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Alex Chausovsky Director of Speaking Services

Managing in an Uncertain Economy. Alex Chausovsky Director of Speaking Services. 2018 Forecast Results If you heard ITR around two years prior…. 2. ITR Economics provides the best economic intelligence to reduce risk and drive practical and profitable business decisions.

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Alex Chausovsky Director of Speaking Services

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  1. Managing in an • Uncertain Economy Alex Chausovsky Director of Speaking Services

  2. 2018 Forecast ResultsIf you heard ITR around two years prior… 2 ITR Economics provides the best economic intelligence to reduce risk and drive practical and profitable business decisions.

  3. Summary April 2019 Macroeconomic Slowdown for 2019 US Global Global Issues Impacting Businesses Tariffs/Trade Uncertainty Leading Indicator Signals are Mixed Know which ones matter to you How to track the leading indicators

  4. Macroeconomic Trends

  5. US Economy Stalls in 2019 and Into 2020 US Gross Domestic Product, SAAR, Chained 2012 $ US Gross Domestic Product $18.8 trillion B 3.1% 0.9% 1.8% 1.3% Source: BEA

  6. US States GDPs Ranked vs. World Country GDPs Sources: BEA; IMF

  7. US GDP by Value Add Percent Sources: BEA, ITR Economics

  8. Slowing Growth in 2019, Mild Negativity in 2020 US Industrial Production Index US Industrial Production Index 109.2 C 3.9% 0.5% 0.7% 2.0% Source: FRB

  9. Leading Indicators Tools for Seeing the Future

  10. Leading Indicators Sources: FRB, ITR Economics May 2010 May 2011 December 2017 The Indicator has a 12-month lead time to the Industry Data Rates-of-Change

  11. Leading Indicator System as a Powerful ToolUS Industrial Production Index to Leading Indicators DATACAST ! Rates-of-Change Sources: FRB, OECD, ISM, Yahoo Finance, IHS Markit

  12. Leading Indicators Point to Global Economic Slowdown Global Leading Indicators Source: Markit Economics 1/12 Rates-of-Change

  13. Impact of Tax Reform: Now and Then

  14. Slowing Rate of Rise in CAPEX TrendUS Nondefense Capital Goods New Orders w/o Aircraft Positive impact from tax law changes showed up here Billions of Dollars Source: Census Bureau

  15. Issues Government Will and Won’t Tackle Billions of Dollars Source: BEA

  16. Total U.S. Public Debt The Long View… (% of GDP) Source: Usgovernmentspending.com

  17. Depression Drivers 1. Demographics 2. Health Care Costs 3. Entitlements 4. Inflation 5. US National Debt

  18. What to Tell the Kids • Live below their means • Learn a second language • Each household should have multiple or diverse income streams • Choose career(s) oriented toward the “opportunities” • Pay off as much debt as possible by 2030 • Be ready to at the price cycle low in the depression • Be self-reliant buy

  19. Tariffs & Trade

  20. What is Driving the Protectionist Trade Policy? US Trade Balance for Goods and Services Source: US Census Bureau Billions of Dollars

  21. Tariffs: There Will Be Winners and Losers “Fair trade” Specialization is a good thing Competition is a good thing Economics is not a zero sum game Potential disruption to supply chains Price increases Retaliation

  22. $250 Billion of Goods Subject to Tariffs Aimed at China Slowing exports to the US will hurt their economy more than ours but it is not risk free. The US is China’s Biggest Customer Potential US Consequences Inflation Downstream Production Job & Profit Loss in Export Supply Chain Exports from the US to China stand at $130.1bn, or 0.7% of US GDP. Exports from China to the US are a record high $436.9bn, or 3.8% of China GDP. Source: US Census Bureau

  23. US Top Goods Export by State Based on annual data, 2017 Source: US Census Bureau

  24. Brands That Have or Will Be Increasing Prices Due to Tariffs CATERPILLAR TOYOTA WHIRLPOOL COCA-COLA WINNEBAGO MILLER COORS SAMUEL ADAMS CAMPBELL SOUP LG ELECTRONICS GENERAL MOTORS KLEENEX & HUGGIES POLARIS INDUSTRIES NEWELL BRANDS (Crock-pot, Rubbermaid, Sharpie) “I can't just go to the shareholders and say, 'You're just going to have to accept my profit's going to be $40 million less. It doesn't work that way…” - Gavin Hattersley, CEO MillerCoors Source: Business Insider, “These popular brands say Trump's tariffs will force them to raise prices”

  25. Tariffed Versus Non-Tariffed Commodities Commodity Prices Sources: Wall Street Journal, London Metal Exchange, Bureau of Labor Statistics 3/12 Rates-of-Change

  26. The Rising Trend in Prices is Reversing US Consumer Price Index Source: BLS Rates-of-Change As seen in

  27. Sign of a Near-Term Peak in Your Material Costs? US Polyester Fibers Producer Price Index Source: BLS 1989 = 100

  28. FOMC Member Interest Rate Projections March 2019 Fed Open Market Committee Source: FRB

  29. Industry Drivers

  30. In Search of More and More Labor US Private Sector Employment Source: BLS Annual Data Trend

  31. Business Cycle Transition in Your Industry Employment US Employment in Linen and Uniform Supply Services Source: CEIC/Bureau of Labor Statistics (CPS) Millions

  32. Leisure and Hospitality Employment is on the Rise US Employment in Leisure and Hospitality Source: CEIC/Bureau of Labor Statistics (CPS) Millions

  33. Deceleration in Hotel & Motel Employment Will Persist US Hotel and Motel Employment Source: BLS Millions of Workers

  34. Casino Employment is in a Cyclical Rising Trend US Casino Employment Source: BLS Thousands of Workers

  35. Transportation & Material Moving Sector Employment is at a Peak US Employment of Transportation & Material Moving Source: BLS Millions of Workers

  36. Acceleration in Restaurant Employment Throughout 2019… US Restaurant Employment Source: BLS Millions

  37. …and in Healthcare Employment as Well US Health Care Employment Source: BLS Millions of Workers

  38. Oil & Gas Industry Employment Will Grow Further US Manufacturing, Utilities, and Oil and Gas Extraction Employment Source: BLS Millions of Workers

  39. Public Safety Employment Will Accelerate This Year US Public Safety Employment Source: BLS Millions of Workers

  40. Ongoing Share Gains by Female Law Enforcement Officers US Full-Time Law Enforcement Employees Source: FBI, BLS Thousands 2018 Percentages are estimated

  41. Summary

  42. Business Cycles 2018 2019 2020* Phase A - Recovery Annual Sales are BELOWYear-Ago Levels, but the Rate-of-Decline is SLOWING. Phase B – Accelerating Growth (Best) Annual Sales are ABOVEYear-Ago Levels, and are GROWING at a RAPID Pace. Phase C – Slowing Growth (Caution) Annual Sales are ABOVEYear-Ago Levels, BUT the Rate-of-Growth is SLOWING Phase D - Recession Annual Sales are BELOWYear-Ago Levels, and are DECLINING at a RAPID Pace.

  43. 5 Pieces of Actionable Advice for Phase C • 1. Develop your rates-of-change so you will know when the trough is near • (Use the ITR Checking Points™) • 2. Focus on the segments of the business that are the most profitable in Phase C • 3. Trumpet your Phase C competitive advantages and start developing your • message for the next phase (B or D, depending on your industry) 4. Cash Management for proper allocation and Inventory Control if applicable 5. Ask yourself what you shouldn’t be doing? (resource management and diversion to more profitable parts of the company)

  44. 90 Day Trial Offer Receive monthly updates on the economy Text TR TRIAL to 444999 for a 90 day trial of our Trends Report @ITROutlook @achausovsky

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