make your move: 2013-2014 · make your move: 2013-2014 alan beaulieu . itr economics ™ . vma mow...
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Make Your Move: 2013-2014
Alan Beaulieu ITR Economics™
www.itreconomics.com
VMA MOW August 2013
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Duration Forecast Actuals GDP 12 $13.593 Trillion $13.648 0.4% US Ind. Prod. 31 97.2 (12MMA) 97.2 0.0% EU Ind. Prod. 12 100.4 (12MMA) 98.8 -1.6% CA Ind. Prod. 8 96.7 96.7 0.0% Retail Sales 30 $2.186 Trillion $2.131 -2.5% Housing 6 743 Ths Units 780 5.0% Employment 33 143.9 Million 142.5 -1.0% CPI 9 2.8% 2.1%
2012 Forecast Results 2
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3
US Industrial Production to Gross Domestic Product
-14.6%
-5.3%
-3.1%
-7.1%
Year-over-year Quarter to Quarter (3/12)
1.9%
-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
GDP US IP
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Data Preparation
3/12 Rate-of-Change = 𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2013 3𝑀𝑀𝑀𝑀𝑀𝑀𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2012 3𝑀𝑀𝑀𝑀𝑀𝑀
× 100 − 100
=5.34.8
× 100 − 100 = 10.5%
Raw Aug-11 1.4 Sep-11 1.5 Oct-11 1.5 Nov-11 1.4 Dec-11 1.5 Jan-12 1.3 Feb-12 1.3 Mar-12 1.6 Apr-12 1.6 May-12 1.5 Jun-12 1.7 Jul-12 1.6
Aug-12 1.7 Sep-12 1.7 Oct-12 1.7 Nov-12 1.6 Dec-12 1.7 Jan-13 1.5 Feb-13 1.5 Mar-13 1.9 Apr-13 1.7
May-13 1.7 Jun-13 1.9 Jul-13 1.7
3MMT
4.4 4.4 4.4 4.2 4.2 4.3 4.6 4.8 4.8 4.8 4.9 4.9 5.0 5.0 5.0 4.9 4.7 4.9 5.1 5.3 5.3 5.3
12MMT
18.0 18.3 18.5 18.6 18.8 19.0 19.2 19.4 19.6 19.8 20.0 20.1 20.3
12/12
12.7%
12/12 Rate-of-Change = 𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2013 12𝑀𝑀𝑀𝑀𝑀𝑀𝐽𝐽𝐽𝐽𝐽𝐽𝐽𝐽 2012 12𝑀𝑀𝑀𝑀𝑀𝑀
× 100 − 100
=20.318.0
× 100 − 100 = 12.7%
3/12
14.1% 13.6% 13.2% 15.1% 13.5% 14.1% 11.3% 11.5% 10.1% 10.5%
4
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US Industrial Production Growth
12/12 annual growth rate
5
-15
-10
-5
0
5
10
-15
-10
-5
0
5
10
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
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Real Gross Domestic Product
6
Trillions of $
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
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7
• Leading indicators pointing up for 2013 • Liquidity is not an issue • Major producer of energy • Stimulative monetary policy, for now • Employment rising (companies right-sized) • Banks are lending –shifted to Phase C • Retail Sales • Construction spending is improving
Recovery
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Employment – Private Sector
Annual Data Trend
8
85
90
95
100
105
110
115
120
85
90
95
100
105
110
115
120
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Employment Mils of Jobs
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9 Mortgage Rates to Federal Funds
Raw Data
-2
2
6
10
14
18
22
-2
2
6
10
14
18
22
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Mortgage RatesFederal Funds
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10 One (or many) bright spot(s): the shale ‘gale’
Source: EIA Annual Energy Outlook, 2008 to 2011
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US Carbon Dioxide Emissions
4500
4700
4900
5100
5300
5500
5700
5900
6100
6300
6500
4500
4700
4900
5100
5300
5500
5700
5900
6100
6300
6500
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Dec 2012: 5289.9 MMT Oct 1995:
Source: EIA.gov
Million Metric Tons
11
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10
12
14
16
18
10
12
14
16
18
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
3MMA
12
3MMA
11.0%
11.9%
US Manufacturing as a % of GDP (Value Added)
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0
100
200
300
400
500
600
'05 '06 '07 '08 '09 '10 '11 '12 '13
Steel Scrap Prices
Oil Futures Prices
Copper Futures Prices
Steel: $365 per Gross Ton
Oil: $92 per Barrel
Copper: $3.29 per Pound
Commodity Price Index
3MMA Index Dec 2009=100
13
Oil today $105.24 Sep 2013 $103.25 Dec 2013 $107.94 Mar 2014 $ 99.39 Jun 2014 $ 86.96
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• Europe’s financial troubles … • China recession? … • Massive legislative changes… • Israel and Iran… • Fiscal Cliff… • Tax Hikes… • Massive deficit and growing nat’l debt
Areas of Concern
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Europe Industrial Production to Europe Leading Indicator
-20
-15
-10
-5
0
5
10
15
-20
-15
-10
-5
0
5
10
15
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Index 12/12
Indicator 1/12
15
EU IP 2014 0.8% 2015 0.8% Recession from mid ‘14 to mid ‘15
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Global Leading Indicators
1/12 Rates-of-Change
0.4
8.2 3.5
-80
-64
-48
-32
-16
0
16
32
48
64
80
-10
-8
-6
-4
-2
0
2
4
6
8
10
'07 '08 '09 '10 '11 '12 '13 '14
OECD Total
EU Manufacturing PMI
JP Morgan Global MFG PMI
16
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17
Annual Year-over-Year Comparison
FTSE 100 and DAX Stock Index
-45
-30
-15
0
15
30
45
-45
-30
-15
0
15
30
45
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14
FTSE 100
DAX Stock Index
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18 Sequestration
Source: John Taylor, Bloomberg
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19 Big Gap
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Year-Over-Year Growth Rates %
20 Western Europe Industrial Production
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0 0
Soft Landing
A
B C
D
Prices
21 Trends 10
Housing Production
Medical New Orders Soft Landing
Financial Retail
Wholesale Trade
Foreign
Nonresidential Construction
Hard Landing
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US Industrial Production to North America Light Vehicle Production
-60
-45
-30
-15
0
15
30
45
-16
-12
-8
-4
0
4
8
12
1975 1980 1985 1990 1995 2000 2005 2010 2015
Production Index
IndexProduction
22
9.7%
End the year @ 15.6 End next year @ 14.6
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23
-14
-7
0
7
14
-50
-25
0
25
50
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
US IP Chemicals
Chemicals
US IP
US Total Industrial Production Index to Basic Chemicals Production Index
12/12 Rates-of-Change
1.3%
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Industrial Chemicals Producer Price Index
-3.7 -5.8
302.7
50
200
350
500
650
800
-75
-50
-25
0
25
50
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMA R-O-C
3/12 12/12
3MMA 12MMA
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US Industrial Production to Plastics Products Production
12/12 Rates-of-Change
25
-24
-18
-12
-6
0
6
12
18
-16
-12
-8
-4
0
4
8
12
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Plastics US IP
US IPPlastics
6.1%
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Petroleum Refineries Production
N32411, 2002 = 100
1.1
-0.5
97.5
70
85
100
115
130
145
160
-28
-21
-14
-7
0
7
14
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMA R-O-C
12/12 3/12
12MMA 3MMA
26
1.4% YOY increase for 2014
Utilization Rate of 83.9% 10-yr average is 85.7%
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US Industrial Production to Iron & Steel Products Production
12/12 Rates-of-Change
27
-60
-45
-30
-15
0
15
30
45
-16
-12
-8
-4
0
4
8
12
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Products
US IPProducts
USIP
- 4.0%
1H14 > 2H14 - 3.2%
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28
US Industrial Production to Paper & Products Production
12/12 Rates-of-Change
-15
-10
-5
0
5
10
-12
-8
-4
0
4
8
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Production US IP
US IPPaper Production
- 1.7%
1H14 > 2H14 - 1.5%
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4.9 0.0
$787.2
400
600
800
1000
1200
1400
1600
-80
-60
-40
-20
0
20
40
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMT R-O-C
Nondefense Capital Goods New Orders w/o Aircraft
3/12 12/12
3MMT
12MMT
Billions of $
29
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30
USIP – 12/12 Indicator - Monthly
US Industrial Production to ITR Leading Indicator
-21
-14
-7
0
7
14
21
-21
-14
-7
0
7
14
21
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Indicator US IP
Indicator - MonthlyUS IP - 12/12
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6 Month Moving Average
Chicago Fed National Activity Index 31
-4.7
-3.9
-3.1
-2.3
-1.5
-0.7
0.1
0.9
-4.7
-3.9
-3.1
-2.3
-1.5
-0.7
0.1
0.9
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
6MMA
-0.2
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30
35
40
45
50
55
60
65
70
30
35
40
45
50
55
60
65
70
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Raw
32 Purchasing Managers Index
Raw Data
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33 Ratio of Inventories to New Orders
Raw Data
0.8
0.9
1.0
1.1
1.2
0.8
0.9
1.0
1.1
1.2
'06 '07 '08 '09 '10 '11 '12 '13 '14
RIO
Dec '10
Dec '09
1.019
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34 US Leading Indicator
60
80
100
120
60
80
100
120
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
Actual
12MMA
94.0
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22.2 16.4
1517.0
200
1000
1800
2600
3400
4200
-90
-60
-30
0
30
60
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMA R-O-C
Stock Prices Index
1/12
12/12
Actual 12MMA
S&P 500, 1941-43 = 10
35
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Corporate Bond Prices
Rates-of-Change
-20
-10
0
10
20
30
40
50
-20
-10
0
10
20
30
40
50
'08 '09 '10 '11 '12 '13 '14
3/12
12/12
Aug '11
Sep '12
1.1
36
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17.0 27.1
0.869
0.2
1.2
2.2
3.2
4.2
5.2
-90
-60
-30
0
30
60
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMT R-O-C
37 Housing Starts
3/12
12/12
3MMT 12MMT
Millions of Units
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Housing Analysis
West 40.8% C Rise
Northeast 14.1% C Flat
South 28.0% B Rise
Midwest 24.6% C Rise
Multi Family 36.0% B Rise
New Homes Sold 25.0% B Rise
Existing Home Sales 10.4% B Rise
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Sewer & Water Facilities Construction
Public, Billions of $
-1.0 -5.1
33.734
10
25
40
55
70
85
100
-60
-45
-30
-15
0
15
30
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMT R-O-C
3/12 12/12
3MMT 12MMT
39
1H14 > 2H14 1.9% - 1.6%
Total Water Supply Const - 5.7% A State and Local Water - 4.5% A Public S & W Disposal -5.4% A
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-21
-14
-7
0
7
14
21
-30
-20
-10
0
10
20
30
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
US IP Construction
Private Construction
US IP
US Industrial Production to Private Non-Residential Construction
12/12 Rates-of-Change
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2.3
44.1
10
50
90
130
170
210
-120
-90
-60
-30
0
30
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMT R-O-C
3.9
41 Commercial Buildings Construction 3/12
12/12
3MMT 12MMT
Billions of $
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-4.3 8.7
92.6
10
35
60
85
110
135
160
185
-250
-200
-150
-100
-50
0
50
100
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
MMT R-O-C
Power Construction
3/12
12/12
3MMT
12MMT
Billions of $
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43 Construction Segments to Consider
Sector Phase Year- over-year Data Trend
Total Public Construction D - 3.2% Declining Total Federal Gov’t Const D -15.2% Declining Public Healthcare B 0.8% Mild Rise Private Healthcare C 0.3% Decline Private Education Build C 6.1% Decline Manufacturing Buildings C 5.5% Decline Private Lodging C 23.5% Rising Religious Buildings A -8.2% Declining Malls D -0.1% Decline Transportation B 13.4% Rising
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Four Phases
44
0 0
A A
B B C C
D D
Expansion
Recession
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Sample Annual Sales & Growth Rates
Millions of $
45
50
70
90
110
130
150
-150
-125
-100
-75
-50
-25
0
25
50
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Data Trend ROC
-3.5% -3.7%
$86.854
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50
70
90
110
130
150
-150
-125
-100
-75
-50
-25
0
25
50
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Data Trend ROC
Example Series
46
Rates-of-Change RISING – Momentum is positive
More growth ahead 3/12: 26.8% (45 month high) 12/12: 5.7% (13 month high)
Rates-of-Change FALLING – Momentum is negative
3/12: 9.4% (11 month low) 12/12: 16.5% (3 month low)
January 2010 • Annual Production: $61.1 million • 30th consecutive month of rise • Production at 21 year low
Rates-of-Change RISING – Momentum is positive 3/12: -11.7% (20 month high)
12/12 - 26.8% (rise for 2nd straight month)
July 2007 • Annual Production: $103 million • 16th consecutive month of rise • Production at 70 month high
October 2006 • Annual Production: $94 million • 7th consecutive month of rise • Production at 59 month high point
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Indicator Indicator
Lead Time (in months)
Indicator Peak
When will TIPRO “PEAK” (12/12 really begins heading downward)
Company Timing
Analysis?
Corporate Bond Prices 9 Sep-12 Jun-13
ITR Leading Indicator 11 Jan-13 Dec-13
Consumer Expectations 12/12 9 Dec-12* Sep-13
CFNAI 6MMA 7 Jan-13* Aug-13
PMI Raw 9
USLI 9 Sep-12 Jun-13
Housing Starts 8 Jan-13* Sep-13
S&P 500 12/12 6
Employment 3/12 3 Nov-12 Feb-13
NDFCGXA -1
Retail Sales 1
Business Cycle Trendcast www.itreconomics.com
*=Tentative
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Preparing for 2013-2014 48 Phase Management ObjectivesTM
1. Positive leadership modeling (culture turns to behavior) 2. Invest in customer market research (know what they value) 3. Training programs (people, process, internal metrics) 4. Review and uncover competitive advantages 5. Spend $ on new products, marketing, advertising 6. Improve efficiencies with investment in technology and software 7. Check systems for readiness to accommodate increased activity 8. Add Sales Staff and Hire Top People 9. Lock in costs
10. Judiciously examine credit 11. Work on “what’s next”
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49 7 Must Watch Items
1. ITR Leading Indicator 2. Chicago Fed National Activity Index 3. US Leading Indicator 4. Purchasing Managers Index 5. Retail Sales 6. Employment 7. Nondefense Capital Goods New Orders
Available from ITR via ITR Trends Report, the ITR Advisor, or on the web
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50
• Concise 4 Page Report
• Excellent Economic “Snap Shot"
• Consists of Current Events, Brief Industry Segments, Snap Shot Indicators, Readers' Questions, Fed Notes, ITR Opportunity Index, and more
• Delivered Monthly
Complimentary Copy of the ITR Advisor