Transcript DuPont Product/Presentation Title - Flexographic Pre

Economic Outlook
ROBERT FRY
DuPONT ECONOMIST’S OFFICE
Flexographic Prepress Platemakers Association
Sanibel Island, Florida
February 22, 2010
2
This presentation contains forward-looking statements based on expectations,
estimates and projections that are not guarantees of future performance and involve
a number of uncertainties and assumptions.
The content is provided “AS IS,” “AS AVAILABLE.” DuPont does not warrant the
accuracy or completeness of the information, text, graphics, links, or other items
contained in this communication, and DuPont expressly disclaims liability for errors
or omissions in these materials. We reserve the right to make changes and
corrections at any time, without notice.
DuPont expressly disclaims all liability for the use or interpretation by others of
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to hold DuPont harmless against any claims for damages arising from any decisions
that the reader makes based on such information. Nothing contained in this DuPont
communication constitutes investment advice.
7/17/2015 DUPONT ECONOMIST’S OFFICE
3
Excuse me.
Can you tell
me where I
am?
You’re in
a balloon.
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4
You must
be a economist.
Your answer is
perfectly correct
and totally
useless.
You must be a manager. You
have a great view, but don’t
know where you are.
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Recovery Chronology
Recovery is first apparent to economists when seasonally adjusted
monthly data turn up.
Recovery becomes apparent to businesses when year-over-year
growth turns positive, usually 5-6 months after the sequential upturn.
Skepticism about recovery persists among public and politicians until
unemployment falls and economic activity returns to pre-recession
levels. This can take years, depending on the speed of the rebound.
Markets (industries/geographies) are in various stages of “recovery.”
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Industrial Production - World
Index 2005=100
115
Gray Bars = Recession Periods
Peak
115
110
110
105
105
100
100
Trough
(Turning
Point)
95
90
85
80
95
90
85
IP331R
99 00 01 02 03 04 05 06 07 08 09 10 11
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80
7
Industrial Production, Mfg - World
Rate of Change Yr/Yr
10
10
Trend
Rate
5
5
0
0
Actual
-5
-5
Y/Y % Chg
2008
0.1%
2009 -9.1%
2010
5.6%
-10
-15
IP33R
99 00 01 02 03 04 05 06 07 08 09 10 11
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-10
-15
8
Industrial Production: Asia
1997 = 100, Seasonally Adjusted
500
450
400
350
300
250
Total industrial production in China, manufacturing elsewhere.
*Data seasonally adjusted by this office.
500
450
400
350
300
250
200
200
150
150
100
100
Japan
China*
50
Taiwan*
India*
Korea
asiaqjm4
98 99 00 01 02 03 04 05 06 07 08 09 10
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50
9
Industrial Production, Asia
Percent Change from Year Ago, 3-Month Moving Averages
40
40
20
20
0
0
Japan
China
Korea
Taiwan
-20
-40
-20
asiagary4
01
02
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03
04
05
06
07
08
09
10
-40
10
Industrial Production, Latin America
1997 = 100, 3-Month Moving Averages
140
140
130
130
Mexico
120
120
110
110
100
100
Brazil
90
80
Argentina
lataqjtt
97 98 99 00 01 02 03 04 05 06 07 08 09 10
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90
80
11
Industrial Production: Central Europe & Russia
2005 = 100, 3-Month Moving Average
140
140
Poland
Hungary
Czech Republic
Russia
130
130
120
120
110
110
100
100
90
ee3sa
04
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05
06
07
08
09
10
90
12
Industrial Production: European Union
2005 = 100
115
115
Industrial Production, Manufacturing
OECD Leading Indicator
110
110
105
105
100
100
95
95
90
90
85
me25qjmfa
99
00
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01 02
03
04 05
06
07 08
09
10
85
13
Industrial Production and Expectations: EU
Balance of Opinion
Percent Change from Year Ago
20
15
10
5
0
-5
10
-10
-15
-20
-25
-30
-35
-10
5
0
-5
-15
Production Expectations, Mfg (Left)
Industrial Production, Mfg (Right)
-20
-25
eu1
99
00
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01
02
03
04
05
06
07
08
09
10
14
US Industrial Production
Cycle Trough = 100
125
125
June 2009 Trough
May 1975 Trough
December 1982 Trough
120
120
115
115
110
110
105
105
100
100
07
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08
09
10
11
15
Global economy recovering from worst
recession since WW2
Most of world is growing again.
•Recovery started in developing countries of Asia and South America.
•Production turned up in Japan in March 2009, in Western Europe in April 2009.
•North America turned up in July 2009.
•Central & Eastern Europe recovering slowly.
Question now turns to shape of recovery.
•A V-shaped bottom is the historical norm, but few expected one.
•Slow recovery (Nike “swoosh”) has been most common base case.
•So far, recovery in industrial production is closer to a V, but going forward, V is likely to
become more asymmetrical (lop-sided) than in past as growth slows.
•W and √¯ are risks.
•Speed of recovery will vary across industries and geographies.
“Recovery” means different things to different people.
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Real GDP
(Annual % Change)
2008
2009
2010
2011
World
1.8
-2.1
3.2
3.3
N. America
0.5
-2.7
3.5
3.1
W. Europe
0.5
-4.0
1.0
1.6
C. & E. Europe
4.0
-5.6
2.3
3.6
Asia
3.1
0.9
5.3
4.6
Japan
-1.2
-5.1
1.8
1.1
China
9.6
8.7
10.1
8.5
S. America
4.8
-0.8
3.3
4.5
M. East & Africa
5.1
0.8
4.0
5.1
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Short-Term Interest Rates
Percent
7
7
6
6
UK
5
5
4
4
3
3
2
2
Euro-Zone
1
0
US
1
Japan
rates3
99
00
01
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02
03
04
05
06
07
08
09
10
0
18
US Monetary Aggregates
January 2005 = 100
300
260
220
300
260
Monetary base*
M1**
M2***
220
180
180
140
140
100
100
* Currency + bank reserves
** Currency + checkable deposits
*** M1 + time & savings deposits + money market mutual funds
60
2005
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2006
2007
2008
2009
2010
60
19
TED Spread & Dow-Jones Industrial Average
3-Month LIBOR minus 3-Month T-bills, Percent
5
DJIA (Right)
TED Spread (Left)
4
3
Index
15000
14000
13000
12000
11000
10000
9000
2
8000
1
0
7000
teddow
J A S O N D J F M AM J J A S O N D J F M AM J J A S O N D J F
2007
2008
2009
2010
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6000
20
Heads, we save Bear Stearns. Tails, we save Lehman.
Hank Paulson, March 2008
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“I think we’ve averted” the risk of a
new American depression.
Ben Bernanke, March 12, 2009
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US Mortgage Applications and Home Sales
Index, 4-Week Moving Average
Thousands
600
8000
500
7000
400
6000
300
5000
200
100
0
mbavprch
Mortgage Applications for Purchases (Left)
New + Existing Home Sales (Right)
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
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4000
3000
23
US Housing Starts
Millions, Seasonally Adjusted Annual Rate
2.4
2.4
2.0
2.0
1.6
1.6
1.2
X
Blue Chip Forecasts
2010 2011
Top 10 0.82 1.20
Consensus 0.71 0.96
Bottom 10 0.63 0.73
0.8
0.4
75
80
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85
90
95
00
05
X
X
1.2
X
X
X
X
0.8
X
10
0.4
24
Gee, thanks for the housing bubble, Alan.
I’m sure you can handle it, Ben. (Looks like Andrea and
I sure picked the right time to sell our condo in DC.)
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Median Sales Price of Existing Single-Family Homes
Percent of Median Family Income
420
420
380
380
1981-2000
Average
340
340
300
300
260
260
220
Source: National Association of Realtors
puvholdmedyfam
70
75
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80
85
90
95
00
05
10
220
26
Anything that can’t go on forever will stop.
Herbert Stein, 1916-1999
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US Motor Vehicle Sales & Production
Millions
20
20
Sales
1986-2007 Trend (1.0%)
Production
18
18
16
16
X
X
14
X
X
X
X
X
X
12
14
12
10
10
8
8
6
6
87
89
91
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93
95 97
99
01
03 05
07
09
11
28
US Consumer Spending and Disposable Income
Percent Change from Year Ago, Constant Dollars
5
5
2008
Fiscal
Stimulus
4
3
4
3
2
2
1
1
0
0
-1
-1
-2
Disposable Income
Consumption Expenditures
-3
-2
mceydpyp96
J FM AM J J A SO ND J FM AM J J A S ON D J FM AM J J A S ON D
2007
2008
2009
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-3
29
US Retail Sales ex Automotive
Percent Change
3
9
2
6
1
3
0
0
-1
-3
From Year Ago (Right)
From Month Ago (Left)
-2
-6
-3
-9
sretafsxmvpnom
-4 J F MA M J J A S OND J F MA M J J A S OND J FMA M J J A S O ND J F -12
2007
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2008
2009
2010
30
US Real Gross Domestic Product
Annualized Growth Rates
8
Shaded areas
denote recessions
6
8
6
4
4
2
2
0
0
-2
-4
-6
-8
Quarter-to-quarter
Year-over-year
Year-over-year forecast
-2
-4
-6
Annual Growth Rates (%)
3.7 4.5 4.4 4.8 4.1 1.1 1.8 2.5 3.6 3.1 2.7 2.1 0.4 -2.5 3.6 3.0
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
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-8
32
US Manufacturing Production & Stock Prices
Percent Change from Year Ago, Smoothed
60
40
Correlation = .50
15
Long-term average
of both series
10
20
5
0
0
-5
-20
-10
-40
-60
Manufacturing Production ex high tech (Right)
Wilshire 5000, 7 months prior (Left)
jipsp
75
80
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85
90
95
00
05
10
33
US Manufacturing Production & Orders
Percent/Percentage Point Change from Year Ago, Smoothed
40
30
Long-term average
of both series
Correlation = .61
20
15
20
10
10
0
5
0
-10
-5
-20
-10
Manufacturing Production ex high tech (Right)
ISM New Orders Index, 7 months prior (Left)
jiporn
-30
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
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34
Worst US recession since WW2 has ended
US recession was been longest and deepest since Great Depression.
• Real GDP declined 3.9% over four quarters.
• 8.4 million jobs lost.
• Recession lasted at least 18 months.
Recession probably ended in June 2009.
• Unprecedented action by Fed steadied financial markets.
• Stock prices bottomed in March 2009.
• Unemployment claims have fallen sharply since early April 2009.
• Home sales & housing starts have risen from troughs.
• Vehicle sales surged in July/August 2009 and continue to trend up.
• Leading indicators are up strongly.
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US Manufacturing Production ex High-Tech Sectors
2002 = 100
115
110
115
Actual
95-07 Trend (0.8%)
110
105
105
100
X
X
X
X
X
100
X
X
95
90
85
X
Annual Growth Rates (%)
1.4 0.8 -8.5 0.0 0.0 2.2 3.3 1.2 0.7 -3.7 -11.0 5.9 3.6
99 00 01 02 03 04 05 06 07 08 09 10 11
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95
90
85
36
Industrial Production, Containers
2002 = 100
110
110
105
105
100
100
95
95
90
90
85
85
80
jipcont
89
91
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93
95
97
99
01
03
05
07
09
80
37
US Industrial Production, Printing & Related Activities
2002 = 100
Actual
90-00 Trend (1.3%)
100
100
90
90
80
70
X
0.8
jip27
0.6
-6.1 -5.9
Annual Growth Rates (%)
-3.8 0.8 2.4 0.6 0.9
X
X
X
XX
XX
-6.6 -14.5 -1.0
2.6
99 00 01 02 03 04 05 06 07 08 09 10 11
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80
70
38
US Industrial Production, Food
2002 = 100
120
120
Actual
89-2000 Trend (1.6%)
115
X
XXX
X
X
XX
115
110
110
105
105
100
100
95
95
90
90
85
Annual Growth Rates (%)
1.0 1.7 0.0 2.4 1.0 0.1 3.1 1.1 3.9 1.5 -0.5 4.3 1.1
99 00 01 02 03 04 05 06 07 08 09 10 11
jip20
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85
39
US Merchandise Trade Balance
Billion $, Annual Rate, 3-Month Moving Average
0
40
Total (Left)
Chemicals ex Pharma (Right)
-200
30
-400
20
-600
10
-800
0
-1000
exchem
97 98 99 00 01 02 03 04 05 06 07 08 09 10
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-10
40
US Merchandise Trade Balance
Billion $, Seasonally Adjusted Annual Rate
0
0
-100
-100
-200
-200
-300
-300
-400
-400
with China
Rest of World ex Oil
Oil
-500
-600
exdcchinxoil
97 98 99 00 01 02 03 04 05 06 07 08 09 10
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-500
-600
41
Value of US Dollar vs Major Currencies
2002 Peak = 100
105
100
95
90
85
80
75
105
100
95
90
85
80
75
70
70
65
60
55
50
65
Euro
British Pound
Japanese Yen
Chinese Yuan
60
55
dollar4
02
03
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04
05
06
07
08
09
10
50
42
Forecasting exchange rates
has a success rate no better
than that of forecasting the
outcome of a coin toss.
-- Alan Greenspan
November 19, 2004
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US Crude Oil and Natural Gas Futures Prices
$/mmbtu
24
22
20
18
16
14
12
10
8
6
4
2
0
$/bbl
NYMEX Crude Oil (Right)
Natural Gas (Left)
oilgasl
99
00
01
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02
03
04
05
06
07
08
09
10
144
132
120
108
96
84
72
60
48
36
24
12
0
44
Industrial Chemical Prices vs. Oil Prices
$/BBL
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
1982 = 100
350
PPI, Industrial Chemicals (Right)
WTI Crude Oil (Left)
325
300
275
250
225
200
175
150
ppichemoil
97 98 99 00 01 02 03 04 05 06 07 08 09 10
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125
100
45
US Consumer Price Index
Percent Change from Year Ago
6
6
4
4
X
X
2
X
X
XXXX
0
-2
2
0
Annual Inflation Rates (%)
2.8 2.9 2.3 1.6 2.2 3.4 2.8 1.6 2.3 2.7 3.4 3.2 2.9 3.8 -0.4 2.5 2.5
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
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-2
46
PCE* Price Index, ex Food & Energy
Percentage of Companies Reporting Slower Deliveries
Percent
80
10
"Core" Inflation (Right)
ISM Supplier Delivery Index (Left)
70
8
60
6
50
4
40
2
30
20
jpcxfae
*Personal Consumption Expenditures
79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
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0
47
US Interest Rates
Percent
10
10
8
8
6
6
XXXX
4
X
X
X
X
X
4
X
X
X
2
0
10-Year Bond Yield
Target Federal Funds Rate
X
ratesq
89
XX
91
93
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95
97
99
01
2
X
03
05
07
09
11
0
48
Global Industrial Production
Percent Change from Year Ago, 3-Month Moving Average
10
10
5
5
0
0
-5
1994-2008 Correlation = .89
-5
-10
Industrial Production (Right)
OECD+6 Leading Index, 4 months prior (Left)
-10
ipworlei
91
93
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95
97
99
01
03
05
07
09
-15
49
Global Industrial Production
2005 = 100
120
120
Industrial Production
OECD Broad Leading Index
110
110
100
100
90
90
80
80
70
70
60
60
ipworleil
50
91
93
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95
97
99
01
03
05
07
09
50
50
Conclusions
Leading indicators point to continued near-term growth.
• No evidence of double-dip, but growth likely to slow in second half of 2010.
Rising commodity prices & surprising bottlenecks have halted
decline in inflation despite slack in economy.
2010 Central Bank challenge: Withdrawing stimulus at correct pace.
Many arguments for slow recovery are really explanations for why the
recession was so severe or arguments for slow long-term growth.
• √¯
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51
US Federal Budget Surplus/Deficit*
Rolling 12-month total, Billion $
0
*On- and off-budget
0
-200
-200
-400
-400
-600
-600
-800
-800
-1000
-1000
Budget deficit BEFORE
stimulus plan and
Obama budget proposal
-1200
-1400
-1600
2005
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2006
2007
2008
-1200
-1400
2009
2010
-1600
52
You know a recession is over
when Congress finally passes a
stimulus bill.
-- Anonymous
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53
“Every election is a sort of advance
auction sale of stolen goods.”
--H. L. Mencken, 1880-1956
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54
“The accuracy of an economic vision is not always
commensurate with the analytical ability of those who
hold it. Pessimistic visions about almost anything always
strike the public as more erudite than optimistic ones.”
--Joseph Schumpeter, 1883-1950
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“The error of optimism dies in the crisis, but in dying it
gives birth to an error of pessimism. This new error is
born not an infant, but a giant.”
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--A. C. Pigou, 1877-1959