Dr. Alan BeaulieuPresident

Shifting Gears

Denver

First in Forecasts Since 1948

ITR Economics provides the best economic intelligence to reducerisk and drive practical and profitable business decisions.

Duration Accuracy

US GDP 24 99.7%

US Ind. Production  34 99.6%

Europe Ind. Production  24 97.2%

Canada Ind. Production  27 94.5%

China Ind. Production 30 99.9%

Retail Sales  28 99.6%

Housing (Single Family Units) 26 99.2%

Employment (private sector) 30 99.4%

2018 Preliminary Forecast ResultsIf you heard ITR around two years prior… 2

First in Forecasts Since 1948

Summary January 2019Macroeconomic Rise for 2019

US

GlobalSegment Thinking Into 3 Time Periods

2018 - 20202021 - 20292030 - 2040

Global Issues Impacting Our Businesses

Tariffs

Leading Indicator Signals are Mixed

Know which ones matter to you

How to track the leading indicators

First in Forecasts Since 1948

State Gross Domestic Product

Data Sources: BEA; IMF 4

First in Forecasts Since 1948

US States GDPs Ranked vs. World Country GDPs

Data Sources: BEA; IMF 5

41 = Pakistan

First in Forecasts Since 1948

Manage the Business Cycles to Maximize ProfitsUS Industrial Production to Gross Domestic Product

Sources: FRB, BEAYear-over-Year, Quarter-to-Quarter (3/12)

-6.9%

-2.9%-5.2%

-15.5%

4.4%

-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 '16 '18 '20 '22 '24

GDPUS IP

GDP

US IP

6

First in Forecasts Since 1948

US and Colorado Annual GSP Growth Rate

US Bureau of Economic Analysis3/12 Rate-of-Change

-4

-2

0

2

4

6

8

'06 '08 '10 '12 '14 '16 '18 '20U.S. Colorado

First in Forecasts Since 1948

US Economy Stalls in 2019 and Into 2020US Real Gross Domestic Product

Source: BEA3MMA Data Trend

14

15

16

17

18

19

20

13

14

15

16

17

18

19

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

GDP - 3MMA Before Data Revision

Sep '15 Forecast

GDP - 3MMA

June '18 Forecast

First in Forecasts Since 1948

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

• Annual Trend: • Phase: • Year-over-Year:

2018:

2019:

2020:

ITROutlook

Slowing Growth for 2019US Industrial Production Index

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

US Industrial Production Index

107.3B

4.0%

3.9%

0.5%

0.7%

Source: FRB

First in Forecasts Since 1948

RawJan-17 1.5Feb-17 1.5Mar-17 1.4Apr-17 1.5

May-17 1.3Jun-17 1.3Jul-17 1.6

Aug-17 1.6Sep-17 1.5Oct-17 1.7Nov-17 1.6Dec-17 1.7Jan-18 1.7Feb-18 1.7Mar-18 1.6Apr-18 1.7

May-18 1.5Jun-18 1.5Jul-18 1.9

Aug-18 1.7Sep-18 1.7Oct-18 1.9Nov-18 1.7Dec-18 1.7

3/12 Rate-of-Change

=

100 100

=.

.100 100 10.4%

3MMT

4.44.44.44.24.14.24.54.74.84.85.05.05.15.05.04.84.74.95.15.35.35.3

12MMT

18.018.218.418.618.819.019.219.419.719.820.020.220.3

12/12

26.7%25.5%25.2%22.4%20.0%18.3%15.4%12.7%

12/12 Rate-of-Change

=

100 100

=.

.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%

A Powerful Management ToolRate-of-Change

DATACAST !

First in Forecasts Since 1948

Tariffs and otherfun things

First in Forecasts Since 1948

Things Are Getting BetterWorld Carbon Dioxide Emissions

500

3500

6500

9500

12500

15500

18500

500

3500

6500

9500

12500

15500

18500

1980 1985 1990 1995 2000 2005 2010 2015 2020

Asia & Oceania

US

Europe

Africa

Central & South America

Source: EIAMillions of Metric Tons

First in Forecasts Since 1948

US Trade in Goods with World (Exports) are an important part of economic health

US Trade in Goods with World: Exports to Imports

8.9%

-4.3%

-15

-10

-5

0

5

10

15

20-30

-20

-10

0

10

20

30

40

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

Exchange RateExports

Exports

Exchange Rate

13Sources: Census Bureau, FRED12/12 Rates-of-Change

3/12 7.7% C

First in Forecasts Since 1948

Tariffs: There Will Be Winners and Losers

Washing Machines, 1.8Solar Panels, 8.5

Steel, 29

Aluminum, 17.4Chinese Imports Round 1, 50

Chinese Imports Round 2, 200

Proposed Chinese Imports, 267

Proposed Auto Imports, 350

China Round 1, 52.4

China Round 2, 60Canada, 12.8Mexico, 2.9Europe, 3.2Turkey, 1.8

Proposed India, 1.4Proposed Japan, 1.9Proposed Russia, 3.2

0

100

200

300

400

500

600

700

800

900

1000

US Tariffs Reciprocal Tariffs

$ V

alu

e

25%

10% Tariff Sep 24th

25% Tariff Jan 1, 2019

Proposed

Actual

Proposed

First in Forecasts Since 1948

Retaliation Threat by StateUS Top Goods Export by State

Source: US Census BureauBased on annual data, 2017

Law of Unintended Consequences

First in Forecasts Since 1948

Lower Taxes May Provide a Temporary BoostUS Tax Rates and Real GDP Growth

Sources: Tax Foundation, BEA, 16

Rea

lGD

PG

row

thR

ate To

p M

argin

al Tax Rate

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-4%

-2%

0%

2%

4%

6%

8%

10%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Real GDP Growth Rate - 3/12 Top Marginal Tax Rate

First in Forecasts Since 1948

Issues Government Will and Won’t TackleUS Federal Government Receipts and Payments

$0

$375

$750

$1,125

$1,500

$1,875

$2,250

$2,625

$3,000

$0

$375

$750

$1,125

$1,500

$1,875

$2,250

$2,625

$3,000

Current Tax Receipts

Consumption Expenditures

Current Transfer Payments

Interest Payments

Source: BEABillions of Dollars

17

First in Forecasts Since 1948

The Long View

Prosperity in the Age of Decline

First in Forecasts Since 1948

A Model for the FutureUS Industrial Production Index

2

4

6

8

10

12

2

4

6

8

10

12

'20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

12MMA3MMA

12MMA

3MMA

Great Depression

Roaring 20s (3 recessions)

Source: FRBData Trends

First in Forecasts Since 1948

1. Demographics1. Demographics

2. Health Care Costs2. Health Care Costs

3. Entitlements3. Entitlements

4. Inflation4. Inflation

5. US National Debt5. US National Debt

Depression Drivers

First in Forecasts Since 1948

Global Partners

First in Forecasts Since 1948

Negative Business Cycle Pressure

Global Leading Indicators

-3.7%

-13.8%-8.3%

-60

-40

-20

0

20

40

60

80

-60

-40

-20

0

20

40

60

80

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22

EZ Comp PMI

EU Manufacturing PMI

JP Morgan Global MFG PMI

Source: Markit Economics1/12 Rates-of-Change

First in Forecasts Since 1948

-5

-4

-3

-2

-1

0

1

2

3

4

5

-15

-10

-5

0

5

10

15

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

World IP

Indicator

IndicatorWorld IP

World Industrial Production Index to G7 Leading Indicator

Sources: CPB Netherlands Bureau For Economic Policy Analysis, OECDRates-of-Change

23

1/12

12/12April high

First in Forecasts Since 1948

The US Economy

First in Forecasts Since 1948

Leading Indicator System as a Powerful ToolUS Industrial Production Index to Leading Indicators

Sources: FRB, OECD, ISM, Yahoo Finance, IHS MarkitRates-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 - 3/12JP Morgan Indicator - 3/12

PMI, Wilshire, G7US IP, JP Morgan

First in Forecasts Since 1948

Downside Business Cycle Pressure Indicated

Colorado Leading Index

Source: Philadelphia Federal ReservePercent

-5.3%-2.5%

-30

-20

-10

0

10

20

30

40

-30

-20

-10

0

10

20

30

40

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

12/12

3/12

First in Forecasts Since 1948

ITR’s Leading Indicator™ Says Slowing Rise AheadUS Industrial Production to ITR Leading Indicator™

-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 - Monthly

US IP - 12/12

Sources: FRB, ITR EconomicsUSIP – 12/12 Indicator - Monthly

27

Reported in ITR Trends Report – ITR Advisor

First in Forecasts Since 1948

Negative Signal for Industrial ProductionUS Industrial Production to US Total Industry Capacity Utilization Rate

-30

-20

-10

0

10

20

-15

-10

-5

0

5

10

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

US IP

US IP Forecast

Utilization Rate

Utilization RateUS IP

1/12

12/12

Source: FRBRates-of-Change

28

First in Forecasts Since 1948

More Decline IndicatedUS Single Unit Housing Starts

-3.3%

3.9%

0.880

0

1

2

3

4

5

6

-100

-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

3MMT12MMT

Source: US Census BureauMillion of Units

29

As seen in

First in Forecasts Since 1948

Colorado Housing Unit Building Permits

1.4%

8.7%

44.9

0

20

40

60

80

100

120

-200

-150

-100

-50

0

50

100

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

MMTR-O-C

3/12

12/12

3MMT

12MMT

Source: US Census BureauThousands of Units

First in Forecasts Since 1948

Denver Housing Unit Building Permits

Source: US Census BureauThousands of Units

1.7%

-8.1%

21.2

0

15

30

45

60

75

90

105

-150

-100

-50

0

50

100

150

200

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

MMTR-O-C

3/1212/12

3MMT

12MMT

First in Forecasts Since 1948

US to Denver Area Median Home Sale Price

Source: US Census BureauAnnual Data Trends

$257.0

$442.2

140

185

230

275

320

365

410

455

140

185

230

275

320

365

410

455

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

DenverUS

US Median Price

Denver Median Price

First in Forecasts Since 1948

ITR’s Leading Indicator Says Cyclical Rise is AheadUS Private Nonresidential Construction to ITR Leading Indicator

-15

-10

-5

0

5

10

15

-45

-30

-15

0

15

30

45

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

ConstructionConstruction ForecastIndicator

IndicatorConstruction

Sources: US Census Bureau, ITR Economics Rates-of-Change

First in Forecasts Since 1948

Cyclical Pressure Remains NegativeUS Stock Prices Index

-4.4%8.1%

2713.3

700

1200

1700

2200

2700

3200

3700

4200

-125

-100

-75

-50

-25

0

25

50

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

MMAR-O-C

3/1212/12

3MMA12MMA

Source: Wall Street Journal1941-43=10

34

First in Forecasts Since 1948

A Clear Signal From AbroadUS Stock Prices Index to MCSI ACWI excluding USA

-45

-30

-15

0

15

30

45

-30

-20

-10

0

10

20

30

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

Stock Prices - 12/12

MCSI ACWI ex US - 1/12

MCSI ACWI ex USStock Prices

Sources: Wall Street Journal, Yahoo FinanceRates-of-Change

First in Forecasts Since 1948

Domestic Indicator of Negative PressureUS Stock Prices Index to US Purchasing Managers Index

-10.7%-8.8%

-40

-20

0

20

40

60

-40

-20

0

20

40

60

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

PMIStock

Stock Prices

PMI

Sources: WSJ, Institute for Supply Management1/12 Rates-of-Change

36

First in Forecasts Since 1948

Decelerating CAPEX TrendUS Nondefense Capital Goods New Orders w/o Aircraft

4.4%6.7%

$814.6

500

750

1000

1250

1500

-60

-40

-20

0

20

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

MMTR-O-C

3/12 12/12

3MMT12MMT

Source: Census BureauBillions of Dollars

37

First in Forecasts Since 1948

US Machinery Manufacturing Capacity Utilizationsignaling slower CAPEX spending in late-2018 and in 2019

US Nondefense Capital Goods New Orders (excluding aircraft) toUS Machinery Manufacturing Capacity Utilization Rate

-30

-20

-10

0

10

20

30

-30

-20

-10

0

10

20

30

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

New Orders - 12/12

New Orders Forecast

Utilization Rate - 1/12

Utilization RateNew Orders

1/12 12/12

Sources: Census Bureau, FRBRates-of-Change

38

First in Forecasts Since 1948

Optimism Index Portends a Softer 2019US Nondefense Capital Goods New Orders

(excluding aircraft) to Small Business Optimism Index

6.7%1.7%

-15

0

15

-25

0

25

'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23

New Orders

New Orders

Business Optimism

Business Optimism

Sources: US Census Bureau, NFIB12/12 Rates-of-change

39

First in Forecasts Since 1948

Copper is Signaling a Slowdown in Spending This YearUS Copper Futures Prices to

US Nondefense Capital Goods New Orders(excluding aircraft)

1.3%6.7%

-30

-20

-10

0

10

20

-150

-100

-50

0

50

100

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

Capital GoodsCopper

Copper Futures Prices

Capital Goods

Sources: WSJ, Census Bureau12/12 Rates-of-Change

40

First in Forecasts Since 1948

People

First in Forecasts Since 1948

Net Migration Between States, July 2016-July 2017

Source: Census BureauDoes not include immigration into the US

42

+160,854-190,508

First in Forecasts Since 1948

State Population Growth Rates

Source: Census BureauPercent Change from Population Estimates 2010 to 2017

43

First in Forecasts Since 1948

US to Colorado to Denver Population TrendsOverall Population Growth (2010-2017)

Source: US Census Bureau

5.5%Denver

17.5%11.5%

First in Forecasts Since 1948

US to Colorado to Denver Millennial Population2017 Estimate in Millions

Source: US Census BureauPopulation Aged 21-39 in 2017 (born 1978 – 1996)

86.00.3% of US Millennials

36.9% of Denver Population

1.8% of US Millennials28.9% of CO Population

Denver 0.21.5

First in Forecasts Since 1948

US to Colorado Unemployment Rates

Source: Bureau of Labor Statistics

2

3

4

5

6

7

8

9

10

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

US Colorado

October 2018

US: 3.7CO: 3.2

First in Forecasts Since 1948

Spending Power in Denver and ColoradoUS to Colorado and Denver Per Capita Personal Income

Source: Bureau of Economic AnalysisThousands of Dollars

30

35

40

45

50

55

60

30

35

40

45

50

55

60

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

US

Colorado

Denver

First in Forecasts Since 1948

High Paying JobsColorado Average Annual Wages

4.7%3.7%

$69.4

40

55

70

85

100

115

-15

-10

-5

0

5

10

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

MMAR-O-C

3/12

12/12

12MMA3MMA

Source: Bureau of Labor StatisticsThousands of Dollars

First in Forecasts Since 1948

No Near-Term End to the Upward Pressure on WagesDenver-Aurora-Lakewood MSA Average Annual Wages

Source: Bureau of Labor StatisticsThousands of Dollars

2.3%2.9%

64.5

40

65

90

115

140

-8

-4

0

4

8

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

MMAR-O-C

12MMA

12/123/12

3MMA

First in Forecasts Since 1948

Servicing the Debt is What MattersConsumer Delinquency Rates (over 90 days delinquent)

4.3%

11.5%

1.1%0

3

6

9

12

15

0

3

6

9

12

15

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

Auto

Student

Mortgage 10 Year Average

10 Year Average

10 Year Average

Source: FRBNYPercent

First in Forecasts Since 1948

On the Backside of the Business CycleUS Total Retail Sales

4.4%5.2%

6.028

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

3/12 12/12

3MMT

12MMT

Source: Census BureauTrillions of Dollars

First in Forecasts Since 1948

ITR Leading Indicator Says Slowing Growth AheadUS Total Retail Sales to ITR US Retail Sales Leading Indicator

-10

-7

-4

-1

2

5

8

-10

-7

-4

-1

2

5

8

'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '21 '23

Sales - 12/12

Sales Forecast - 12/12

Indicator - Monthly

IndicatorSales

Sources: Census Bureau and ITR EconomicsRetail Sales = 12/12, ITR Retail Sales = Monthly

52

First in Forecasts Since 1948

Searching for a RecessionUS Search Interest for "Recession" on Google to

US Total Retail Sales

Sources: Google, US Census BureauRates-of-Change (Search Interest has a 16 month lead time)

-24

6

36

66

96

126-12

-8

-4

0

4

8

'06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Retail Sales

Retail Sales - 12/12

Search Interest - 3/12

3/12

12/12

Search Interest

First in Forecasts Since 1948

Prices

First in Forecasts Since 1948

Disinflationary EnvironmentUS Consumer Price Index to US Producer Price Index

2.2%1.6%

-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

Source: FRB1/12 Rate-of-Change

55

First in Forecasts Since 1948

All Except for Steel Commodity Prices

-21.3% Zinc

-10.4% Alum

12.8% Steel

-14.1% 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 & Steel

Source: WSJ, London Metal Exchange, Steel Market Update3/12 Rates-of-Change

56

First in Forecasts Since 1948

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

Protectionism & Future US Bond Yields

First in Forecasts Since 1948

Summary January 2019

Beware of Business Cycle Decline in 2019

Some industries hit harder than others

Consumer is the source of concern

Additional Profit Margin Pressure Points EmploymentInflation Issues

The Long View is UnchangedSevere business cycle decline 2030-2040

First in Forecasts Since 1948

Phase C

59

1. Focus on the segments of the business that are the most profitable in Phase C

(shifting costs, consumer demand, selling points)

2. Technology implementation – play to the trough, there is good growth ahead

3. Cash assessment and management for proper allocation

4. Inventory control if applicable

5. Ask yourself what you shouldn’t be doing? (resource management and

diversion to more profitable parts of the company)

6. Trumpet your Phase C competitive advantages and start developing your

message for the next phase (B or D, depending on your industry)

7. Talent development – this never ends

8. Develop your rates-of-change so you will know when the trough is near (Using the ITR Checking PointsTM)

First in Forecasts Since 1948

90 Day Trial Offer

Text TR TRIAL to 444999for a 90 day trial of our

Trends Report

Receive monthly updates on the economy