Winds of Change...May 02, 2019 · 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 US IP Containers US IP Containers US Industrial Production to Paperboard Containers

WindsofChangeDr. Alan BeaulieuPresident

Paperboard Packaging Council

First in Forecasts Since 1948

ITR Economics provides the best economic intelligence to reducerisk and drive practical and profitable business decisions.

Duration Accuracy

US GDP 24 99.7%US Ind. Prod. 24 96.8%Europe Ind. Prod. 27 99.9%Canada Ind. Prod. 24 96.7%China Ind. Prod. 30 97.8%Retail Sales 25 98.0%Housing 27 99.5%Employment 23 99.5%

2017 Forecast ResultsIf you heard ITR around two years ago… 2


US Industrial Production to Gross Domestic Product

Sources: FRB, BEAYear-over-Year, Quarter-to-Quarter (3/12)

-6.9%-2.9% -5.2%

-15.5%

3.6%

-16

-12

-8

-4

0

4

8

12

-16

-12

-8

-4

0

4

8

12

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

GDPUS IP

GDPUS IP


12-Month Moving Average 12/12 Rate-of-ChangeYear-over-Year Growth Rate

• Annual Trend: • Phase: • Year-over-Year:

2018:

2019:

2020:

ITROutlook

US Industrial Production Index

US Industrial Production Index

104.4B

2.3%

2.9%

-1.2%

Source: FRB

2.3%

84

89

94

99

104

109

114

84

89

94

99

104

109

114

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21-15

-10

-5

0

5

10

-15

-10

-5

0

5

10

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21


US Real Gross Domestic Product

Source: BEA3MMA

5

10

12

14

16

18

20

10

12

14

16

18

20

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Sep '15 ForecastAug '17 Forecast GDP - 3MMA

Rate-of-Change& How They Work

Tools for Seeing the Future

7.8%8.9%

-45

-30

-15

0

15

30

45

-30

-20

-10

0

10

20

30

'… '… '… '… '… '… '… '… '… '… '… '… '…


RawApr-16 1.4

May-16 1.5Jun-16 1.5Jul-16 1.4

Aug-16 1.5Sep-16 1.3Oct-16 1.3Nov-16 1.6Dec-16 1.6Jan-17 1.5Feb-17 1.7Mar-17 1.6Apr-17 1.7

May-17 1.7Jun-17 1.7Jul-17 1.6

Aug-17 1.7Sep-17 1.5Oct-17 1.5Nov-17 1.9Dec-17 1.7Jan-18 1.7Feb-18 1.9Mar-18 1.7

3/12 Rate-of-Change

= !"#$% &'() *!!+!"#$% &'(, *!!+ ×100 − 100

=1.*3.) ×100 − 100 = 10.4%

3MMT

4.44.44.44.24.14.24.54.74.84.85.05.05.15.05.04.84.74.95.15.35.35.3

12MMT

18.018.218.418.618.819.019.219.419.719.820.020.220.3

12/12

26.7%25.5%25.2%22.4%20.0%18.3%15.4%12.7%

12/12 Rate-of-Change

= !"#$% &'() (&!!+!"#$% &'(, (&!!+ ×100 − 100

=&'.*().' ×100 − 100 = 12.7%

3/12

15.9%13.6%13.6%14.3%14.6%16.7%13.3%12.8%10.4%10.4%

Data Preparation

DATACAST !


2.0%

-20

-10

0

10

20

-20

-10

0

10

20

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

ContainersUS IP

US IPContainers

US Industrial Production to Paperboard Containers Production

Source: FRB12/12 Rates-of-Change

8

Correlation .81leads IP by 3 months


Paperboard Containers Production Index

Source: FRB2012 = 100

9

1.8%2.0%

108.8

80

100

120

140

160

180

-40

-30

-20

-10

0

10

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMAROC32221 Paperboard Container ManufacturingThis industry comprises establishments primarily engaged in converting paperboard into containers without manufacturing paperboard. These establishments use corrugating, cutting, and shaping machinery to form paperboard into containers. Products made by these establishments include boxes, corrugated sheets, pads, pallets, paper dishes, and fiber drums, and reels.

Tentative Nov ‘17 12/12 highMilder-than-normal seasonal decline

Typical 12MMT LOR Sep ‘18 highExpect longer


US Industrial Production to US Wholesale Trade Nondurable Goods

Sources: FRB, US Census Bureau12/12 Rates-of-Change

10

10

7.0%

-24

-16

-8

0

8

16

24

-15

-10

-5

0

5

10

15

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

WholesaleUS IP

US IP

Wholesale

3/12 above the 12/12 Only a slower rate of $ rise in 2019


Tariffs and otherfun things


Ease of Doing Business

Source: The World Bank

NZ 1Singapore 2Denmark 3Korea 4Hong Kong 5US 6UK 8Germany 21Japan 35Russia 36China 75India 100Brazil 125


US Raw Steel Production

Source: World Steel Association 12MMT

14

25

50

75

100

125

150

25

50

75

100

125

150

1946

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

US Steel - 12MMT

5.2% B


3.9%2.4%

170.0

120

140

160

180

200

220

240

-20

-15

-10

-5

0

5

10

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMAR-O-C

3MMA

12MMA

US Steel Mill Employment

Source: BLSThousands

Steel Jobs: Highest in over 25 yrs


US Trade in Goods with World: Exports to Trade Weighted Exchange Rate Index

Sources: Census Bureau, FRED12/12 Rates-of-Change

16

6.1%-2.1%

-15

-10

-5

0

5

10

15

20-30

-20

-10

0

10

20

30

40

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Exchange RateExports

Exports

Exchange Rate


US Top Goods Export by State

Source: US Census BureauBased on annual data, 2017


1.8%2.9%

111.6

60

100

140

180

-30

-15

0

15

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

MMAR-O-C

3MMA 12MMA

Mexico Manufacturing Production Index

Source: CEIC 2008 = 100

18

2019 -0.1%


Leveling the Manufacturing Field Around the Globe

Years of 15% to 20% per annum labor cost increases in China without corresponding productivity increases

Cheap and readily available energy in North AmericaAggressive reengineering and automation

The China Advantage?

2016: Only 1 Percent Point Difference

2004: 15 Percentage Point Advantage


Leveling the Manufacturing Field Around the Globe

Years of 15% to 20% per annum labor cost increases in China without corresponding productivity increases

Cheap and readily available energy in North America

The China Advantage?

2016: Only 1 Percent Point Difference

2004: 15 Percentage Point AdvantageMoving ForwardRobotics Protectionism Politics & Economic Stability

HBR H03IWO Supply Chain by Rose and Reeves


$50 Billion in New Tariffs Aimed at China – Trade War?

Source: US Census Bureau

US:Punitive for Theft of IT

China: Responds25% tariffs

China:Soybeans

AutosAircraft

CHINA LOSES?

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.

The US is China’s Biggest Customer


$60 Billion in New Tariffs Aimed at China – Trade War Ahead?

Source: US Census Bureau

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 12.3% of China GDP.

The US is China’s Biggest Customer

Slowing exports to the US will hurt their economy more than ours but it is not risk free.

Potential US ConsequencesInflation DownstreamProduction

Job & Profit Loss in Export Supply Chain

(to China)Industry Exports US $ bnAerospace $ 16.3 Soybeans $ 12.4 Motor Vehicles $ 10.0 Semiconductors $ 6.9 Oil & Gas $ 6.9 Waste & Scrap $ 5.6 Ctrl Instruments $ 5.6

Synthetic Rubbers $ 3.9 Pharmaceuticals $ 3.4 Ind’l Machines $ 3.3

First in Forecasts Since 1948Source: Census Bureau

Does not include immigration into the US23

Net Migration Between States, July 2016-July 2017+160,854-190,508


State Population Growth Rates

Source: Census BureauPercent Change from Population Estimates 2010 to 2017

24


US Federal Government Current Tax Receipts to Consumption Expenditures to Current Transfer Payments to

Federal Government Interest Payments

Source: BEABillions of Dollars

25

$0

$375

$750

$1,125

$1,500

$1,875

$2,250

$2,625

$3,000

$0

$375

$750

$1,125

$1,500

$1,875

$2,250

$2,625

$3,000

1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Tax/Exp/Paym

Current Tax ReceiptsConsumption ExpendituresCurrent Transfer PaymentsInterest Payments


US Tax Rates and Real GDP Growth

Sources: Tax Foundation, BEA, 26

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Real GDP Growth Rate Top Marginal Tax Rate

Rea

l GD

P G

row

th R

ate Top M

arginal Tax Rate


Percent of Total US Tax Receipts by Source to Real Gross Domestic Product

Taxes: Percent, GDP: 3/12 Rate-of-Change, December Value27

27

Sources: Tax Policy Center, BEA

8.8%

48.8%

1.8%

-10%

0%

10%

20%

30%

40%

50%

60%

-10%

0%

10%

20%

30%

40%

50%

60%

1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024

Corporate Income Taxes

GDP 3/12 Growth Rate

Will the tax reform generate additional cash? 35%, 21%, and 18.4%Businesses in America already cash rich

Immediate expensing? A Help. Inducement to invest more than theyneed and/or can implement?

Pulling in from the future?8 yrs to pay the tax on repatriated funds. No big influx of cash to the

Treasury. Apple $4.5b/year.

ATLANTA FED IS WATCHING…On business investment, roughly two-thirds of respondents to our national survey…indicated that the reform wouldn't affect their capital expenditures at all. Just 15 percent said they would increase their capital spending by 10 percent or more, and those responses came mostly from smaller firms.

~ Raphael BosticAtlanta Federal Reserve Chair

Rotary Club of AtlantaJanuary 8, 2018


PPC &Retail Sales


4.3%4.4%

5.794

2

4

5

7

8

10

11

-24

-18

-12

-6

0

6

12

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMTR-O-C

3MMT

12MMT

US Total Retail Sales

Source: Census BureauTrillions of Dollars

30

12MMT rise through 20192018 4.0%


US Total Retail Sales to ITR US Retail Sales Leading Indicator

Sources: Census Bureau and ITR EconomicsRetail Sales = 12/12, ITR Retail Sales = Monthly

31

-12

-8

-4

0

4

8

12

-12

-8

-4

0

4

8

12

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Sales - 12/12Sales Forecast - 12/12Indicator - Monthly


US Total Retail Sales to US Personal Savings as a Percentage of Disposable Income

Sources: Census Bureau, BEA12/12 Rates-of-Change

32

-3

-1

1

3

5

7

9

-12

-8

-4

0

4

8

12

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24

Sales - 12/12Sales Forecast - 12/12Index - 12MMA


Total Retail Sales toUS Health & Personal Care Retail Stores

Source: US Census Bureau12/12 Rates-of-Change

1.0%

4.4%

-9

-6

-3

0

3

6

9

12

-9

-6

-3

0

3

6

9

12

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Retail Sales Personal Care

Personal Care

Retail Sales

3/12 0.8% CRecord high 12MMT


US Total Retail Sales to US Beverage Production Index

12/12 Rates-of-Change34

2.3%4.4%

-12

-8

-4

0

4

8

12

-12

-8

-4

0

4

8

12

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Retail SalesBeverage

Beverage Production

Retail Sales

3/12 1.8% C


US Grocery Stores Retail Sales

Source: Census BureauBillions of $

3.5%2.8%

644.5

350

450

550

650

750

850

-12

-8

-4

0

4

8

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

MMTR-O-C

12MMT

3MMT

35

More 12MMT rise ahead


4.4%

-6.4%

-12

-9

-6

-3

0

3

6

9

12

-12

-9

-6

-3

0

3

6

9

12

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

SalesGoods

Sporting Goods

Retail Sales

US Total Retail Sales to US Sporting Goods Retail Stores

Source: US Census Bureau12/12 Rates-of-Change

36

3/12 struggling in A12MMT at lowest level in just under 5 years


Wholesale Trade of Nondurable Goods to US Consumer Nondurable Goods New Orders

12/12 Rates-of-Change37

-30

-20

-10

0

10

20

30

-30

-20

-10

0

10

20

30

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Wholesale

New Orders

Nov ‘17 high


US E-Commerce Retail Sales

Source: Census BureauBillions of Dollars

38

14.0%16.8%

453.5

0

250

500

750

1000

-40

-20

0

20

40

'02 '04 '06 '08 '10 '12 '14 '16 '18 '20

MMTROC

3MMT 12MMT 2019 12.8%

The sale of goods and services where the buyer places an order, or the price and terms of the sale are negotiated over an Electronic Data Interchange, the Internet, or any other online system (extranet, e-mail, instant messaging). Payment may or may not be made online.


General Economic Trends


2.5%5.8%

2.0%

-60

-40

-20

0

20

40

60

80

-60

-40

-20

0

20

40

60

80

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22

EZ Comp PMIEU Manufacturing PMIJP Morgan Global MFG PMI

Global Leading Indicators

Source: Markit Economics1/12 Rates-of-Change


CPrices

00

Soft Landing

A

B

D

Housing

Trends 10

Production

Medical

New Orders

FinancialRetail

WholesaleTrade

Foreign

Nonresidential Construction

Hard Landing


US Industrial Production to ITR Leading Indicator™

Sources: FRB, ITR EconomicsUSIP – 12/12 Indicator - Monthly

42

Reported in ITR Trends Report – ITR Advisor

As seen in

-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22

IndicatorUS IP

Indicator - MonthlyUS IP - 12/12

Tentative Jan ‘18 high


US Industrial Production to US Total Industry Capacity Utilization Rate

Source: FRBRates-of-Change

-30

-20

-10

0

10

20

-15

-10

-5

0

5

10

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

US IPUS IP ForecastUtilization Rate

43


Purchasing Managers Index

Source: Institute for Supply Management1/12 Rate-of-Change

44

As seen in

4.8%

-50

-25

0

25

50

75

-50

-25

0

25

50

75

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

1/12


US Paperboard Containers Production Index to US Purchasing Managers Index

Sources: FRB, Institute for Supply ManagementRates-of-Change

45

-45

-30

-15

0

15

30

45

-12

-8

-4

0

4

8

12

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Containers - 12/12

Index - 1/12


US Stock Prices Index

Source: Wall Street Journal1941-43=10

46

16.0%16.5%

2558.5

500

1000

1500

2000

2500

3000

3500

4000

-125

-100

-75

-50

-25

0

25

50

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMAR-O-C

3MMA12MMA


US Stock Prices Index to US Purchasing Managers Index

Sources: WSJ, Institute for Supply Management1/12 Rates-of-Change

47

9.5%4.8

-40

-20

0

20

40

60

-40

-20

0

20

40

60

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

PMIStock

First in Forecasts Since 194848Analysis prepared by : Baird Family Wealth Group 1/4/18

Source: Robert Shiller – Yale University

Cyclically Adjusted Price Earnings (CAPE) RatioJanuary 1900 –December 2017


US Nondefense Capital Goods New Orders w/o Aircraft

Source: Census BureauBillions of Dollars

49

8.4%5.8%

$781.1

500

750

1000

1250

1500

-60

-40

-20

0

20

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMTR-O-C

3MMT

12MMT

12MMT rise to Sep ‘182019 - 3.2%

A positive impact from the tax law will show up here


US Nondefense Capital Goods New Orders (excl. Aircraft) to US Machinery Manufacturing Capacity Utilization

Sources: Census Bureau, FRBRates-of-Change

-30

-20

-10

0

10

20

30

-30

-20

-10

0

10

20

30

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

New OrdersNew Orders ForecastUtilization Rate

50


US Paperboard Containers Production Index to US Nondefense Capital Goods New Orders without Aircraft

Sources: FRB, Census Bureau12/12 Rates-of-Change

51

-30

-20

-10

0

10

20

30

-12

-9

-6

-3

0

3

6

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Containers

New Orders

New Orders Forecast


Wholesale Trade of Nondurable Goods to US Nondefense Capital Goods New Orders (excluding aircraft)

:12/12 Rates-of-Change

52

-30

-20

-10

0

10

20

30

-30

-20

-10

0

10

20

30

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Wholesale

New Orders

New Orders Forecast

7.0%

2019 3.5%


US Single Unit Housing Series

Source: Census BureauMillions of Units

53

As seen in

6.7%9.2%

0.858

0

1

2

3

4

5

6

-100

-75

-50

-25

0

25

50

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

MMTR-O-C

3MMTProjected Sep ‘18 12MMT high

2018 4.1%


US Consumer Price Index to US Producer Price Index

Source: BLS1/12 Rate-of-Change

55

2.2%2.7%

-10

-5

0

5

10

-10

-5

0

5

10

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Consumer PriceProducer Price


US Paperboard Producer Price Index

Source: BLS1982=100

56

9.6%11.4%

261.2

150

200

250

300

350

-75

-50

-25

0

25

'02 '04 '06 '08 '10 '12 '14 '16 '18 '20

MMAR-O-C

3MMA

3MMA leveling outMacro outlook suggests flat to mild downward pressure later this year.

57

0

2

4

6

8

10

12

14

16

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Yield on 10 Year Treasury NoteSource: FRB


0

1

2

3

4

5

6

2018 2019 2020 Longer Run

FOMC Member Interest Rate Projections

Source: FRB 58

Fed Open Market CommitteeMarch 2018December 2017


If you only remember two things from my presentation, they should be…

1. The need to update and rethink your webpage and social media footprint.

2. Competitive advantages are an absolute must.

When you get back to your office, the two things you should do are...

1. Decide on, and implement, changes while you have the time.

2. Decide how you are going to increase market share in a slow growth environment.

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Documents

Winds of Change...May 02, 2019 · 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 US IP Containers US IP Containers US Industrial Production to Paperboard Containers