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.
www.itreconomics.com
3
8
9
10
11
12
13
14
0.8
0.9
1.0
1.1
1.2
1.3
1.4
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
USCanada
CanadaUS
US GDP to Canada GDP3MMA Trillions of Constant $
www.itreconomics.com
4
23.3
9.3
8.75.3
4.1
3.6
3.3
3.3
2.52.4
2.32.2 2.0 1.7 1.6
United States
China
Japan
Source: IMF
World GDP, Bils of US $, Current Prices Percent of World GDP
www.itreconomics.com
• Leading indicators pointing up• Liquidity is not an issue• Exports are up• Stimulative monetary policy• Employment rising (companies right-sized)• Banks are lending • Normal seasonal rise in Retail Sales • Deficit spending continues
US/Canada Recovery5
www.itreconomics.com
• Europe’s financial troubles might…• China’s housing/inflation bubble could…• Oil prices could break through $120 …• USD could lose all credibility causing…• Unemployment remains high…• Construction activity problematic…
Recession in 20126
www.itreconomics.com
7Example: Revenue 12MMTMonthly
SeptOctNovDec
10101010
3MMT = 4.63
JanFebMar
111111
3MMT = 5.14
AprMayJune
111111
3MMT = 4.98
JulyAugSept
111111
3MMT = 4.223MMT = 3.953MMT = 4.24
12MMT = 18.7012MMT = 18.97
12MMT = 17.54
8.2%
www.itreconomics.com
8
RATE-OF-CHANGE
ACTUAL MONTHLY DATA AS OF 10/11ACTUAL MONTHLY DATA AS OF 10/10
3-MOS MOVING TOTAL (3MMT) AS OF 10/113-MOS MOVING TOTAL (3MMT) AS OF 10/10
ANNUAL MOVING TOTAL (12MMT) AS OF 10/11ANNUAL MOVING TOTAL (12MMT) AS OF 10/10
= 1/12
= 3/12
= 12/12
www.itreconomics.com
9Global Industrial Production Indices12/12 Rates-of-Change
ITR Trends Report
2.3 Brazil
-0.2 Japan
4.4 Mexico4.7 US
7.6 SE Asia5.6 Europe
-30
-20
-10
0
10
20
-30
-20
-10
0
10
20
'00 '02 '04 '06 '08 '10 '12 '14
www.itreconomics.com
10China Industrial Production Index
SA, 2000 = 100
14.213.9
414.1
70
140
210
280
350
420
490
560
630
-28
-21
-14
-7
0
7
14
21
28
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
MMAR-O-C
www.itreconomics.com
11
-30
-20
-10
0
10
20
30
-30
-20
-10
0
10
20
30
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
US IP
Japan IP
US Industrial Production to Japan Industrial Production12/12 Rates-of-Change
ITR Trends Report
www.itreconomics.com
12US Industrial Production to India Industrial Production12/12 Rates-of-Change
-15
-10
-5
0
5
10
15
20
-15
-10
-5
0
5
10
15
20
'98 '00 '02 '04 '06 '08 '10 '12 '14
IndiaUS IP
US IPIndia IP
www.itreconomics.com
132010 Exports from Canada to the WorldBillions of Dollars
9%
22%
5%
24%
19%
14%
4%
1% 1% Agricultural and fishing products
Energy products
Forestry products
Industrial goods and materials
Machinery and equipment
Automotive products
Other consumer goods
Special transactions trade
Unallocated adjustments
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14Canada Industrial Production Index toCanada Professional, Scientific and Technical Services
12/12 Rate-of-Change
-12
-9
-6
-3
0
3
6
9
12
-12
-9
-6
-3
0
3
6
9
12
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
ServicesIndex
IndexServices
www.itreconomics.com
15Canada Industrial Production Index toCanada Health Care & Social Assistance
12/12 Rates-of-Change
-4
-2
0
2
4
6
-12
-6
0
6
12
18
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Health CareIndex
IndexHealth Care
www.itreconomics.com
16US GDP to Canada GDP
3/12 Rates-of-Change
-6
-4
-2
0
2
4
6
8
-6
-4
-2
0
2
4
6
8
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
USCanada
CanadaUS
www.itreconomics.com
17
US
www.itreconomics.com
18US Employment – Private SectorAnnual Data Trend
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
Employment Mils of Jobs
ITR Trends Report
www.itreconomics.com
19Total U.S. Public Debt(% of GDP)
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
120.0%
www.itreconomics.com
20
236128
-158
-378-413
-318-248-161
-455
-1552-1449
-1173-939 -938-955-925-988-1013-1031
-1145
-2000
-1500
-1000
-500
0
500
-2000
-1500
-1000
-500
0
500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
OMB’s 10-Year Deficit Projections(Baseline of Current Policy)
Billions of Dollars
www.itreconomics.com
21Consumer Loan Delinquency Rates3MMA and 12MMA
3.6%3.2%
-2
0
2
4
6
-2
0
2
4
6
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
3MMA12MMA
www.itreconomics.com
22Delinquency Rates for C&I Loans3/12 & 12/12 Rates-of-Change
-41.0%-32.8%
-80
-40
0
40
80
120
160
-80
-40
0
40
80
120
160
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
3/1212/12
www.itreconomics.com
23Commercial & Industrial Loans at Commercial BanksRates-of-Change
-20
-15
-10
-5
0
5
10
15
20
25
-20
-15
-10
-5
0
5
10
15
20
25
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
3/1212/12
www.itreconomics.com
24Corporate Profits – 2nd QuarterBillions of $
Source: BEA
$23.5
$22.2
$83.3
$81.2
$106.0
$125.2
$401.8
$34.4
$25.0
$85.8
$87.7
$122.6
$217.1
$494.7
$26.8
$15.2
$90.8
$103.6
$112.7
$249.9
$438.9
$0 $100 $200 $300 $400 $500 $600
Transportationand warehousing
Utilities
Wholesale trade
Information
Retail trade
Manufacturing
Financial
2011 (2Q SAAR)
2010
2009
www.itreconomics.com
25US Consumer Price Index to Canada Price Index
12/12 Rates-of-Change
-3
0
3
6
9
12
15
-3
0
3
6
9
12
15
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
USCanada
CanadaUS
www.itreconomics.com
26US 3-Month Money Market Rate to Canada 3-Month Money Market Rate
Raw Data
-2
0
2
4
6
8
-2
0
2
4
6
8
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
US
USCanada
Canada
www.itreconomics.com
27US 10-Year Government Bond Yields to Canada 10-Year Government Bond Yields
Raw Data
0
2
4
6
8
0
2
4
6
8
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14
US
USCanada
Canada
www.itreconomics.com
28US Mortgage Rates to Federal FundsRaw Data
-2
2
6
10
14
18
22
-2
2
6
10
14
18
22
1975 1980 1985 1990 1995 2000 2005 2010 2015
Mortgage RatesFederal Funds
www.itreconomics.com
29
0
4
8
12
16
20
0
4
8
12
16
20
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Short-Term Interest RatesLong-Term Bonds
US Short-Term Interest Rates to US Gov’t Long-Term Bond YieldsRaw Data Trends
www.itreconomics.com
30
6.2
2.6
4.0
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
-25
-20
-15
-10
-5
0
5
10
15
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMAR-O-C
Dec '09
Oct '09
Jul '95
Nov '10
US M2 Money SupplyTrillions of 82$
12/12
Actual12MMA
1/12
ITR Trends Report
www.itreconomics.com
31US Industrial Production to Corporate Bond Prices12/12 Rates-of-Change
ITR Trends Report
-30
-20
-10
0
10
20
30
-15
-10
-5
0
5
10
15
1975 1980 1985 1990 1995 2000 2005 2010 2015
BondsUS IP
US IPCorporate Bonds
www.itreconomics.com
32Canada Exchange RateC$ per US Dollar
0.9
1.2
1.5
1.8
2.1
2.4
2.7
3.0
3.3
3.6
-40
-32
-24
-16
-8
0
8
16
24
32
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMAR-O-C
0.986
-4.5-6.2
12/12
12MMA
3/12
3MMA
www.itreconomics.com
33Nondefense Capital Goods New Orders w/o AircraftBillions of $
9.613.9
$777.1
400
600
800
1000
1200
1400
1600
-80
-60
-40
-20
0
20
40
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMTR-O-C
Oct '09
Nov '09
Jul '08
Feb '113/12 12/12
3MMT
12MMT
ITR Trends Report
www.itreconomics.com
34US Leading Indicator1996 = 100
6.25.2
113.3
65
80
95
110
125
140
155
-24
-18
-12
-6
0
6
12
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMAR-O-C
Jun '09
Apr '09
Aug '07
Oct '101/12
12/12
Actual12MMA
ITR Trends Report
www.itreconomics.com
35Canada Industrial Production Index toCanada Purchasing Managers Index
Rates-of-Change
-60
-40
-20
0
20
40
-12
-8
-4
0
4
8
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
IndexProduction
Production - 12/12
Index - 3/12
www.itreconomics.com
36S&P 500 to S&P Toronto Stock Exchange (TSX)
Data Trends
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
0
200
400
600
800
1000
1200
1400
1600
1800
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
S&P 500
S&P TSX
S&P TSXS&P 500
www.itreconomics.com
37Retail Sales Excluding AutomobilesTrillions of 82-84$
1.52.8
$2.095
1.00
1.75
2.50
3.25
4.00
4.75
-21
-14
-7
0
7
14
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMTR-O-C
Feb '11
Jul '09
Jan '10
Nov '07
3/1212/12
3MMT 12MMT
ITR Trends Report
www.itreconomics.com
38Canada Retail Trade GDPBillions of C$
200
300
400
500
600
700
800
-20
-15
-10
-5
0
5
10
'98 '00 '02 '04 '06 '08 '10 '12 '14
MMAR-O-C
3.63.8
444.171
www.itreconomics.com
39Canada to Ontario Retail Sales12/12 Rates-of-Change
-6
-3
0
3
6
9
12
-6
-3
0
3
6
9
12
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
CanadaOntario
www.itreconomics.com
40US Light Vehicle Retail Sales to Canada Light Vehicle Retail Sales
12/12 Rates-of-Change
-30
-20
-10
0
10
20
-30
-20
-10
0
10
20
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
US SalesCanada
Canada SalesUS Sales
www.itreconomics.com
41Canada Housing StartsThousands of Units, SAAR
-9.0
2.4
183.3
100
140
180
220
260
300
340
380
420
460
-120
-100
-80
-60
-40
-20
0
20
40
60
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMAR-O-C
www.itreconomics.com
42Canada to Ontario Housing Starts Growth12/12 Rates-of-Change
-45
-30
-15
0
15
30
45
-45
-30
-15
0
15
30
45
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
CanadaOntario
www.itreconomics.com
43Housing StartsMillions of Units
5.0-3.2
0.5710.2
0.7
1.2
1.7
2.2
2.7
3.2
3.7
4.2
-90
-75
-60
-45
-30
-15
0
15
30
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
MMTR-O-C
Mar '06
Nov '10
Sep '09
Dec '09
3/1212/12
3MMT 12MMT
ITR Trends Report
www.itreconomics.com
44
50
150
250
350
450
35
65
95
125
155
1975 1980 1985 1990 1995 2000 2005 2010 2015
ConstructionIndex
IndexConstruction
US Industrial Production to Non-Residential ConstructionData Trends
www.itreconomics.com
45
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 ObjectivesTM:
ITR Trends Report
www.itreconomics.com
46
Phase Late A – Recovery
Part 211. 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 ObjectivesTM:
ITR Trends Report
www.itreconomics.com
47
Phase Early B – Growth1. 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 ObjectivesTM:
ITR Trends Report
www.itreconomics.com
48
EnergyGreenWaterExportsHigher EducationHealth Care
Practices
FoodPetsFuneral ServicesAlcoholSecurityLegal Services
(Diversified)
Find a way to do business in the “counter-cyclical” or largely unaffected areas:
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49
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 debtorso Purchase land/property – leasing rises with inflationo 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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50
To learn how incorporating economic data into your planning process can
increase your profitability,please contact
Clients and Subscribers may call at any time to
ask questions.
www.itreconomics.com
51
Be sure to tune in to “Make Your Move” with Alan & Brian Beaulieu
Mondays at 4 PM Eastern Timeon the VoiceAmerica Business Channel
Listen live at www.voiceamerica.com
Institute for Trend Research
Brian Beaulieu
provides economic
forecasts with 90%
accuracy so companies
can improve their
performance and profits.
Rave Reviews
"Brian was spectacular, charismatic and
incredibly relevant."
C. Homann
Royal Bank of Canada
“Brian’s presentation was insightful, relevant
and very entertaining. The presentation in
Bend, Oregon was the best presentation on the
economy in this region for many years. I
found his message on investing in businesses
especially enlightening, as well as the optimal
timing of those investments in the business
cycle.”
Roger J. Lee, Director
Economic Development for
Central Oregon
“You WOWED our members at Nexstar’s
Super Meeting in Atlanta! Everyone enjoyed
your great sense of humor and how you were
able to connect specifically to them during
your presentation. You could have heard a pin
drop in the room while you were speaking as
everyone was captivated.”
Sandie Jacobson
Nexstar Network
“I can safely say that, in my 13 years of
putting together programs for the Marketing
Council and other AGMA meetings, you are
the most interesting, most informative, most
enlightening and most enthusiastic speaker we
have ever had!”
Kurt Medert, Vice President
American Gear Manufacturers
“…Brian was fabulous, not enough words in
the Thesaurus to express how good Mr.
Beaulieu really is in his presentation”
Glen R. Anderson
Executive Vice President
Pressure Sensitive Tape Council
A sample of what you will learn:
Short-term and long-term economic
forecasts (U.S. and /or abroad).
How our forecasts impact your company.
What ITR Management ObjectivesTM
apply at this time in the business cycle.
What about inflation?
What leading economic indicators should
we be watching for?
See the future first before your
competition does!
About Brian
Brian Beaulieu has been an economist with
ITR® since 1982, serving as a principal and
it’s CEO since 1987. At the Institute, his
focus is research into using business cycle
analysis and forecasts to increase business
profits.
He is co-author of “Make Your Move”, a
book on how to increase profits through
business cycle changes.
Mr. Beaulieu is Chief Economist for Vistage
International; a global organization comprised
of over 14,000 CEO’s and has an active
consulting practice. Beaulieu has been
providing workshops and economic analysis
seminars in 10 countries to literally thousands
of business owners and executives for the last
28 years. He is the winner of the 2008
Speaker Impact of the Year Award from
Vistage International.
Mr. Beaulieu’s views have appeared in/on: the
Wall Street Journal, New York Times,
Barron’s, USA Today, CNBC TV, FOX
Business TV, Knight Ridder News Services,
Reuters, CBS Radio, The Washington Times,
Forbes, Atlanta Journal Constitution, KERA
TV, Canadian TV, and numerous other outlets.
To book an engagement call:
166 King Street
Boscawen, New Hampshire 03303
603-796-2500 [email protected]