

22

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Mortgage RatesFederal Funds

48

0

2

4

6

8

10

12

14

16

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Yield on 10 Year Treasury NoteSource: FRB


0

1

2

3

4

5

6

2018 2019 2020 Longer Run

FOMC Member Interest Rate Projections

Source: FRB 49

Fed Open Market Committee

March 2018December 2017


Phase A - Recovery


Year-Ago Levels, but the

Rate-of-Decline is SLOWING.

Phase B –

Accelerating

Growth (Best)



GROWING at a RAPID

Pace.

Phase C – Slowing

Growth (Caution)


Year-Ago Levels, BUT the

Rate-of-Growth is

SLOWING

Phase D -

Recession



DECLINING at a RAPID

Pace.

Business Cycles2017-1H18

2H18

2019

DATACAST

2020


ITR Management Objectives™

Actionable Takeaways

1. Plan for continued overall expansion during 2018

2. Invest in operational efficiency – productivity has to match wage increases

3. Be willing to take risks!

4. Sell the business in climate of maximum goodwill – or be ready to hold on through 2019

5. Budget for higher wages and input costs – Raise your prices!

6. Follow the Must Watch Leading Indicators PMI, ITRLI, Housing Starts, etc.

7. Know where you and your markets are in the business cycle

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Winds of Change - MARINE LEADERSHIP ALLIANCE · 2018-04-27 · Winds of Change Connor Lokar...

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Transcript of Winds of Change - MARINE LEADERSHIP ALLIANCE · 2018-04-27 · Winds of Change Connor Lokar...