 Good afternoon and welcome. I'm Rebecca Marquez, a business intelligence coordinator with PMMI. Today we're going to hear from Chris Steele, Research and Consulting Economist with ITR Economics. Chris will be covering the findings of PMMI's First Quarter 2017 Quarterly Economic Outlook Report. Chris is an economist at ITR Economics. He provides economic consulting services with a great deal of insight and action-oriented advice for small businesses, trade associations, and Fortune 500 companies. Chris has also brought in-depth insights of industry trends to the ITR Economics team with his willingness to go above and beyond in his daily research for our clients. Chris has graduated from UMass Amherst with a BA in Economics and served six years in the National Guard. His attention to detail, ability to understand a client's specific needs, and organizational skills create an enjoyable partnership with each of his clients. Today Chris will interpret the information included in the Quarterly Outlook and provide insight on how today's economy may be affecting your packaging and processing operations. If you have any questions that you would like to ask at Chris, please type your question in the chat box that is located in the bottom right-hand corner of your screen. At the end of this presentation, which will last approximately 30 to 40 minutes, he will answer your questions. At this point, I would like to hand the webinar over to Chris with ITR Economics. And thank you everyone. Good afternoon. And thank you for joining our first quarter of 2017 Market Forecast Webinar. Before I get into the Meet and Grave Ever report, I'd like to give you a little bit of an overview of what I'll be discussing today. First off, I will be presenting ITR's overall U.S. macroeconomic outlook for the next three years. I want to do this to color your expectations, regardless of any of the specific industries which you might be involved in. So you have a good backdrop of the overall fundamental and foundational economics that are moving behind the scenes. After that, I'm going to jump into the details on a variety of different market forecasts that we've prepared for PM&I and how they relate to different industries and segments of the economy. Finally, I'd like to give a brief overview of the closing data of 2016 for a variety of different international segments. After that, as Rebecca mentioned earlier, I will kick it back to her for questions. And I look forward to hearing all of your feedback and inquiries. However, before that, before I get into the actual data and the actual report, I would like to go over briefly our proprietary terminology and methodology that we use here at ITR. If you have joined us before for any of our previous market webinars, you know that we here at ITR as long-term business cycle theorists do things a little differently than many economic forecasting firms and many traditional statistical forecasting firms. So whether you are a first-time listener to our webinar or you are a long-term listener, you just need a brief brush up on exactly what I'm saying and what our different terminology and methodology means. I would like for you at any given time to come back to this slide here. This is a great refresher from our terminology and in general will help you keep up with specifics of what I'm saying. So first off, the two primary metrics that we here at ITR use in our forecasting are moving averages in rates of change. For our moving averages or moving totals, we have both the 12-month moving average or moving total and 3-month moving average or moving total. You might hear me refer to these either the 12 MMT or the 3 MMT respectively. The 12-month moving total or the annual total is simply a rolling total of the most recent 12 months of data. When this data makes sense to sum up, for example, sales numbers or units shipped, we use the 12-month moving total. When we're looking at things such as indexes, which don't necessarily make sense to sum up, we use the moving averages instead. And the reason we use the annual moving average or the 12 MMT or MMA is to help smooth out the data. Again, as long-term business cycle theorists, we're not so concerned with month-to-month movement as there is inherent volatility within any company activity or market activity from month to month. We're more concerned with the long-term trends in the general directional movement of the overall economic activity. Because of this, we use the 12-month moving activity to smooth out the data and get a nice long-term view of what is happening. Much to that note, then we also have the 3-month moving total or 3-month moving average. And as it is simply the most recent 3-months of data aggregated together, it is more volatile than the 12-month moving total. And while that makes it more prone to sending false or misleading signals on a short-term basis, it does help give us an early indication of where the quarterly activity is going. After we have our data trends or our moving averages, we move over to our rates of change. Our rates of change are our primary forecasting metrics here at ICR. And each of the 12 MM and the 3 MM have a correlated or analogous rate of change. For example, we have our 12-12 rate of change. You also hear we refer to it as our annual rate of change. And what this is, it's simply the most recent 12 MMT compared to the 12 MMT one year ago or more simply the change between the most recent 12 months of data compared to the 12 months before that. You also hear me call this our year-over-year growth rate. And this is what we use to forecast different segments of the economy. Then we also have our 312, the analog to the 3 MMT. The 3-12 again is inherently a more volatile series than the 12-12. And it helps to give us early indications of directional changes within the 12-12. In general, the 3-12 tends to lead the 12-12 by a median of between three and five months. And this changes for different aspects of the economy or different companies. But in general, once we see the 3-12 rising above the 12-12 on a chart and continuing to grow, that's generally a strong statistic indicator that that 12-12 is going to fall a suite within the next three to five months. Conversely, when the 3-12 falls below the 12-12 or downward path, as we often call it, and is falling, that is strong statistical evidence that the 12-12 is going to reach a cyclical peak. And the reason that we like to look at the 12-12 is to help determine the phase of the business cycle that any company or any segment of the economy is in. You can see in the bottom of my screen here that we have this nice sine curve in four different colors. And this represents the business cycle as defined by ITR. The business cycle has four distinct phases, phase A, B, C, and D. And the first portion of the business cycle is phase A recovery. You can see in the bottom left-hand curve of that picture in blue is our visual description of phase A. Phase A is when the 12-12 is below zero, which means that the segment of the economy is contracting on a year-over-year basis, and activity is below where it was during the same 12 months one year prior. However, it's rising, and it's moving up toward that zero line. We call this phase A recovery because it is the first phase of the business cycle where we're starting to move toward positivity. I like to think of it as the light at the end of the tunnel. This is where sales or economic activity is still down, but you're getting that first glimpse of positivity on the horizon. Once the 12-12 upward passes that zero line, it is expanding on a year-over-year basis. We transition to what we call phase B, accelerating growth, the best phase of the business cycle to be in. And again, it's when the 12-12 is above the zero line, so you're expanding on a year-over-year basis, and it is rising, so you're getting progressively faster growth on a month-to-month basis. Once the 12-12 reaches a cyclical peak, as you can see in the middle of the sign graph we have here, we transition into phase C, slower growth of the business cycle. This is when the 12-12 is above zero, so you're still growing on a year-over-year basis, and things are still becoming progressively better. However, the growth rate is beginning to slow, and that 12-12 is falling back down toward the zero line. This is the cautionary phase of the business cycle, where activity is still increasing, but you have to be aware that you may fall into phase D recession, imminently. Phase D recession is the worst phase of the business cycle to be in, and it's when the 12-12 has fallen below the zero line, and is continuing to get more and more negative. So this is when economic activity is slowing and declining, and it's declining at a faster pace as we move forward. However, we don't always see all four phases of the business cycle progress nicely like this chart shows, one into the other, into the other, and then repeating over and over. Instead, we can have what we consider a soft landing here at ITR, and this is where we transition from phase C slower growth, so the 12-12 is moving down toward that zero line. However, it reaches a cyclical trough before falling below the zero line and transitions directly back to phase B accelerated growth. This is the best economic activity we can hope for, and it generally occurs during economic boom times in periods of overall macroeconomic acceleration. Conversely, we have the worst case scenario, which is a hard landing. This is where any segment of the economy is in phase A recovery, so that 12-12 is rising toward the zero line. However, it begins to slow and peaks before crossing above that zero line and falls directly back into phase D recession. Much like the soft landings are generally seen during economic boom times, we generally see this during periods of fundamental transition with any segment of the economy or during macroeconomic recessionary periods. So again, that's a general refresher on the different methodologies and terminologies that I'll be using, and again, I encourage you to go back and look at this slide either at any time during my presentation or afterward if you have any specific questions relating to exactly what I was saying. Another common indicator that we'll use is the theory of leading indicators. And a leading indicator is any indicator, for example, retail sales is a leading indicator to many aspects of the economy that tends to either turn up or turn down before the economy or a company as a whole sees a correlated turn up. So you can see here that we have a generic basic indicator 112 here in this dark blue compared to a generic fictional company A in this light blue cyan color. You can see that the indicator reached a cyclical peak in March of 2010. However, the company didn't reach a cyclical 12-12 peak until one year later in March of 2011. Conversely, in the next business cycle, in June of 2014 for the indicator, followed by June of 2015 for the company. Now what that means is that we see a clear cyclical correlation here where any activity in the indicator tends to happen about one year on the median earlier than it does in the company. And we lost our graphic here. But what we do here with our leading indicators is that we shift them horizontally on the graph. So since this has a 12-month lead time, we'll take that indicator 112 and shift it horizontally to the right on the graph, essentially giving you 12 months of predictive power. Now at any given time, different aspects of the economy can give, will be considered false signals compared to their historical relationship. Generally during times, as I mentioned before, of transition or structural change within the economy. Because of that, we don't base our forecasting or predictive powers on any one leading indicator. And we don't advise you to do the same either. Instead, we advise you to find a basket of leading indicators, anywhere between four and seven, that all have a good logical correlation and cyclical correlation to either your company sales or the aspect of the economy that you're interested in. And once you see in between three, four, maybe even five of those indicators all turn the corner and either turn up or turn down, generally in lockstep. That's when you know that there is a change moving through the economy that is widespread enough that it is strong statistical evidence that you're going to see that correlated change within the aspect of the economy that you're interested in. Let's talk a little bit about U.S. industrial production. You can see U.S. industrial production here in the dark blue line. The orange line is the ITR leading indicator. The ITR leading indicator is a proprietary leading indicator developed by us here at ITR. It's meant to lead U.S. industrial production by between seven to 12 months on the median. U.S. industrial production is one of our benchmarks for the U.S. economy as a whole and comprises about 30% of the economy. That fluctuates from year to year based on the economic climate, but in general it's a good benchmark for about one third of the economy. It comprises three primary components, mining, utilities, and manufacturing. You can see that U.S. industrial production is currently down about 1.2% year over year and it's been contracting for the majority of 2016. Of those three components, only manufacturing, which is up about 0.3%, so no breakneck growth by any means, is expanding. Mining and utilities are both down on a year over year basis. However, there is signs of positivity in the U.S. economy. U.S. industrial production has ticked up. I reached a cyclical 12-12 low in October, which signals a tentative transition to phase A recovery. In general, we look for three months of sustained 12-12 rise before declaring a definitive transition to a different phase. However, as you can see, and we lost the graphic here again, but that's no problem, as you can see this ITR leading indicator is currently shifted back to show its real-time relationship. So this is in real-time what you see. However, if we were to shift this over on the graph, the cyclical trough that occurred about eight months ago in the ITR leading indicator lines up with the tentative October low that we saw in the 12-12. That's a strong supporting evidence that this cyclical trough we've seen will persist in the near term and that transition to phase A recovery will persist through the remainder of 2016 into 2017 before transitioning to phase B accelerated growth. We're seeing some strong positive signals from the U.S. industrial production quarterly growth rate. It's currently only down about 0.7%, and again, that upward passing movement is further evidence that this phase A transition will hold in the near term. In general, we expect strong activity in the U.S. industrial production in 2017. We expect to see phase B accelerating growth by the second quarter persisting into early 2018. After that, we expect to see slower but persistent growth throughout 2018. This is very encouraging. We're looking at significant two years of growth over the next two years. One of the reasons for the depression or recession that we've seen over the past year and in late 2015 as well is primarily due to headwinds from the mining component of U.S. industrial production. Even if you have never watched the news, I'm sure you have all seen what's happening with oil prices and how they fell through the floor in late 2015 and the majority of 2016. And that decrease in commodity prices, which happened with many metal prices such as iron and steel as well, led to decreased production in the mining side of things and was significant enough to drive U.S. industrial production into recession. This recovery comes at a time when the West Texas Intermediate Oil Price, which is a strong benchmark for U.S. oil prices in general, is now pushing the mid-50 dollar mark, which is generally considered a fairly healthy price level to encourage investment in the oil fields. As well, we've also seen improvement in steel prices and copper prices and in metal prices in general, which will help to give, stimulate investment and give some nice, buoyant pressure to U.S. industrial production throughout 2017 moving into 2018. By 2019, we do expect that positivity that we're seeing to trickle off and we do expect U.S. industrial production to fall into recession, so back into phase D recession, by the late first quarter or early second quarter of 2019. Now, I know saying recession often gets people on edge. We think of the massive shock that the economy saw in 2008 moving to 2019, but I want to squash some of your fears here where it's not going to be this capital R recession that hits every aspect of the economy. Instead, we expect to see mild single-digit contraction in U.S. industrial production. And what's happening is that this is generally going to be a consumer-led recession. So we expect the consumer real works to start slowing down. We expect a cooler housing market and in general, rising interest rates, all which tend to have negative effects on the economy as a whole. As I mentioned before, it will be a consumer-led economy, so those aspects of the economy, such as food production and things of that nature, retail sales will be more heavily impacted and will generally be impacted earlier in 2019 than other hard industrial facets of the economy. Similar to the decline that we've seen in U.S. industrial production, it's also been a tough year for U.S. non-defense capital goods new orders. That's a mouthful of a title, but basically capital goods new orders is our benchmark for the U.S. business-to-business economy or business-to-business activity. It comprises such things as industrial machinery, agricultural machinery, office equipment, vehicle parts, things such as that. And it is a good indicator of the productive capacity of an economy. We have seen a general phase A recovery trend in U.S. non-defense capital goods new orders since about four months ago. If you look in the chart here, you can see that the 12-12 did tick down in October, which is a slightly worrying sign. However, we are seeing general quarterly expansion or rise in the quarterly growth rate. And the 12-12 hasn't fallen below that previous low. So all of these signs are pointing toward the recovery trend persisting as the data for the end of 26 comes in followed by expansion by mid-2017 and again throughout 2018. This is a similar story to what we saw on the industrial side of the economy and basically this has been a commodity price-driven decline. The declining oil prices have seen depressed demand for oil field machinery, things such as Derrick's and Rotary Rig and Rotary Rig servicing. And because of that, we've seen a lot of weakness related to the mining industry. However, this has been more systemic and we've seen it throughout many seconds of the economy, even those consumer sections of the economy that are traditionally sheltered from commodity price shocks. And the reason for that is that low iron and steel prices have formed these negative pricing pressures, which have been putting general downward pressure on corporate profits as prices drop and companies are forced to essentially compete down toward the zero-profit line. So we've seen diminished marginal returns and purchasing managers have been very skeptical of the returns on investment. And because of that, we've seen them delaying or pushing off a lot of large capital purchases. They haven't been assured of the profitability of these large purchases and because of that, they've essentially been doing more with less throughout the majority of 2016. As metal prices are rising, we're seeing again some upward buoyancy on corporate profits and we expect those profit margins to increase throughout 2017 as general inflationary pressures take hold. So we're hoping to see a general rebound effect here where a lot of the capital purchases that have been put off throughout the majority of 2016 will start to be made at a faster clip in 2017, moving to 2018, as they essentially just can't be pushed off any longer and the general economic growth climate encourages optimism and further promises of productivity. So while this is a tough indicator for 2016, that rise in the 1212 does seem to be taking place in boats very well for 2017. A very negative picture of the U.S. economy on both the industrial and business side of things. However, I want to draw your attention to U.S. gross domestic products. For those of you who are unaware, gross domestic product is the most holistic picture of any economy in attempts to capture the entirety of U.S. economic activity. You can see in the left here, this is the dollar-valued nominal amount in gross domestic product and it has been generally rising since the wake of the 2008 economic recession, about mid-2009. As well, you can see in the growth rate you expected to see a cyclical trough without falling into phase D recession so that nice soft landing that we like to see in the economy fall by accelerating growth into 2018. So this begs the question, if we're expecting to see it finish strong, about 1.9% to 2% growth in 2016, fall by accelerating growth throughout 2017 into 2018, where does this weakness come from? Well, it comes from the fact that in the U.S. economy broken into three major productive sections, the U.S. consumer is king. Personal consumption expenditures make up nearly two-thirds as of 2014 of the entire U.S. economy by comparison, business investment, so that U.S. non-defense capital goods metric makes up only a paltry 16%, followed by government spending at 18%. So you can see that while weakness in the industrial and business-to-business sectors were enough to drag down the overall growth rate within U.S. GDP, it wasn't enough to pull it into contractionary territory because in general, wherever the U.S. consumer goes, so too goes the overall U.S. economy. Which brings us to consumer activity just by the numbers. Here we have U.S. total retail sales deflated, and what I mean by deflated is that we've accounted for any inflationary or deflationary pressures in order to get the real value of how much economic activity is going on on the consumer side of things, as opposed to anything that may be inflationary or pricing-related in nature. You can see, even though it is deflated, U.S. total retail sales are expanding by 1.0% year-over-year, which is a relatively strong growth rate, and you can see it has been expanding since generally the wake of the U.S. economic recession in 2008. We expect U.S. total retail sales, even though they are generally slowing to avoid recession, and much with our general macroeconomic outlook for the majority of the U.S. in 2017, we expect to see that similar, nice, phase-B accelerating growth trends. There are various consumer, strong consumer trends that are driving this U.S. consumer spending, the first and probably strongest being private sector employment growth. U.S. private sector employment, which we use as a benchmark for overall employment growth in the U.S. economy, is currently up 2.0% year-over-year. It's in phase-C slower growth, but we expect it to persist into 2017 without falling into recession. You can also see that the job openings are up 7.0%. And what that means is that U.S. companies are actively looking for employees. They are looking to expand the productive capacity of the U.S. economy. That is a very beneficial sign. If you read the news and listen to a lot of political pundits, oftentimes the U.S. employment and unemployment rate is called into question because it is calculated in a variety of different ways. For example, the benchmark U.S. unemployment rate that you see quoted in the Wall Street Journal or New York Times or on Fox News, does differentiate between part-time employment, for example, a retail job where you only work 18 hours a week, and a salaried full-time position. This can be misleading because oftentimes there are strong economic incentives to drive people toward those generally more profitable full-time salary positions or full-time wage positions as opposed to the less reliable, more volatile part-time employment. What we saw in the wake of the 2008 recession was actually a rise in the employment rate or a decrease in the unemployment rate, if you will, for a significant portion of time. And what was happening here is that we saw a rise in involuntary part-time employment, also known as part-time employment for economic reasons. And you can imagine this as a U.S. worker, let's imagine in the auto industry, that was hit very hard by the 2008 recession. Let's say that they lose their job and are unable to find a new comparable job within their field due to the ongoing economic weakness. Because of this, they might take two, maybe even three, part-time jobs in order to make up for that weakness. And just based on the unemployment rate by the numbers, that will actually essentially show as a net wash. And we'll see that rise in employment and that decrease in unemployment, even though they're generally lower-skilled, less economically valuable jobs. But I have good news here in that the involuntary part-time employment is down 7.1% year-over-year. That's the lowest 12-month moving average in nearly eight years. So not only are we seeing job growth and job openings, these are generally economically viable and economically desirable jobs as well. However, as with many economic movements, there is a downside or a potential risk factor involved in a tightening labor market. You can see that private sector employment growth is up 2.0%, as I mentioned earlier. However, job openings are outpacing that. And what this means is that employers are having a hard time filling new vacant positions. Because of that, we're seeing a tightening labor market, and we expect to see rising wages throughout 2017 and into 2018. Because of this, you must. You must. It is vital that you budget for rising labor costs throughout the year because it is useless to take advantage of overall economic growth if your wages are rising faster than your productivity, which results in a net negative. Also, we are seeing the quit rate rising. The quit rate is very simply explained. It's just the average rate at which U.S. workers quit their jobs. It can seem a little counterintuitive to see a rising quit rate during a time of rising employment. But what is happening here is that the U.S. consumer is seeing that there are jobs available. Because of that, they are perhaps looking for new jobs that either give better benefits packages or better wages, or perhaps simply will let them live in a more desirable area. When you see this quit rate rising, it's vital that you focus on employee retention and job satisfaction, especially with the younger so-called millennial generation that's really taking hold of the workforce right now and will continue to do so in the near future. They have economic incentives that have been vexing a lot of managers and a lot of hiring managers. Basically, they are less concerned with traditional metrics of a good job, such as high pay on the standard 9-5 salary position, and instead are very incentivized by a bunch of generally unconventional metrics. For example, they want to see that their job is important and that it has impact either on the environment or on their society as a whole. Also, they are very strongly incentivized by non-traditional work hours and perhaps more flexible hours or address codes or even more time off. And the reason I mentioned this is because as we see rising labor costs, if you can find ways to increase employee retention and employee job satisfaction without simply giving them higher bonuses or higher pay, it will help you to increase that retention while decreasing or mitigating that rise in labor costs. Generally positive for the economy is this tightening labor market and this expanding workforce. However, you must be aware that it comes with some potential risk factors on the hiring side of things. So that is our general outlook for the overall U.S. economy and now I'd like to get a little more fine-grained and talk about a few different specific markets that we forecast for PMMI and which will be vital to keep your finger on the pulse of moving through 2018. Here we have U.S. Pharmaceutical and Medical Device Production. It is currently up 2.2% year over year and is in a phase B accelerated growth trend. I'll draw your attention to the chart on the right side of this slide because you can see that U.S. Pharmaceutical and Medical Device Production is due for an imminent cyclical peak and transition to phase C slower growth. So we are moving toward that cautionary phase of the business cycle within the medical device field. However, we will generally avoid recession throughout 2018 moving to 2019. You can see our data trends on the left over here where the 12 month moving average is expected to rise throughout 2018. It will stagnate in the second half of 2018 a little bit before picking up again. As I mentioned there are strong consumer trends driving the retail sales side of things. Anyone involved in the medical industry has U.S. demographics on their side. We have an aging workforce in the share of the U.S. population that is above 65, 65 years or older is increasing and will do so over really the next decade. The reason this is important to the medical community is because this is where the lion's share of U.S. healthcare costs are incurred. And that fact that we have more people who are in the more medically intensive phase of their life will help to drive persistent growth in this field and keep it out of recession over at least the next few years. You can see that we expect 2017 to peak or to close at 1.4% year over year growth followed by a slightly slower, about 1% growth rate throughout 2018. Again, despite the overall recession we are expecting for 2019, we do expect pharmaceutical and medical device production to generally expand during that time period. So definitely an area of growth and perhaps an area to double down in if you have involvement here. Next we have U.S. food production. You can see that U.S. food production similar to pharmaceutical production is in phase B accelerating growth. It's currently up 1.8% year over year and will also reach a cyclical transition to phase C slower growth over the next quarter. A very similar story here instead of an aging demographic the new workforce coming in and wages and employment rising which will help to again keep this segment of the economy out of recession through at least 2018. We do expect to see some general upward movement in 2019 as well. What we are seeing is both growth on the retail and restaurant side of things. So restaurant and drinking establishments and bars are seeing increased spending and patronage as well as your traditional retail grocery stores. However there is a marginal risk factor within the food industry and that's that a wide basket, a wide array of agricultural prices has been depressed throughout most of 2016. And as we saw with oil and metal on the industrial side of things we're seeing low food prices put some negative pricing pressures on a lot of different aspects of the food economy as well. For example we're seeing it in milk and cheese. Moving through 2017 and 2018 as we expect general growth if you are involved in one of these segments of the U.S. food industry that are seeing decreasing prices it's critical that you maintain a competitive pricing scheme and try and either match or undercut that of your local major competitors. With the economy growing like this and expecting general macroeconomics headwind in 2019 we want you to focus on market share over margins for the next two years and that will help lead to a longer term healthier outlook for your company as opposed to prioritizing short term gain. Here we have a personal care products production index and again you can see that we have very similar growth characteristics to both pharmaceuticals and U.S. food production. Another phase B accelerating growth trend currently up 3.0 percent year over year and again with an imminent phase C transition. Now there is a mild risk of mild contractionary of a mild contractionary environment moving into the second half of 2017 however any contraction here will be as I mentioned before generally mild and relatively brief. We don't expect to see a general recession in this industry and we do expect to see 1.1 percent year over year growth throughout 2017 followed by accelerating growth throughout 2018 ending the year up 3.8 percent year over year. So if you begin to see activity drop in this segment and perhaps some decrease in your sales it is vital that while you see that you look forward instead of look to the short term you project both confidence and optimism to both your clients and your employees. This will help you to keep retention rates up and will help you to maintain your productive capacity in anticipation of generally favorable tailwinds throughout the majority of 2018 into 2019. Next we have beverages, coffee and tea production. This is a subsector of U.S. food production and because of that you also see the transition to phase C slower growth. Beverage is coffee and tea production and beverages do cover both alcoholic and non-alcoholic beverages are currently up 3.3 percent year over year and we expect general growth moving into 2018 with only a mild risk of deflationary pressures in the second half of 2018. However you can see despite the rapid growth rate that we see in this left side of the chart from late 2015 through 2016 we do expect to see generally decreased growth rates moving throughout 2018. While in overall positive it is important that if you want to realize the rise in profits that correlates with this rise in economic activity in the beverage, coffee and tea production sector of the economy that you want to start analyzing the marginal benefit of your different product lines and find the winners and the losers. This is a time where growth is slowing and you want to ditch the losers and double down on both marketing and selling your higher margin products. Next slide we have U.S. chemicals in cleaning products production. This segment of the economy comprises both industrial solvents and cleaners for example that would be used in large food production facilities or on certain kinds of mild equipment and it also includes consumer driven household cleaning equipment such as window cleaners or bleach anything like that that you'd find at a Walmart or a Lowe's. It's in phase C slower growth in the cautionary phase of the business cycle and is up 1.0% year over year. We expect mild deflationary pressures moving into mid 2017 but in general this will be a growth segment. You can see based on the 12 MMA that any growth will be very mild basically remaining virtually flat over the next two quarters before expansion takes hold through 2018. There are two different stories being told within the chemicals and cleaning products production side of the economy and that's again of the industrial side and the consumer side. The consumer side is generally outperforming the industrial side and you will want to focus on capturing market share within the consumer side over the next three quarters until U.S. industrial production really begins to pick up and start accelerating in the second half of 2017. On this slide we have U.S. Durables, hard goods components and parts production. That's a very generally vague term so I know that it can be confusing but in general what this segment of the economy comprises is anything that is produced with the anticipation of having a lifespan of three years or over. This has things such as cars, computers, household appliances and furniture for example. A phase C slower growth trend however we have seen some early upward movement in the 12-12 which is currently up 1.1% year over year signaling a tentative transition to phase B accelerating growth. This is in line with our expectations for the segment of the economy and you can see that we expect acceleration to take hold imminently into early 2018 finishing 2017 up about 3.9% excuse me 2.9% followed by slightly depressed growth rates throughout the remainder of 2018. Again you should be focusing wherever possible on consumer led segments within this aspect of the economy. We see stronger growth in appliance production, automobile sales and parts production and also things such as furniture and hardware for household hardware. Hey Chris this is Rebecca. I do want to just go back one slide for a moment we have a question from one of our attendees on slide previous to this the chemicals. The question is does this include detergent? And that's it. Does this include detergent? That's a great question. Thank you for submitting it. It does not in fact include detergents. Detergents and soaps are included in their own segment. However we are generally seeing similar trend characteristics within that aspect of the economy. Excellent. Do remind anyone that if they do have questions to please feel free to leave them in the chat box at the lower left hand corner of your screen. Thanks Chris. Thank you Rebecca. And thank you for the question as well. Let's start moving into our general international overview. You can see here that I have Canada industrial production. One of the US's largest trading partners and obviously our largest neighbor. The trend characteristics between US industrial production and Canada industrial production are very similar. Canada industrial production is currently in phase, this isn't correct, phase eight, recovery of the business cycle. However it is underperforming the US economy just because of its increased reliance on mineral and oil mining. Again we expect general positivity in 2017 with an accelerating growth trend lasting into early 2018. We expect recessionary headwinds a little earlier than we do on the US side of things. So if you do have exposure of business in Canada start planning for decreased economic activity by the fourth quarter of 2018 as opposed to the first or second quarter of 2019. Now I'll bring you down to a general overview of North American industrial production as a whole. You can see not a very promising picture, a lot of red here. With Canada and the US and those kind of cuffs of the phase A recovery and with Mexico virtually even with year four. Mexico's economy is doing relatively well compared to a lot of North America as their attractive labor force in low wages coupled with cheaper regulatory pressures are attracting a lot of manufacturing business from both the US and Canada. See, we expect Latin American industrial production down in South America to generally recover throughout 2017 finishing the year just up 0.5% about even with 2016 followed by stronger growth throughout 2018. Again, here you can see a lot of red but there are winners and losers. Argentina, Chile and Peru are all on those recovery trends that we expect to see and that we see in North America as well and they will begin accelerating earlier than both Ecuador and Brazil in the first half of 2017. Brazil is an area of concern and if you have product lines focused toward this area you may want to start again dropping the marginal product lines and thinking about expanding your geographic reach between their dependence on fossil fuels and also political upheaval that we've seen they are far underperforming their neighbors and will continue to do so throughout 2017. Colombia with a fairly well diversified both agricultural and manufacturing side of things is up 4.0% Target Colombia in 2017 if you are able to. Next we'll move into Europe industrial production index it's in phase C slower growth and is up 1.3% year-over-year a lot of these countries have a reduced dependency on profits from both oil and mineral mining compared to the majority of North America and South America and because of this they'll generally avoid recession in this business cycle. We expect acceleration through 2017 again driven by strong consumer trends in the retail side of things followed by slower growth in 2018. You can see a lot of green here so in general if you're involved in any of the primary economic drivers of Europe be it UK, Germany or France Spain and Italy those will all be general will generally facilitate economic growth over the next two to three years. However some of the eastern European countries such as Estonia and Moldova with less mature diversified economies are seeing some mild contraction as well as Norway due to their increased exposure to the oil markets. Again sides of positivity which is refreshing compared to a lot of the negativity that I've spoken about today in Southeast Asia Southeast Asia industrial production is currently up 1.4% year-over-year it's fallen into a phase C slower growth trend but will transition back to phase B imminently and will generally expand through 2018 despite a lot of ongoing concerns earlier in the year regarding the viability of China sustaining those about 5 to 6% growth rates China has transitioned to phase B accelerating growth and is expected to accelerate through the remainder of 2017 a lot of their major trading partners and a lot of the smaller countries around them are benefiting from that economic growth that we're seeing and I like to think of Southeast Asia as the old adage a rising tide that lists all boats as long as we see general growth in China we expect to see some positivity with a lot of their neighbors as well you can see two major exceptions to that Japan down 1.3% in India down 0.5% Japan has been struggling with an aging demographic more severe than that of the US and much more severe than most of the developed economies in the world and because of that they've seen depressed retail spending and very a lot of hesitance to invest on the business-to-business side of things Shinzo Abe has enacted historic negative interest rates but so far it has not been enough to kickstart the Japanese economy this is definitely a nation to watch in 2017 for early signs of recovery although it will generally underperform compared to the rest of its Southeast Asian neighbors India as well a very mild economic procession right now which will not likely persist through mid 2017 has been hit by pressures from two sides we've seen decreased capital goods production that's been due to a lot of decreased imports from both Europe and the US and also their recent governmental demonetization scheme where they outlawed various large bills and essentially wiped out a lot of the cash reserves that are publicly held in India this mostly impacted consumer-tied aspects of the economy because they have traditionally a very cash heavy activity so expect weakness throughout the first half of 2017 in areas such as consumer durable goods and also the automobile industry for India however again this is a relatively mild economic procession and we do expect it to transition back to your over your growth by the second half of 2017 for all of you of actions to take before the 2019 recession again when it comes to long term business cycle planning we want to take advantage of economic boom years while predicting, preparing for and ultimately mitigating decline during the back side of the business cycle so I encourage you to take a look at these 10 bullet points that I've put for you depending on your exposure to different economy they will all apply to everyone however in general they are safer, stronger management objectives for the next two years I'm going to skip over these for now because I would like to hand it back to Rebecca and leave some time for questions so thank you all for joining me today and listening in on our first quarter of 2017 past webinar and Rebecca if we have any questions I will kick them back to you Chris thank you so much for the great reflection of the current economy and issues at hand for packaging and processing industry we do have a few questions so I will share those with everyone but I would also like to open this up for questions from others please feel free to enter your questions in the chat box at the bottom left hand of your screen so first question is are you expecting the dollar to keep strengthening in 2017? we do expect a stronger dollar in 2017 generally with the rise in commodity prices as well as their interest rates expected by the Fed we do expect to see some upward momentum for the dollar but we don't expect to see it grow as fast as it did in 2016 so if you are sensitive to fluctuations in the US dollar you will have to plan for general strengthening but nothing like what we saw in 2016 okay great we also did have a request for you to show your final slide again if you could back up and do that our next question I think it is this one yes our next question is what is the expectation for GDP growth for 2019 and ahead we expect in line with our expectation of a recession on both the consumer and industrial side of things we do expect mild single digit contraction so a mild US economic recession in 2019 but we expect GDP recovery by the end of 2019 followed by general growth in 2020 moving to 2021 we don't have hard and fast numbers forecasted for those years yet but based on basic business cycle movements and the economic cyclical nature of things 2020 and 2021 should be growth years excellent thank you there's a couple things that we've had people ask to confirm one thing is that a questioner would like for you to confirm that you said for the food and food prep industry to emphasize market share over margins is that correct I will caveat that that is primarily for aspects of the food production side of the economy that are currently being subjected to these negative pricing pressures again think dairy milk and cheese because we do expect general growth over the next two years and so would rather you be in a strong market position moving the 2019 recession prioritizing growth now and being hit by both business cycle decline and general economic decline in 2019 okay great we also had someone ask if you could confirm one of your sources listed as FRB as being Federal Reserve Board that is correct okay great I have another question here actually a couple of people are asking about this do you think that the proposed economic and trade policies of the new administration will help or hurt the U.S. economy but again I am going to give you a little forewarning and a little caveat here that here at ITR Economics we are an economic and business cycle forecasting firm we are not a political forecasting firm because of that we don't speak to the possibility of different political or presidential changes we simply don't forecast those as quantitatively there is no agreed upon robust methodology for that however what we have seen a lot of talk of whether it comes to fruition for example is a repeal of NAFTA if NAFTA were to be repealed there would be winners and losers as is often the case in the U.S. economy would expect to see some boosts to U.S. auto and mining workers who have seen a lot of their business move to both Canada excuse me and Mexico however in general in the long term that would most likely put general downward pressure on U.S. economic growth so that is a risk factor however with President Alex Trump coming into office he has talked a lot about large large infrastructure spending projects while a lot of numbers have been thrown around none have been hammered down or officially proposed yet but increased infrastructure spending which in a lot of parts of the U.S. is direly needed would give a significant boost to the U.S. economy and it is in line with their expectations for growth during the first half of President Elect Trump's also the results of the election we have seen inflationary signals from the bond market again this is signaling expectations of inflation and general economic growth which goes to show that on the private side there are general expectations of positivity from the the new election results so in general it supports our expectation for 2017 and 2018 at the risk of increased spending coupled with tax cuts which in the short term most likely won't have that much effect on the U.S. economy but moving into 2019 and beyond that ballooning of the deficit that would result from these large spending projects coupled with lower corporate tax rates would present a risk that would have to be dealt with so if that sounds like a complicated answer it's just simply because there are a lot of different potential growth areas and potential risk areas that we're looking forward to however if I had to boil it down to two statements I would say that the results look like positivity over the next two years followed by mild inflationary and deficit risks moving through that okay great we do as I'm sure you can imagine have quite a few questions about the incoming administration but I think you've answered those you know right now to the best of your ability however have you looked at the implementation of new tariffs on manufacturing has that been taken account yet into your analysis ramifications of protective tariffs those are nothing new for the U.S. economy for example in the first quarter of 2016 of last year now I should say we saw massive, massive tariffs levied protectively against Chinese steel they were accused of dumping below cost which is against international trade policies and because of that we saw really about 200% protective tariffs at one point in general what that does is it increases reliance on U.S. manufacturers which tends to have again winners and losers there is economic positivity for example in the Rust Belt in different manufacturing terms towns excuse me but at the cost of increased prices and downward pressures on U.S. disposable personal income and often times on retail sales we haven't factored that into our analysis or quantitative forecasts yet mainly because as I mentioned before we do not predict political changes within the economy so we are waiting to see any actions taken by President-elect Trump or his colleagues to actually hit within the data probably moving into the first half of 2017 we'll start to see whether or not that affects our look significantly or not thank you so much just a couple more questions here one question is why do you expect such growth in the EU in general if there are so many economic problems within the EU is that they tend to be very mature on resource dependent markets they have very few trade barriers and because of that they benefit from long term trade and they're simply moving on to the upside of their business cycle a lot of the weakness that we've seen globally especially in North and South America has been commodity driven especially with the oil prices so you can see that there are pockets of weakness related to that but in general they're going to outperform a lot of the US because those upward pressures from consumer spending and a strong labor market which they have as well simply isn't competing with the same headwinds from the mining industry that are a relatively smaller portion of their economy again a lot of the problems concerning the EU right now are very speculative there are heavy political risks involved in potential Russian aggression as we saw in the Ukraine that we expect to see in various Baltic states again this is moving more into the political side of things and those threats haven't hit the data yet and so we haven't accounted for those but it is a definite risk factor also Brexit the Brexit referendum depending on how that plays out over really the next two years based on the timeline put down by the British government that could have significant ramifications for not only the UK but Europe as a whole as one of the largest economies in the region one of the risks they see is both a decrease in migration both in and out of Britain and heavier tariffs so that will put some downward pressure in the labor market where they're unable to import relatively cheaper labor from other areas of Europe especially Eastern Europe which will drive up prices and generally hinder growth in the country and also if the EU decides to let the protective tariffs if and when they remove themselves from the EU that will also have inflationary pressures without related economic growth which risks kind of a stagflation as we saw in the 70s and 80s in the US but again so while those are risk factors that we are keeping our finger on and keeping an eye on most of it is political and speculative nature at this point and because of that we are waiting to see a translate over into the actual numbers Great, thank you so much one more question that we have here will rising interest rates negatively affect consumer spending? In general yes however the impact on the consumer side of the economy will likely be marginal compared to business to business side of the economy far and above the strongest driver of consumer activity and US retail sales is going to be wage growth and disposable personal income we do expect to see wages growing throughout 2017 inflationary pressures really haven't taken hold yet but by the end of 2017 they will be present but overall we expect to see wages outpace inflationary pressures and that rise in the interest rate so I wouldn't worry about that on the consumer side of the economy it's really on the business to business side where they are borrowing to make multiple hundreds of thousands of dollars or million dollar capital purchases where those interest rates really can make or break the decision on a corporate level Great, that's actually all the questions we have Chris I'd like to thank you for a really great presentation on behalf of PMMI thank you for participating today and as a final note everyone who attended will receive an email to complete an evaluation on today's webinar please complete the very short evaluation as soon as possible and let us know how we can improve future webinars this will be posted on PMMI.org and slides will be made available to everyone who attended probably within the next day or two and that's all thank you so much for attending and thank you so much Chris Thank you Rebecca and if anyone has any further questions that we didn't get to or if they come up with them later in the day or the week feel free to forward them over to me and I'd love to answer them for you I will definitely do that thank you so much and thank you everyone for attending