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EVP 360 Company A
May 2018
TM
ITR EconomicsTM • Manchester, NH
603.796.2500 • itreconomics.com
© 2018 ITR Economics™ All Rights ReservedCompany A Outlook
Company A Recent Results and Forecast
Annual Sales Growth Rate Business Cycle
(12MMT) (12/12) Phase
Data through March 2018 $209.8 million 5.4% B
Year-End 2018 $211.8 million 2.6% C
Year-End 2019 $195.2 million -7.9% D
Year-End 2020 $206.4 million 5.8% B
Expected Impact of Economic Trends on Company A
• Expect an imminent trend reversal in the company Sales 12/12 as indicated by the North America Heavy Duty Truck
Production 12/12.
• The US economy and the majority of the indicators in this report will be in recession during 2019, however US Food
Production and US Engines and Power Transmission Production will not. Look to increase your presence in these
markets to mitigate expected decline in 2019.
Company A Forecast
• Sales will rise into 3Q18 and before declining through 2019, as the industrial economy experiences a brief downturn.
Sales rise again from 2020 into at least 1Q21. The forecast is unchanged from the prior report.
Management ObjectivesTM
• Pricing pressures are building in the overall economy. Budget for increasing costs, including labor costs, in 2018. This
may require slow and targeted price increases during the year.
• Market the benefits of your products related to cost savings and efficiencies to help justify higher prices.
• Organic growth will drive the business in 2018 but any growth in 2019 will need to be driven by strategic efforts. Look
to offset exposure to the auto market, which could be hard hit in 2019.
ITR Economics™ EVP 360™Indicator Signals for Company A
Year-End Year-End
Indicator Jun-18 Sep-18 Dec-18 Mar-19 2019 2020 Timing
Company A Sales B C C D D B N/A
Market Index B C C D B B 0
US Industrial Production Index B B C C D B 1
US Nondefense Capital Goods New Orders (excluding aircraft) B B C C D B 1
US Food Production Index B B B B C B 11
US Breweries Production Index D D A A N/A N/A 17
US Engines and Power Transmission Equipment Production Index A B B B D N/A -1
US General Purpose Machinery Production Index B C C C D B 0
North America Heavy Duty Truck Production C C C C D N/A -1
Note: The table above depicts what each of the included indicators is signaling for your business and considers the relevant timing relationship. Each of these indic ators gives evidence
regarding the likely trajectory of your business. This table gives a quick overview of what those signals mean for your company. For example, if US Industrial Production normally leads
your business by 12 months and is expected to be in Phase C as of December 2018, then the table would show "C" in the Year-End 2019 column.
Macroeconomic Trends Overview
• US Industrial Production will rise in 2018, ending the year 2.9% above the 2017 level. Recession is anticipated to occur in 2019.
• Tariffs and related trade issues are downside risk to the outlook.
• GDP is up 2.9% and projected to avoid recession through 2020.
• Inflationary pressure are building, adding to accelerating in dollar-denominated measure of economic growth.
• The Savings Rate is signaling that Retail Sales' growth will diminish noticeably in 2019.
Key Trends in Other Indicators
• Phase B, Accelerating Growth, in US Engines and Power Transmission Equipment Production through the end of this year indicates market
conditions will be supportive of further Sales growth in the coming months.
• The Brewery Production Index has been contracting year over year (12MMA basis) for the last year and a half. Look to other markets for
opportunities in the near term.
• Rising US Surface Trade with Canada and Mexico is contributing to accelerating growth in North America Heavy Duty Truck Production.
ITR Economics™ EVP 360™Company A Sales
Millions
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Lower Forecast Range 4.6 8.0 5.8 0.8 -3.8 -8.0 -10.1 -10.3 -8.1 -6.0 -1.8 3.0 5.6
Annual Growth Rate (%) 5.9 9.5 7.5 2.6 -1.8 -5.8 -7.8 -7.9 -5.6 -3.5 1.0 5.8 8.4
Upper Forecast Range 7.2 11.0 9.2 4.4 0.2 -3.5 -5.4 -5.4 -3.1 -1.0 3.7 8.5 11.1
Actual 5.4
Lower Forecast Range 208.2 212.0 211.7 208.1 202.8 197.8 193.4 190.0 190.2 190.5 194.8 201.0 206.4
Annual Sales (Millions) 210.8 215.0 215.1 211.8 207.0 202.6 198.4 195.2 195.4 195.5 200.3 206.4 211.7
Upper Forecast Range 213.4 217.9 218.5 215.5 211.2 207.5 203.5 200.4 200.6 200.6 205.8 211.8 217.1
Actual 209.8
Quarterly Sales (Millions) 79.3 83.2 79.5 74.1 72.1 76.6 73.3 69.3 72.5 76.8 80.4 78.3 80.5
Actual 54.5
Outlook: Results: Supporting Evidence: Risks:
• Expect annual Sales to peak by • Results through March 2018 • The upcoming peak in the US • The US Food Production Index
3Q18 before declining into were without our forecast General Purpose Machinery and US Engines and Power
4Q19. range. Production Index 12/12 Transmission Equipment
• The Sales 12/12 will peak • The forecast was extended to supports our expectation Sales Production Index both suggest
imminently and transition to include 1Q21, but was to transition to Phase C by the the Sales 12/12 may rise into
Phase D, Recession, in early otherwise unchanged from the end of 2018. 2Q19, longer than forecast.
2019. The Sales 12/12 will previous report. • Expected trends in North • The US Brewery Production
decline for the duration of America Heavy Duty Truck Index 12/12 has been below
2019 before recovery takes Production suggest the Sales zero for the last year and half.
hold in early 2020. 12/12 will reach a low in 4Q19. This is a risk to near term rise in
• Annual Sales will resume rising • Rise in US Industrial Production the Sales 12/12. Focus on other
from 1Q20 into at least 1Q21. in 2020 supports rise in the sectors of the food industry to
Sales 12/12 that year. maximize Sales growth.
ITR Economics™ EVP 360™Market Index
2012 = 100
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Lower Forecast Range 2.1 2.5 1.3 -0.2 -1.3 -1.7 -1.5 -0.8 0.5 1.8 2.7 2.8 2.5
Annual Growth Rate (%) 2.7 3.1 2.0 0.6 -0.5 -0.9 -0.7 0.1 1.4 2.7 3.7 3.8 3.5
Upper Forecast Range 3.3 3.7 2.7 1.3 0.3 -0.1 0.1 1.0 2.3 3.6 4.7 4.8 4.5
Actual 2.9
Lower Forecast Range 97.9 98.2 97.9 97.6 97.2 97.1 97.1 97.5 98.5 99.6 100.5 101.1 101.9
Annual Market Index (12MMA) 98.5 98.8 98.6 98.3 98.0 97.9 97.9 98.4 99.3 100.5 101.5 102.1 102.8
Upper Forecast Range 99.0 99.3 99.2 99.0 98.8 98.7 98.7 99.3 100.2 101.4 102.4 103.1 103.7
Actual 97.9
Quarterly Market Index (12MMA) 0.4 96.7 98.9 97.6 98.7 96.4 98.8 99.7 102.5 101.1 102.7 102.3 0.0
Actual 100.4
Outlook: Results: Supporting Evidence: Risks:
• The Market Index 12MMA will • The Market Index 12MMA on • A recent 12/12 peak in US • The US Chemicals and Chemical
peak this quarter and then the lower range of the forecast Construction Machinery New Products Production Index
decline through mid-2019. in March. Orders supports our 12/12 forecast suggests the
• The Index 12/12 will enter • This is likely caused by several expectation of the Index Market Index 12/12 may rise
Phase D, Recession, in 1Q19 minor data revisions to the transitioning to Phase C this into 1Q19.
but recovery will take hold by components of the Market quarter. • The US Engines and Power
the end of the year. Index. • Anticipated trends in the US Transmission Equipment
• Leading indicator evidence Nondefense Capital Goods New Production Index and US
suggests our long-term outlook Orders (excluding aircraft) Construction Machinery
is accurate. 12/12 suggests the Index 12/12 Production Index 12/12s
• The forecast is unchanged from will resume rising by 2020 and suggests the Index 12/12 may
the prior report and was into at least 1Q21, consistent reach a low in 1Q20, three
extended to include 1Q21. with forecast expectations. quarters later than expected.
ITR Economics™ EVP 360™Company A
Data Trends, Millions
3MMT 12MMT
400 QUARTERLY SALES
Sales - 12MMT
(3MMT)
Sales Forecast - 12MMT
Sales - 3MMT $54.5 million
300 ANNUAL SALES
(12MMT)
$209.8 million
200
OUTLOOK
Expect the Sales 12MMT to
rise into the second half of
2018. Annual Sales will then
decline into late 2019. Rise will
resume by early 2020 and
extend into at least early
100 2021.
0 0
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Lower Forecast Range 212.0 211.7 208.1 202.8 197.8 193.4 190.0 190.2 190.5 194.8 201.0 206.4
Annual Sales (Millions) 215.0 215.1 211.8 207.0 202.6 198.4 195.2 195.4 195.5 200.3 206.4 211.7
Upper Forecast Range 217.9 218.5 215.5 211.2 207.5 203.5 200.4 200.6 200.6 205.8 211.8 217.1
ITR Economics™ EVP 360™Company A
Rates-of-Change
60 60 PHASE
40 40
QUARTERLY GROWTH
(3/12)
20 20
11.9%
ANNUAL GROWTH
0 0
(12/12)
5.4%
-20 -20
NEXT 12/12 HIGH
2Q18
-40 Sales - 3/12 -40
Sales - 12/12 NEXT 12/12 LOW
Sales Forecast - 12/12
-60 -60 4Q19
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Lower Forecast Range 8.0 5.8 0.8 -3.8 -8.0 -10.1 -10.3 -8.1 -6.0 -1.8 3.0 5.6
Annual Growth Rate (%) 9.5 7.5 2.6 -1.8 -5.8 -7.8 -7.9 -5.6 -3.5 1.0 5.8 8.4
Upper Forecast Range 11.0 9.2 4.4 0.2 -3.5 -5.4 -5.4 -3.1 -1.0 3.7 8.5 11.1
ITR Economics™ EVP 360™Company A to Market Index
12/12 Rates-of-Change
Sales Market Index
60 60
Market Index
40 40
Company A Sales
Annual Growth
(12/12)
20 20
5.4%
0 0
Market Index
Annual Growth
-20 -20 (12/12)
Company A Sales
Company A Sales Forecast
2.9%
-40 -40
Company A Sales and the Market
Market Index
Index are both in Phase B,
Accelerating Growth. This suggests
Market Index Forecast that the rising trend in company Sales
is market driven.
-60 -60
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Market Index
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Lower Forecast Range 2.5 1.3 -0.2 -1.3 -1.7 -1.5 -0.8 0.5 1.8 2.7 2.8 2.5
Annual Growth Rate (%) 3.1 2.0 0.6 -0.5 -0.9 -0.7 0.1 1.4 2.7 3.7 3.8 3.5
Upper Forecast Range 3.7 2.7 1.3 0.3 -0.1 0.1 1.0 2.3 3.6 4.7 4.8 4.5
ITR Economics™ EVP 360™Growth in the US Industrial Economy This Year corroborates Our Forecast of Sales Rise
Sales Company A to Index
60 US Industrial Production Index 12
40 8
20 4
0 0
-20 -4
All indicators are shifted along the
Sales - 12/12 horizontal axis to reflect their cyclical
Sales Forecast - 12/12 relationship to Company A Sales.
-40 -8
Index - 12/12
Index Forecast - 12/12 Page 8 of Core ITR Trends Report
-60 -12
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase B • The projected 3Q18 high in the Index 12/12 suggests a 4Q18 April 2018 Index 12/12: 2.6%
high in the Sales 12/12.
Accelerating Growth
1-Month Lead Time to • The projected 4Q19 low in the Index 12/12 suggests a 1Q20 Indicator Relevance
Sales 12/12 low in the Sales 12/12. US Industrial Production is a benchmark
indicator for the US economy. Rise in US
Indicator Phase Signals Year-End Year-End
Industrial Production Signals higher levels of
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
output in the industrial economy.
B B C C D B
ITR Economics™ EVP 360™Inflation Will Keep 2019 Decline in New Orders Mild; Raise Your Prices With the Market
Sales Company A to New Orders
60 US Nondefense Capital Goods New Orders (excluding aircraft) 30
20
30
10
0 0
-10
-30
Sales - 12/12
Sales Forecast - 12/12 -20
New Orders - 12/12
New Orders Forecast - 12/12 Page 8 of Core ITR Trends Report
-60 -30
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase B • The projected 3Q18 high in the New Orders 12/12 suggests a March 2018 New Orders 12/12: 7.5%
3Q18 high in the Sales 12/12.
Accelerating Growth
1-Month Lead Time to • The projected 4Q19 low in the New Orders 12/12 suggests a Indicator Relevance
Sales 12/12 4Q19 low in the Sales 12/12. New Orders is a B2B-specific macroeconomic
benchmark for Freeman Schwabe that is
Indicator Phase Signals Year-End Year-End
denominated in dollars.
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
B B C C D B
ITR Economics™ EVP 360™Food Industry May Provide Opportunity to Extend Sales 12/12 Rise into 2Q19
Sales Company A to Index
60 US Food Production Index 12
40 8
20 4
0 0
-20 -4
Sales - 12/12
-40 Sales Forecast - 12/12 -8
Index - 12/12
Index Forecast - 12/12
Page 9 of Manufacturing ITR Trends Report
-60 -12
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase B • The projected 2Q18 high in the Index 12/12 suggests a 2Q19 April 2018 Index 12/12: 4.6%
high in the Sales 12/12.
Accelerating Growth
11-Month Lead Time to • The projected 4Q19 low in the Index 12/12 suggests a 4Q20 Indicator Relevance
Sales 12/12 low in the Sales 12/12. The US Food Production Index provides insight
into the food industry, a major end-use market
Indicator Phase Signals Year-End Year-End
for Company A's products.
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
B B B B C B
ITR Economics™ EVP 360™Production is Contracting; Look To Other Verticals For Growth Opportunities
Sales Company A to Index
60 US Breweries Production Index 30
40 20
20 10
0 0
-20 -10
Sales - 12/12
-40 Sales Forecast - 12/12 -20
Index - 12/12
Index Forecast - 12/12
-60 -30
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase B • The 2Q17 low in the Index 12/12 suggests a 3Q18 low in the February 2018 Index 12/12: -0.9%
Sales 12/12.
Accelerating Growth
17-Month Lead Time to • The tentative 4Q17 high in the Index 12/12 suggests a 2Q19 Indicator Relevance
Sales 12/12 high in the Sales 12/12. US Breweries Production is a proxy for demand
from the brewery industry, which Company A
Indicator Phase Signals Year-End Year-End
sells into.
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
D D A A N/A N/A
ITR Economics™ EVP 360™Production Will Not Return to Levels Seen in 2012 and 2015 During the Next 12 Quarters
Sales Company A to Index
60 US Engines and Power Transmission Equipment Production Index 60
40 40
20 20
0 0
-20 -20
Sales - 12/12
-40 Sales Forecast - 12/12 -40
Index - 12/12
Index Forecast - 12/12
-60 -60
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase D • The projected 2Q19 high in the Index 12/12 suggests a 2Q19 April 2018 Index 12/12: -0.2%
high in the Sales 12/12.
Recession
1-Month Lag Time to • The projected 3Q20 low in the Index 12/12 suggests a 2Q20 Indicator Relevance
Sales 12/12 low in the Sales 12/12. US Engines an Power Transmission Equipment
represents a major market that drives demand
Indicator Phase Signals Year-End Year-End
for Company A products.
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
A B B B D N/A
ITR Economics™ EVP 360™Production Forecast Supports Expectation of Phase C in Sales By the End of 2018
Sales Company A to Index
60 30
US General Purpose Machinery Production Index
40 20
20 10
0 0
-20 -10
Sales - 12/12
-40 -20
Sales Forecast - 12/12
Index - 12/12
Index Forecast - 12/12
-60 -30
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase B • The projected 3Q18 high in the Index 12/12 suggests a 3Q18 April 2018 Index 12/12: 5.2%
high in the Sales 12/12.
Accelerating Growth
Coincident Relationship to • The projected 4Q19 low in the Index 12/12 suggests a 4Q19 Indicator Relevance
Sales 12/12 low in the Sales 12/12. US General Purpose Machinery Production
represents Company A's industry.
Indicator Phase Signals Year-End Year-End
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
B C C C D B
ITR Economics™ EVP 360™Recession in 2019 Followed by Rise Production in 2020 Supports Sales Forecast
Sales Company A to Production
60 North America Heavy Duty Truck Production 60
40 40
20 20
0 0
-20 -20
Sales - 12/12
-40 Sales Forecast - 12/12 -40
Production - 12/12
Production Forecast - 12/12 Page 9 of Manufacturing ITR Trends Report
-60 -60
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22
Indicator Snapshot Turning Point Analysis Current Indicator Amplitude
Phase B • The projected 2Q18 high in the Production 12/12 suggests a March 2018 Production 12/12: 26.4%
2Q18 high in the Sales 12/12.
Accelerating Growth
1-Month Lag Time to • The projected 1Q20 low in the Production 12/12 suggests a Indicator Relevance
Sales 12/12 4Q19 low in the Sales 12/12. North America Heavy Duty Truck Production
represents one of Company A's vertical
Indicator Phase Signals Year-End Year-End
markets.
Jun-18 Sep-18 Dec-18 Mar-19 2019 2020
C C C C D N/A
ITR Economics™ EVP 360™Company A Forecast History
Millions
Jun-17 Sep-17 Dec-17 Mar-18
Lower Forecast Range -11.0 -4.5 -1.0 4.6
Annual Growth Rate (%) -8.9 -3.4 0.2 5.9
Upper Forecast Range -6.8 -2.3 1.4 7.2
Actual -9.3 -4.2 1.4 5.4
Deviation in range in range in range in range
Lower Forecast Range 194.1 197.3 199.2 208.2
Annual Sales (Millions) 195.7 199.5 201.6 210.8
Upper Forecast Range 197.3 201.8 204.0 213.4
Actual 195.4 197.9 204.0 209.8
Forecast Accuracy 99.8% 99.2% 98.8% 99.5%
Quarterly Sales (Millions) 50.8 52.2 52.3 54.6
Actual 50.7 52.0 52.7 54.5
Forecast Revision History:
• The forecast has been in place since June 2017.
ITR Economics™ EVP 360™Company A Market Index
2012 = 100
Jun-17 Sep-17 Dec-17 Mar-18
Lower Forecast Range -1.7 0.1 1.3 2.1
Annual Growth Rate (%) -0.7 0.4 1.9 2.7
Upper Forecast Range 0.3 0.8 2.5 3.3
Actual -0.2 0.7 2.1 2.9
Deviation in range in range in range in range
Lower Forecast Range 94.4 96.1 97.2 97.9
Annual Market Index (12MMA) 94.9 96.5 97.8 98.5
Upper Forecast Range 95.4 97.0 98.3 99.0
Actual 95.5 96.2 97.0 97.9
Forecast Accuracy 99.4% 99.6% 99.2% 99.4%
Quarterly Market Index (12MMA) 94.9 98.6 97.1 99.6
Actual 95.4 98.6 97.3 100.4
Forecast Revision History:
• The forecast has been in place since June 2017.
ITR Economics™ EVP 360™Executive Vantage Point 360 Guide
The data points included below are hypothetical and are provided
only to give guidance regarding how to read this report.
Indicator Snapshot:
• The indicator snapshot tells you the indicator's phase of the business cycle.
• It will also tell you whether the indicator leads, lags, or moves in real time with the company.
2-Month Lag Time → • This indicator lags your company by two months.
5-Month Lead Time → • This indicator leads your company by five months.
Coincident Relationship → • This indicator moves in real time with your company (no lead or lag time).
Headline:
Production at Highest Level in Six Years; • Simple! The most pertinent information to your company on the market. We address where
Expect Growth into Mid-2015 • the market is, where it's going, and if there have been any changes to our outlook.
Turning Point Analysis:
• The 4Q12 high in the US Purchasing • The cyclical turning points tell you when the indicator is reaching a cyclical high or low and
Managers Index 1/12 suggests a 1Q14 high in • when this suggests the company will reach a cyclical high or low, based on the previously
the Sales 12/12. • mentioned lead, lag, or coincident relationship.
Indicator Phase Signals:
• The phase signals a suggested phase, adjusted for the lead/lag time of the indicator, for your
• company based on the actual or expected status of the indicator.
Example: ITR expects Phase B in a six-month leading indicator to persist through
Example: December 2013 before transitioning to Phase C by March 2014. This would
Example: be shown as Phase B through June 2014 and Phase C in September 2014
Example: given the six-month lead time.
• An indicator phase signal does not mean your company will enter that phase at that time.
Example: Your company may enter recession even
Example: if US Industrial Production avoids recession.
ITR Economics™ EVP 360™Terminology and Methodology
Data Trends: Rates-of-Change:
Monthly Moving Total (MMT) vs Monthly Moving Average (MMA): A rate-of-change figure is the ratio comparing a data series during a
Averages are used when the data cannot be compounded, such as an specified time period to the same period one year ago. Rates-of-
index, percent, price level, or interest rate. Totals are used for things Change are expressed in terms of the annual percent change in an
where it makes sense to add the data together. For example, units sold MMT or MMA, 3MMT/A, and actual monthly data.
or total dollars spent.
Rates-of-change reveal whether activity levels are rising or falling
3MMT/A and 12MMT/A: compared to last year. A rate-of-change trend illustrates and measures
A 3-month or 12-month moving total/average is the total/average of cyclical change and trends in the data. ITR Economics’ three commonly
the monthly data for the most recent 3 and 12 months, respectively. used rates-of-change are the 1/12, 3/12, and 12/12, which represent
The 3MMT/A illustrates the seasonal changes inherent to the data the year-over-year percent change of a single month, 3MMT/A, and
series. The 12MMT/A removes seasonal variation to derive the 12MMT/A (respectively).
underlying cyclical trend. It is also referred to as the annual total or
annual average. A rate-of-change above 0 indicates the data is higher than one year
prior, while a rate-of-change below 0 indicates the data is below one
year earlier.
Click here for a brief video explanation of the
methodology we use in this report.
Accelerating Growth (B): 12/12 is rising Business Cycle Slowing Growth (C): 12/12 is declining but
above 0, data trend is accelerating in its remains above 0, data trend ascent is slowing
ascent and is above the year-ago level. This or has stopped its rise, but it is still above last
is the second positive phase of the business year. This is the first negative phase of the
cycle. Above year-ago level business cycle.
Below year-ago level
Recovery (A): 12/12 is rising below 0 and Recession (D): 12/12 is below 0, data trend is
the data trend is either heading toward a below the year-ago level and the rate of
low or is in the early stages of recovery. This decline is intensifying. This is the second and
is the first positive phase of the business final negative phase of the business cycle.
cycle.
ITR Economics™ EVP 360™Indicator Definitions
US Industrial Production Index Index of total industrial production in the United States; includes manufacturing, mining, and utilities. Source:
Federal Reserve Board. Index, 2012 = 100, not seasonally adjusted (NSA).
US Nondefense Capital Goods New Orders New orders for nondefense capital goods, excluding aircraft, in the United States. Includes farm machinery and
(excluding aircraft) equipment, construction machinery, mining machinery, nondefense small arms and ordnance, industrial
machinery, commercial and service industry equipment, other general purpose machinery, photographic
equipment, metalworking machinery, turbine and generator manufacturing, power transmission equipment,
pumps and compressors, material handling equipment, electronic computers, computer storage devices and
peripheral equipment, communications equipment, nondefense search and navigation equipment, electrometrical
equipment, electrical equipment, heavy duty truck manufacturing, railroad rolling stock, nondefense ship and boat
building, office and institutional furniture, and medical equipment and supplies. Source: US Census Bureau.
Measured in billions of dollars, not seasonally adjusted (NSA).
US Food Production Index Industries in the US Food Manufacturing subsector transform livestock and agricultural products into products for
intermediate or final consumption. The industry groups are distinguished by the raw materials (generally of animal
or vegetable origin) processed into food products. The food products manufactured in these establishments are
typically sold to wholesalers or retailers for distribution to consumers. Source: Federal Reserve Board. NAICS Code:
311. Index, 2012 = 100, not seasonally adjusted (NSA).
US Breweries Production Index Industries in the Primary Metal Manufacturing subsector smelt and/or refine ferrous and nonferrous metals from
ore, pig or scrap, using electrometallurgical and other process metallurgical techniques. Establishments in this
subsector also manufacture metal alloys and superalloys by introducing other chemical elements to pure metals.
The output of smelting and refining, usually in ingot form, is used in rolling, drawing, and extruding operations to
make sheet, strip, bar, rod, or wire, and in molten form to make castings and other basic metal products. Index,
2012 = 100, NSA. NAICS code 331.
US Engines and Power Transmission This U.S. industry comprises establishments primarily engaged in manufacturing gears, speed changers, and
Equipment Production Index industrial high-speed drives (except hydrostatic) and mechanical power transmission equipment (except motor
vehicle and aircraft), such as plain bearings, clutches (except motor vehicle and electromagnetic industrial control),
couplings, joints, and drive chains and internal combustion engines (except automotive gasoline and aircraft).
Index, 2012 = 100, NSA. NAICS 333612-8.
ITR Economics™ EVP 360™Indicator Definitions
US General Purpose Machinery Production General purpose machinery manufacturing, including pumps and compressors, material handling equipment,
Index elevators and moving stairways, conveyors, industrial trucks, power driven handtool manufacturing, welding and
soldering equipment, packaging machinery, fluid power manufacturing, etc. Index, 2012 = 100, NSA. NAICS code
3339.
North America Heavy Duty Truck North America factory sales of heavy-duty trucks and buses in class 8 (over 33,000 pounds gross weight). Includes
Production garbage trucks, furniture moving trucks, city buses, truck tractors, cement trucks, dump trucks and sleeper cabs.
Source: Wards Auto. Measured in thousands of units, not seasonally adjusted (NSA).
ITR Economics™ EVP 360™Management ObjectivesTM
Phase B - Accelerating Growth Phase C - Slowing Growth
1. Ensure quality control keeps pace with increasing volume 1. Know if your markets are headed for a soft landing or a hard landing
2. Invest in workforce development: hiring, training, retention 2. Cash is king: beware of linear budgets and ensure you are not in denial
3. Ensure you have the right price escalator; space out price increases 3. Stay on top of aging receivables
4. Maximize your profit margins through differentiation; stand out from the 4. Revisit capital expenditure plans
crowd and set yourself apart 5. Lose the losers: eliminate unprofitable business segments
5. Expand distribution channels 6. Use competitive pricing to manage your backlog through the coming
6. Expand credit to customers slowdown
7. Improve corporate governance (rent a CFO, establish a board of advisors or 7. Avoid committing yourself to long-term expenses at the top of the price
board of directors) cycle but lock in revenue
8. Communicate competitive advantages; build the brand 8. Go entrepreneurial and/or counter-cyclical
9. What’s next? Products less than seven years old can help buck the business 9. Evaluate your vendors for financial strength; if needed, look for additional
cycle trend vendors as a safety net
10. Sell business in climate of maximum goodwill 10. Cross train key people to prepare for workforce reduction i f the cycle looks
recessionary
Phase A - Recovery Phase D - Recession
1. Conduct a SWOT review and know where you need to put your money 1. Implement cost-cutting measures
2. Model positive leadership (culture turns to behavior) 2. Offer alternative products with a lower cost basis
3. Start to phase out marginal opportunities (products, processes, people); 3. Perform due diligence on acquisitions while valuations are falling
repair margins 4. Reduce advertising as consumers become more price conscious
4. Perform due diligence on customers and extend credit 5. Enter or renegotiate long-term leases
5. Be on good terms with a banker; you will need the cash more now than in 6. Negotiate labor contracts
any other phase 7. Consider capital equipment needs for the next cycle
6. Invest in customer market research; know what they value and market/price 8. Tighten credit policies
accordingly 9. Develop programs for advertising, training, and marketing to implement
7. Hire key people and implement company-wide training programs ahead of in Phase A
Phase B 10. Lead with optimism, remembering that Phase D is temporary
8. Allocate additional resources to sales and marketing
9. Invest in system/process efficiencies
10. Make opportunistic capital and business acquisitions; use pessimism to your
advantage
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