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September 2006

September 2006. Gasket Fabricators Association. “Projecting When Business Cycles Will Change” Presented By: The Institute for Trend Research Dr. Jeff Dietrich jeff@ecotrends.org www.ecotrends.org. Xerox (Scientific Data Systems) Message to Sigma 2 users, (1969).

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September 2006

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  1. September 2006 Gasket Fabricators Association “Projecting When Business Cycles Will Change” Presented By: The Institute for Trend Research Dr. Jeff Dietrich jeff@ecotrends.org www.ecotrends.org

  2. Xerox (Scientific Data Systems)Message to Sigma 2 users, (1969) We have not succeeded in answering all your problems. Indeed we sometimes find we have not completely answered any of them. The answers we have found only serve to raise a whole new set of questions. In some ways we feel that we are as confused as ever, but we believe we are confused on a much higher level and about more important things.

  3. US Industrial Production IndexForecast Through December 2008Annual Average Index Tipping Points- Hard Landing – 2009-2010 Here today • Forecast – y-o-y • 3.6% • 3.7% Historical Perspective: 1950’s 5.2% 1980’s 1.9% 1960’s 5.5% 1990’s 3.1% 1970’s 3.0% 2000’s 1.7*% Source: ITR’s EcoTrendsTM

  4. RATE-OF-CHANGE ACTUAL MONTHLY DATA AS OF 8/06 ACTUAL MONTHLY DATA AS OF 8/05 = 1/12 3-MOS MOVING TOTAL (3MMT) AS OF 8/06 3-MOS MOVING TOTAL (3MMT) AS OF 8/05 = 3/12 ANNUAL MOVING TOTAL (12MMT) AS OF 8/06 ANNUAL MOVING TOTAL (12MMT) AS OF 8/05 = 12/12

  5. US Industrial Production to Gross Domestic Product3/12 Rates-of-Change

  6. US, California & the West Annual GSP Growth Rate

  7. Global Industrial Production Indices12/12 Rates-of-Change

  8. Retail Sales Excluding AutomobilesTrillions of 82-84$ Rates of Change 12/12 3/12 • Forecast • 5.9% • 4.9% • 1.2% Revenues 3MMT 12MMT Source: ITR’s EcoTrendsTM

  9. Nondefense Capital Goods New Ordersw/o AircraftBillions of $ 12/12 3/12 Forecast: 2006 6.4% 2007 11.1% 3MMT 12MMT Source: ITR’s EcoTrendsTM

  10. Nondefense Capital Goods New Orders to Electrical Equipment New Orders12/12 Rates-of-Change • Forecast – Electrical NO • 8.1% • 9.4%

  11. Unemployment Rates

  12. Construction Markets12/12 Rates-of-Change Annual Data Trend -Non-residential construction looks positive through 2008

  13. US Industrial Production IndexForecast Through December 2010Annual Average Index Tipping Points- Hard Landing – 2009-2010 Here today Debt Interest Rates Demographics Inflation Inventories China Elections Oil Home Prices Source: ITR’s EcoTrendsTM

  14. Housing Starts Millions of Units Negative into 1H09 3/12 12/12 3MMT 12MMT Source: ITR’s EcoTrendsTM

  15. U.S. Composite Leading Indicator1996 = 100 Money Supply, Ave. Weekly Hrs (Manuf); Manuf. N.O. (Consumer Goods & Nondefense Capital Goods); Building Permits (New Private Housing units); Stock Prices (500 common stocks); Interest rate spread; Consumer Expectations; Ave. Weekly Unemployment Claims. 1/12 12/12 Actual 12MMA Source: ITR’s EcoTrendsTM

  16. Federal Budget Analysis 2.6% 1974

  17. Consumer Loan Delinquency Rate 13 - year low Source: ITR’s EcoTrendsTM

  18. Interest Rate Comparison

  19. Durable Goods New Orders to Durable Goods InventoriesRates-of-Change Caution in 2008

  20. US Industrial Production to US Oil & Gas Extraction ProductionAnnual Data Trends Price of Oil per barrel: 1998 2003 2004 $18 $28 $34 % Oil Imports 1973 - 2005 - 28% 63%

  21. Fuel Costs*Oil Price at which Alternative Energy Sources Become Viable • $20 Conventional Oil • $40 Tar Sands; Cane-based ethanol • Gas to liquids; coal to liquids • $50 Shale Oil • $60 US corn-based ethanol • $80 Biodiesel *Excludes tax credits Cambridge Energy Research Associates, The Economist, 4/22/06

  22. Exports by NationPercentage of Total World Exports of Goods and Services Source: IMF 12 12 10.4 9.5 10 10 8 8 5.9 5.7 6 6 4.8 4.7 3.8 4 4 3.4 2 2 0 0 US Germany China Japan France UK Italy Canada

  23. India Industrial Production Index to China Industrial Production Index12/12 Rates-of-Change

  24. China Industrial Production Source: ITR’s EcoTrendsTM

  25. Major Issues Stalking China’s Future“A Tiger on Steriods” • Banking System* (Relational & ‘Not for Profit’) • Legal System* (Court of no appeals) • Government Interference/Control* • Environmental (Water, Pollution) & Health Issues • Negative Demographics • Competition for Resources and ‘Cheap’ Labor – (Philippines, India, Vietnam, Thailand, E. Europe…) • Civil Unrest (Pollution, wages, abuse, health.. • Increasing US protectionism sentiment (currency)

  26. US Industrial Production to Japan Industrial Production12/12 Rates-of-Change Source: ITR’s EcoTrendsTM

  27. GOODS & SERVICES AS A PERCENT OF GDP (real) w/o structures 2Q06 –after tax profits percentage increase Retail Sales 19.9% Wholesale Profits 21.5% Manufacturing Profits 27.7%

  28. Did You Know? • US ranked first in technology and innovation • First in technological readiness • First in the quality of research institutions • First in productivity • First in profits • Source: World Economic Forum, Newsweek June 12, 2006

  29. Four Phases US Economy Expansion Zero Percent Growth Bankrupt

  30. “It is not necessary to change. Survival is not mandatory” W. Edwards Demming

  31. US Industrial Production to Commercial Aircraft Production & Civilian Aircraft Equipment Production12/12 Rates-of-Change Forecast – Civilian Aircraft 2006 15.3% 2007 9.3%

  32. Nondefense Aircraft & Parts New OrdersBillions of Dollars 12/12 3/12 12MMT 3MMT

  33. US Industrial Production to Defense Communications Equipment New Orders12/12 Rates-of-Change Opportunities likely into 2008

  34. National Defense Expenditures to Defense Capital Goods N.O.12/12 Rates-of Change

  35. US Industrial Production to Electric Utility Generation Production12/12 Rates-of-Change Lags Overall Economy Speaks to opportunities into 2008

  36. US Industrial Production Index to Electrical Equipment Production12/12 Rates-of-Change

  37. US Industrial Production to Pharmaceutical & Medical Production12/12 Rates-of-Change Lags US economy by 10-12 mo Expected to be positive into 2008

  38. Nondefense Capital Goods New Orders w/o Aircraftto Electro medical, Measuring, and Control Instruments New Orders12/12 Rates-of-Change 2007 4.9%

  39. US Industrial Production to General Purpose Machinery Production12/12 Rates-of-Change Positive through 2007 into 1H08

  40. US Industrial Production Index to Engines Production12/12 Rates-of-Change • Forecast – Engines • 4.2% • 7.1%

  41. Computer & Electronic Products New OrdersRates-of-Change

  42. US Industrial Production to NA Automobile ProductionData Trends • Forecast: • -0.7% • 9.3%

  43. US Industrial Production to Auto Parts & Allied Goods Production12/12 Rates-of-Change

  44. Hand Tools Expenditures to Retail Sales Excluding Autos12/12 Rates-of-Change

  45. Nondefense Capital Goods New Orders to Refrigeration & HVAC Equipment New Orders 12/12 Rates-of-Change

  46. US Industrial Production to Corporate Bond Prices12/12 Rates-of-Change Source: ITR’s EcoTrendsTM

  47. Preparing for a Hard Landing • Sell – top of the business cycle • Conserve cash, cut and consolidate • Watch inventories to New Orders • Diversify…more specialized ‘UnChina’ • Engineering and Technical… • High Tech – High Touch… • Smaller - more specialized runs

  48. GDP , Bils of US $, Current PricesPercent of World GDP Mexico Russia Wal-Mart Brazil China California

  49. “There is no freeway to the future. No paved highway from here to tomorrow. There is only wilderness. Only uncertain terrain. There are no roadmaps. So pioneering leaders rely upon a compass and a dream”. The Leadership Challenge James M. Knouzes & Barry Z. Posner

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