 with ITR Economics. Chris will be covering the findings of PMMI's first quarter 2018 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 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 is going to 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 Chris, please type your question in the chat box that is located in the bottom right-hand corner of the screen. At the end of the presentation, which will last about 30 to 40 minutes, he'll answer your questions. And at this point I'd like to hand the webinar over to Chris with ITR Economics. Thank you very much and thank you everyone for joining us once again for our market forecast webinar update. I'm excited to be here talking to you. The fourth quarter of 2017 was an exciting time and overwhelmingly a very positive time for the US economy. So when we're going through this market forecast update today, opportunity is going to be the name of the game and that's what I want you to focus on. 2018 is already shaping up to be a good year. We've been forecasting it to be a pretty positive year and in general we're seeing a lot of upside risks to our overall economic outlook through mid-2018 into the early second half of 2018. So I really want to come at this from a positive angle with a lens of optimism so that we're able to take advantage of that rise before we finally look at some of the political happenings that have been coming out of Washington and Capitol Hill before jumping into some more specific packaging and processing specific industries. So without further ado, let's get into it. As most of you have seen before, this is our terminology and methodology spiel of today's update. I know most of you are very familiar with what we do here at ITR Economics, so I don't want to take too much time and beat you over the head with our terminology and methodology, but I do want to take just a moment to go back over some of the key terms that we use to make sure that we're on the same page going through this report. So first off, the two shorthands that you'll hear me use very frequently throughout this report are 12 MMT and 1212. The 12 MMT, or 12 Months Moving Total, is just the annual total, so the total dollar value, or the total amount of things made within an industry. We also call those our data trends. Conversely, the analog to that is our 1212 annual rate of change. This is simply the year over year growth rate where we look at the most current year of data and compare it to the previous year. This is our benchmark and our primary forecasting tool that we'll most commonly use when discussing where an industry or company or segment of the economy is within the business cycle. And as a quick refresher, down bottom you can see our stylized graphic of the business cycle as ITR defines it. In the bottom left-hand quadrant we have in blue phase A recovery. I like to consider phase A recovery the light at the end of the tunnel phase of the business cycle because this is when your 1212 is below zero. Things are still contracting on a year-over-year basis. However, that 1212 is upward rising toward the zero line. So on a month-to-month basis things are becoming progressively less worse. Once that 1212 rises past the zero line, we get into that green territory. We're in phase B accelerating growth. This is quite obviously the best phase of the business cycle. And it's when on a month-to-month basis you're expanding on a year-over-year basis. And on a month-to-month basis that pace of expansion is quickening. It's accelerating. Once that 1212 peaks we transition over into the top right-hand quadrant in yellow phase C slowing growth. This is still a positive phase of the business cycle. Sales or whatever metric we're looking at are still above the year-go-level. However, I like to consider it the cautionary phase of the business cycle because this is when that pace of expansion is beginning to slow. On a month-to-month basis things aren't quite as good as they were the month before. And the primary reason that's cautionary is if that 1212 continues to fall toward that zero line and into negative territory, we transition over into phase B recession. I don't need to define that for any of you. I'm sure we're still acutely aware of what recessionary pressures are. So let's jump into the meat of today's report. For those of you who have been following ITR economics for some time now this slide won't be new to you. This is US industrial production and it's one of our primary benchmarks for the US economy as a whole. On the left side in dark blue you see the 12 month moving average that 12 MMA. So that's the total amount of stuff being produced within the industrial sector. And as a catch up the industrial sector comprises mining, manufacturing, and electric and natural gas utilities. You can see that we came out of a pretty tight recession in late 2015 through most of 2016. We are currently above the year ago level in a phase B accelerating growth trend and industrial production is up about one and a half percent year over year. The finalized data for 2017 hasn't been calculated yet but when it is we expect it to come in somewhere around 2.2 percent year over year. That phase B accelerating growth trend is going to persist through mid 2018 before ultimately slowing during the latter half of the year. But 2018 is still going to be good. It's going to be up about 1.1 percent followed by a minor industrial recession in 2019 when we'll finish the year down just about 1.2 percent year over year. Now if you have been following along with our forecasting for some time now you know that we were expecting an early 2018 peak in the US industrial production growth rate. So we expected that phase C slowing growth trend to take hold by 2q18. However as I mentioned the fourth quarter of 2017 injected some pretty significant optimism into our outlook for 2018 and now we expect that accelerating growth trend to accept to persist through mid 2018. Overall our forecast remains almost identical to what it was. We just expect that accelerating growth trend to persist one maybe two quarters longer. The ultimate takeaway though however is that by 2018 or excuse me by the end of 2018 things will not be as good in the industrial sector as they are now. Let's take a look at a few of the key leading indicators that have caused us to mildly adjust our expectations for 2018. Here we can see in blue once again the US industrial production 1212. In in orange we have the US total industry capacity utilization rate. This is a measure of how much of the equipment and machinery and trucks are currently in use in the United States. You can see that that utilization is rising. It did tick down earlier this year before jumping back into a robust phase B accelerating growth trend and right now this is signaling acceleration in the US industrial sector through the second quarter of 2018. The ITR leading indicator doesn't want to shift right on our screen right now unfortunately and I apologize for that. However you can see that again in orange the ITR leading indicator which is a proprietary leading indicator developed and maintained by us here at ITR Economics is again signaling phase B accelerating growth through the second quarter of 2018 and some mild positivity in the as late as the third quarter. Conversely we have US corporate profits in blue. Corporate profitability peaked earlier this year early in the summer. It's jumped up a little bit but it is a fairly volatile series. However the overall trend that is being communicated by US corporate profits right now again is one of slowing growth. So while we still are seeing some positivity for the second half of the year as far as US corporate profits go which lead by about nine to ten months it is signaling a first quarter or second quarter peak in the US industrial production 1212. Similarly if we look at the Wilshire total market cap and this is a stock market index not dissimilar to the the Dow Jones or any of those it did peak earlier this summer before declining a little bit and jumping back up. This is signaling to us that will likely see the most robust rise through the first quarter of 2018 followed by perhaps a slight cooling period during the second into the third quarter before things pick back up again. Again there's been a lot of positivity in the stock market and that's being represented in the data and once again has caused us to extend our positive outlook for the US industrial sector by about a quarter or so. Similarly we had one of those double humped performances in the US purchasing managers index. The US purchasing managers index leads by nine to fourteen months majority range so right now this positivity is signaling a second to early third quarter peak in US industrial production dissimilar to some of the other positive leading indicators we've seen here it has curled over into phase C and once again reinforces that expectation that US industrial production whether it peaks in the second or maybe the early third quarter of 2018 will be on the backside of the business cycle by the end of 2018. Another important metric we have when judging the health of the US economy is US non-defense, capital goods, new orders excluding aircraft. A bit of a paragraph more than is a name of an economic segment but basically this is B2B activity. This is business investment. Once again you can see that it was in a pretty prolonged recessionary trend for the majority of 2015 and 2016. However in early 2017 it did transition back to that phase A recovery trend. We've transitioned to accelerating growth over the past two quarters and we're currently up about four and a half percent year over year. We expect that acceleration to persist through early 2018 into the second quarter of 2018 finishing up about five five and a half percent year over year. If you can see in this light gray line that's superimposed over this that's the 312 rate of change and it's currently upward rising and outperforming the 1212. That's signaling upside business cycle pressures and supports our expectation of one to two more quarters of acceleration in B2B activity. That recession that I mentioned in capital goods new orders during 2015 and 2016 and this won't come as a surprise to any of you I'm sure at this point was primarily due to commodity price shocks. We saw steel prices, coal prices, oil prices really fall off of cliff in 2015 and that deflationary environment translated over into B2B activity. Consumers aren't stupid they know that when commodity prices are falling producers are able to make more for less and they demanded price cuts in response. Because capital goods new orders are a dollar valued segment of the economy this represents that we weren't selling fewer capital goods we were simply selling them for less. So it was a deflationary environment that drove that weakness. So you can see that a large basket of base commodity metals that we have here are all up year over year copper is up 29% zinc 29% aluminum 23% lead 19 steel a tin just about even with the prior year. The one I want to focus in on here is copper prices. The old adage is that copper is the metal with a PhD in economics and primarily that's just because it's so widespread from industry to industry anything that makes use of electronics or digital equipment is most likely going to have a significant amount of copper in it and because of that it's very reflective of wider movements within the economy at large. Whenever you see that it's up 29% year over year instantly I want you to start thinking inflationary pressures just like the deflationary environment that we saw in 2015 and 2016 we're now in an inflationary environment and grappling with these rising commodity costs is going to be a major managerial challenge that will characterize the business environment throughout 2018. There's been a lot of talk about politics and Washington's impact on the economy as of late and it's important to discuss what's going on in politics and how that's going to reflect over on the economy at large. Obviously we've seen a landmark tax bill and corporate tax cuts past in recent months and we've had a lot of questions about what that means for business investment in the US and what that means for the economy as a whole. So let's take a look. There's a lot going on in the screen so I want to break it down to you line by line. In dark blue starting up around 50% in the 1960s and going down to about 30-35% as of 2016 you can see the corporate tax rate as a percentage. Again you can see that it's been generally decreasing over time there's been blips where it's raised but the overall trend is one of decline. Similarly in that green line also moving down from the top left hand of your screen to the bottom right hand of your screen is corporate tax revenue as a percent of corporate profits. So what that line is showing is that since 1960 there's been a general trend of increasing profits compared to how much tax corporations are paying and that's not surprising. If you cut how much you're paying in corporate taxes your profits are going to jump up by an equal amount. However the important takeaway of this slide as we've looked down bottom in that dotted line is gross business investment as a percentage of GDP. Again we've seen that the tax burden on corporations has decreased significantly pretty steadily since the 1960s. However there is no consistent declining trend or rising trend seen in gross business investment. In fact if you look at the linear extrapolation it's been hovering at about 11.5 to 12.5% consistently since the 1960s. Significantly if you look over to 1986 in the middle of your screen where that blue line drops significantly that was the Reagan era tax cut. And if you look at what's happening to business investment during that time about from 1985 to 1987 you'll see that business investment as a percentage of GDP actually declines while corporate taxes are being slashed. The fact of the matter is that historically there is no clear cut relationship between corporate tax rates and business investment. One of the major reasons for that is that large corporations who overwhelmingly benefit from these corporate tax rates are more interested in seeing near term positivity in their numbers. They want to have good profitability numbers for their next quarterly meeting and generally corporate tax cuts translate more severely over into dividends and stock buybacks than they do into business investment. Our research shows that it's really those small to medium sized companies. Those companies of about 1,000 or fewer employees that really are drivers of employment in the overall US economy and tax cuts targeted toward those aspects of the corporate world are likely to have a much stronger effect on US economic health as a whole. The takeaway from this is that while yes we are monitoring the tax environment and the corporate environment as it stands in Washington we have not made any long term changes to our economic outlook based on corporate tax reform in the US because historically it just doesn't have any large sustained impact on economic growth as a whole. Speaking of economic growth as a whole let's step back a little bit and look at a more holistic picture of the US economy. Excuse me. Here we have US gross domestic product. Once again over on the left you can see the total dollar value of the economy and on the right you can see the consecutive rates of change. That little blitz that we saw back on the left side of our screen, that declining trend once again was the 2008-2009 financial crisis in great recession. And it's important to note that despite a lot of the negativity in the news despite what a lot of people would tell you about the US economy losing its position as one of the primary and strongest economic forces in the world we've been in a rising trend as far as the dollar value of the US economy is concerned since late 2009. Compared to the peak of the pre-2008-2009 recession US GDP is actually up about 17.5% from where it was. So we've seen a pretty significant rising trend take hold. If you look over to the right at the growth rate you can see that we're currently in a phase B accelerating growth trend. And interestingly enough that weakness that we saw in the industrial sector, that recession that we saw in business to business investment during 2015 and 2016 did not translate over into a technical recession for US gross domestic product. We saw some phase C slowing growth but ultimately benefited from a nice soft landing and transitioned directly back to phase B accelerated growth. Once again the fourth quarter stats for GDP haven't been tabulated yet but we expect to finish the year not quite at 3%. That slowing growth trend once again is going to take hold by mid-2018 and we'll finish 2018 up about 1.6%. Another point of contrast between the economy at large in the industrial sector is that while we do expect growth to basically stop in the middle half of 2019 we expect at most about 0.8 percentage points of growth in GDP during the third quarter of 2019. It will overall avoid a recession and finish 2019 up about 1.2% growth. We generally want to see GDP growing between 2% and 3% at least to signal some robust health in the economy. So depending on what industry you're in this may feel like a recessionary period however it doesn't meet our technical definition. And what's driving that disparity between US GDP and US industrial production? Well if we break down GDP we break down the economy as a whole into its three largest components. We get business investment at 16% of GDP government spending at 17% of GDP and then US personal consumption at nearly two thirds of the whole US economy. Personal consumption is what you and me spend our money on on our day to day basis. It's furniture for our homes, it's food, it's gasoline, it's iPads and iPhones. So as far as the US economy is concerned the consumer really is king. As long as they are doing well the economy tends to do well in addition and when the consumer starts to feel some pain you can definitely expect to see that trickle over into the top line growth numbers. So let's take a minute to look at how the US consumer is doing. Well first let's look at jobs. Here we have US private sector employment. It's currently at a record high. Employment growth is up 1.7% year over year. It is in a phase C slowing growth trend but job openings are up 5.1% and they're accelerating. When you see that disparity between slowing employment growth and accelerating job openings that should screen a tightening labor market to you. That means that the US economy is looking for more laborers than the US population is able to supply. Additionally the involuntary part-time employment or part-time employment for economic reasons is declining. It's down almost 12% and that's great to see because in the wake of the 2008 financial crisis we really saw involuntary part-time employment skyrocket where people lost their full-time, healthy jobs and were forced to take on one, two, sometimes even three part-time jobs just to make ends meet. In the long term those aren't viable jobs to encourage consumer spending and as a result we don't like to see those numbers rising as it means that the US consumer isn't doing very well. Additionally as the labor market tightens the quit rate is rising. That signaled not only a healthy consumer but a confident consumer. The consumer is very aware that wages are rising. They're aware of the tight labor market and they're hopping jobs looking for their dream job or their dream location as a result. As I mentioned before you can see that as the labor market tightens we've seen rising overall US wages and in green here you can see the percent change, the rate of growth of wages. It's up at about 3% right now. Not as severe as we saw prior to the 2008 recession where we saw about 4% growth in overall wages but still enough to beat out inflation and help to drive rising disposable personal income for the US consumer which is going to get them out and spending money which is what we like to see. However you can see that overall wage growth has actually peaked in its pace of rise in late 2016 and has been marginally decelerating ever since. This is one of the risk factors that we're monitoring that is driving our expectations of cyclical decline in 2019. As wages begin to slow and inflation rises that means that the US consumer's purchasing power is going to start being eaten away. But when we look at the US labor market there's something like 150 million workers in the US economy. So that's painting with very broad brushes. Instead let's break it down by demographics. Here you can see total US employment by age and there are two primary sectors that I want you to look at here. First is that top blue line ages 25 to 34. This is the much talked about millennial generation and you can see that in 2016 they beat out the generation exers as the largest portion of the labor force. So when you have holes in your labor force and you're looking for new workers, you're out hiring predominantly and at an accelerating pace you're going to be hiring these young people, these millennials from ages 25 to 34. The second major trend that I want to draw your attention to is in the middle of that red line. The workers of age 55 to 64. These are your baby boomers. Ordinarily what would you think of people coming up on retirement? If you look back to 1996 we had just over 10 million baby boomers working in the economy and we now have over 26 million. By far the strongest rise as a proportion of the overall labor force has been attributed to these baby boomers and what that means is that you're going to have an aging increasingly top heavy labor prospects. We've seen average ages of employment pushed out and 70 is really the magical number that we've been looking at throughout the U.S. 70 is really when people are thinking of retiring now and that poses a few problems for you. A, in five to ten years now that top heavy portion of your baby boomers will largely have disappeared. They'll retire en masse over the next decade or so. But until then you're going to be having a larger proportion of very skilled and highly paid baby boomers on your payroll. So what happens as they transition out of your labor force and the millennials continue to translate into is that you'll be losing a lot of institutional knowledge. A lot of those job skills that aren't necessarily codified in your training program but instead are the result of years or even decades of experience are going to be lost with those baby boomers over the next five to ten years. So it's very important that you find a way to connect that 55 to 64 age group with that 25 to 34 age group and facilitate the transfer of knowledge. That way there aren't large holes in your institutional knowledge among your labor force over the next five to ten years and that those millennials 25 to 34 as they approach that 35 to 44 age are ready to move up the corporate ladder and replace those retiring baby boomers. But as we've mentioned before as millennials move into the workplace there are some managerial issues and potential friction that is going to come with that transition. A 2016 study by Deloitte found that 66% of millennials plan to change their job in the next five years. In 2008 Glassdoor found that 75% of millennials expected to have between two to five employers in their lifetime only 10% of millennials thought that have more than six employers over their entire career. As of 2016 however only 54% of millennials think they'll have two to five employers while more than a quarter say that they'll have more than six. A lot of this stems from the millennial generation moving into the workforce during one of the worst recessions we've seen since the Great Depression. The younger generation of millennials who still would have been in high school or early college and not yet fully into the workforce would have seen many of their parents and their friends and family have lost their jobs during that recession. And a lot of the older half of the millennials would have had trouble finding their jobs and they'd off similarly as they were just getting started. Because of this they tend to be a little more cynical toward the corporate outlook on staying within one job and one employer for a long period of time. Add in historically low home ownership rates and historically low marriage rates to the millennial generation and that means that they are very mobile labor capital. They don't have houses tying them down, they don't have families, they don't have kids and they don't want to uproot from their school districts and because of that they are very willing to jump around, they are very willing to move and you have to target them aggressively. There are a lot of ways you can do this from a managerial standpoint. Historically it has been wages, wages, wages when we talk about labor force retention and acquisition. However in that regard the millennials are a different generation as well. They've shown that they actually value job satisfaction and job growth prospects more than they value wage growth. So there are a variety of different non-monetary forms of compensation that you can look into offering to your younger portion of the workforce in order to keep them on, get your attention numbers up without impacting your top line too heavily. These non-monetary benefits are things such as lack stress codes if you think of the Silicon Valley culture. People want to show up to work in sneakers and a t-shirt. If you're in a not highly professional or not highly client facing position where that's possible that's an easy way to make people happy with their jobs at no expense to you. Similarly allowing flexible hours and focusing on results over productivity will help to retain those millennials as well. The long story short is that as commodity prices rise as labor prices rise and as we can see as inflation rises you're going to be facing significant increases in your cost base over the next year to five quarters which will threaten your profitability. You have to take actions to try and mitigate those price rises wherever you can by cutting costs. You can see here in orange we have the US CPI the consumer price index. It's up about 2.2% which is considered a very healthy pace of inflation for the US economy. However, that's more targeted toward what me and you feel in our everyday life as we go to the grocery store as we go to Best Buy. As an employer, as a business owner or manager what you should be worried about is the US producer price index which is seen here in blue. That's almost double the consumer pace of inflation at 4.3%. This is largely due again to those rising labor costs and those rising commodity prices that we have taken up. If you do not take costs to either pass on price increases to your consumers or find ways to cut your costs faster than this inflation takes place you are going to be risking what we call zero profitability growth over the next year. Your top line is going to be moving up but only as fast as your bottom line is and you're not going to see any real rise in profitability. What's important to look at is where your prices are going and how your cost structure is focused within your consumer base. What's nice is that most corporate consumer bases tend to follow the 80-20 rule. That is 20% of your consumers generally account for about 80% of your profits. So when you're looking at raising your prices don't do it indiscriminately. Don't do it above board because you'll be threatening a lot of your profitability by scaring off your consumers and threatening your market share. Instead look at that 80% of your customer base that is only responsible for about a fifth of your profits and see are they marginal customers? Are they just breaking even? Are they losing you money? This is where your price increases should be target. You will lose customers here. They tend to be the most price sensitive. But if you're just breaking even or if you're spending money on these customers it's better to lose them into your bottom line rise than it is to keep them and threaten your profitability in order to see top line revenue grow. As we talk about the business environment and inflation and the cost of doing business it's important to look to federal funds rates and get a handle on what interest rates are doing. Here you can see our esteemed chairs of the Fed over the last few decades from oldest to youngest with Yellen taking the helm on the right and you can see that it's very easy to forecast interest rates. You just have to line them up by height and down the interest rates go. However we are looking at interest rates rising over the next year. We've seen that take hold already. We'll have to update this slide but luckily the new chairman of the Fed is about six and a half feet tall and firms are expectations. But in reality our expectations for rising interest rates are primarily being driven by the communications from the Federal Reserve itself. We tend not to quibble or argue with the Federal Reserve too too much because they tend to be very consistent in going through with what they've communicated to the public at large. Here in these dots you can see each individual member of the Federal Open Market Committee who is in charge of setting interest rates and their expectations for interest rates in 2018, 2019, 2020 and beyond. As I mentioned before, we've seen some rise in that interest rate already. By the end of 2018 they expected to be somewhere between 1.5 to 2.5% by 2019, not quite 3% before hovering just about at 3% or below in 2020 and beyond. The expectations of the Fed have been tempered in recent months in the pace of interest rate rise due to lackluster consumer inflation. However, we do expect that the large takeaway here is that over the next three years and in the long run in general we are moving away from the easy money policies that the Fed has given to the U.S. since the Great Recession and moving back toward more sober actual interest rate environments. What that means is that the cost of doing business, the cost of securing loans, the cost of making purchases is going to go up. This is at the same time that labor prices are rising at the same time that inflation is taking hold. So again, it is another factor saying that you have to find ways to mitigate your cost structure if you intend to be profitable over the next three years and beyond. So a lot of optimism for the U.S. economy growth throughout 2018, acceleration being extended into mid-2018 and maybe even the third quarter. However, there are some lingering concerns that we've had over the past six months to a year. The U.S. dollar has weakened a little bit versus the euro in recent months but it still remains very strong and that's going to hurt for any exporters that we have. It's going to decrease the competitiveness of U.S. goods on the open international market. Again, you'll have to find ways to make yourself competitive and advertise your competitive advantages if you are trying to market yourself abroad. Again, positive business cycle problems, rising wages, low retention, increasing costs, all things that you have to keep in mind rather than just growing your top-line business metric over the next year to year and a half. Internationally, we've been looking at slowing growth in developing nations and these are your BRIC nations, your Brazil, Russia, India, China, some of your largest developing nations. They're all rising on a year-over-year basis. We're seeing some positivity but compared to the growth rates that we saw a decade ago, they're only shadows of their former self. These developing nations make up about 15 to 20% of global economic growth and if they're not carrying their weight, we're going to see some mild international headwinds. Finally, and this is a longer term concern looking out to our expectations of a 2030 Great Depression. We have rising U.S. debt, negative world demographics, primarily an aging workforce and a top-heavy workforce, especially in places such as the E.U., Japan, and China. Now let's jump down to some of the more industry-specific sectors of the economy that we look at. Here we have U.S. food and foods preparation production index. Food production is currently up 3.0% year-over-year. It is in a phase B accelerating growth trend but we expect it to transition to phase C imminently. We have upward revised our expectations for food production since the last report based on very positive signaling coming out of the industry, especially the beverage section. Again, the data for 2017 isn't finalized. We expect it to finish somewhere between 3.5% and 4% for 2017, followed by slow growth throughout 2018, finishing 2018, up about 1.5%. We will have a soft landing in this industry. Accelerating growth will take hold by the end of 2018 and we should see about 2.1% growth in 2019. So two to three years of solid economic expansion within the food industry and that's not surprising. The U.S. consumer is healthy, they have money. We like to eat, we like to eat out. We're going to continue spending money on food, both packaged and pre-prepared. U.S. beverages, coffee, and tea production. You can see that it's currently in an early phase B accelerating growth trend. It's not quite half a percentage year over year. We're going to see robust rise take hold through 2017 and into 2018, finishing 2018 up about 3% year over year. Once again, we'll see that transition back side of the business cycle occur in 2019. However, again, we will have a relatively soft landing finishing 2019 up just about 1% year over year. Coffee and tea production is currently in a phase C slowing growth and the majority of the acceleration that we're seeing, the majority of the rise that we're seeing in this sector is coming from beverages production which includes both processed soft drinks as well as alcoholic distilleries and breweries. So if you can, that's the segment that you want to rotate to and focus on over the next year or so. Pharmaceutical and medical device production index is currently in phase D recession. It's down not quite 2.5% in year over year, but we do expect it to transition to the front side of the business cycle and enter phase A recovery by early 2018. The numbers haven't been calculated yet, but it will finish the year down during the fourth quarter of 2017 before finishing 2018 up about 2% and another comparatively mild recessionary period in 2019. Expect to see some weakness in this industry as really the very fabric of the US healthcare as it exists now is in flux and both producers and consumers of medical devices and pharmaceuticals are uncertain as to what the future holds and they're not likely going to be building any large significant stockpiles over the next year or two. That's one of the reasons that we're expecting to see these periods of moderate growth followed by moderate recession. US personal care products production currently down 3.4% year over year, again in phase D recession, but on the cost of that transition to phase A recovery. We'll finish 2017 down about 3% before accelerating through the majority of 2018 finishing the year up 2.5%. A relatively soft landing in 2019, we expect on median to be down about 10 basis points compared to 2018, but there is the possibility that we'll actually eke out a mild amount of small economic growth during this 2019 time period. When it comes to this time period where our forecast range is split along that zero line, even though we're calling it a technical period of recession for personal care products, it's critical that you don't pull back on your production, that you don't pull back on your marketing or your advertising until you actually start to see orders declining, because again, you want to remain in a position where you are being more aggressive than your competitors during this period of relative decline, and you don't overreact to early signs of market weakness. US chemicals and cleaning products production is in phase C, slowing growth. It's up about 1.5% year over year. We'll see a little bit more rise through the end of 2017. 2018 will again see about 1.8% growth compared to 2017, followed by once again a very mild technical recession in 2019, but this again should not be something that you overreact to. US Durables, Hard Goods, Components, and Parts production is currently in phase C, slowing growth, just about even with the prior year at about 0.3% year over year growth. It will finish 2017 at the same before accelerating through the majority of 2018. Once again, a mild recession in 2019. Durables, Hard Goods, Components, and Parts is kind of a nebulously defined segment of the economy, but basically it's any goods that are targeted towards US consumers that are expected to last for more than three years. This includes electronics, such as televisions and computers. It includes furniture. It includes plumbing fixtures and appliances. So any large big box items that we look at. That growth that we're expecting to see over the next year is primarily being driven again by that rising disposable personal income that we're seeing for the US consumer, as well as those rising wages in that relatively stable labor market performance. We mentioned a little bit about the international economic environment earlier, but let's take a look at what the global leading indicators are doing. The OECD, that's the Organization of Economic Cooperation and Development, basically the largest international developing and industrialized nations. The Five Major Asia, Brazil, Canada, China, India, Japan, all of our major economic leading indicators are up. However, they are turning the corner. They are transitioning to the phase C slowing growth trend, and that supports our expectations that the minor industrial recession that we're seeing in the US for 2019 is going to be mirrored by most major economies abroad as well. No signs of concern yet. Things will vary on a nation to nation basis, but do expect that by the end of 2018, the international global economic environment will not be as hot as it is now. Let's take a look at what's going on abroad. In North America, you can see a lot of green Canada up 5.1%. US finally up in that green zone, up about 1.6%. Some mild weakness in Mexico down about 0.3% year over year. A lot of that weakness is being driven by skepticism about the future of trade relations in NAFTA between the US, Canada, and Mexico. A lot of corporations are hesitant to make large capital investments in the Mexican economy, and we're talking factories and machinery and increased supply and distribution lines while we're still renegotiating NAFTA. I can't tell you what the future of NAFTA is going to be since I'm not a political forecaster, but if all goes business as usual and NAFTA remains in place or is only mildly tweaked compared to what it is now, expect to see growth take hold in the Mexican economy by the end of 2018. South America, again, a lot of improvement since the last time we spoke. As I mentioned earlier, you can see that Brazil is up 1.5%. The economic environment in Brazil isn't great despite this growth. They are coming off a very severe multi-year recession, but again, getting some green on the board there is a great signal for the South American economy as a whole beyond Colombia, about even with the year-ago level, if you sell into these markets, it's time for caution, but not over-concerned. Europe, again, green almost across the board. Major difference between the last time we spoke, if you look up into Norway, Sweden, some of the Scandinavian countries, there was some red on the board just one quarter ago. They have transitioned to a mild rising trend as oil prices continue to rise. When we look at Germany, we look at France, we look at the UK, some of the major economic powerhouses of the region, they are all up and those growth rates are rising. Similarly, almost completely green in Asia as well. India up 2.8%, China up 6.6%. It's good to see this growth, positive growth is obviously what we want to see. But again, as I mentioned before, those 3%, 6% in growth rates for India and China, which are some of the world's largest developing nations are only fractions of the growth that we saw in the 1990s and early 2000s when we saw 10%, 15% growth coming out of these regions. And while this growth remains subdued even though it is positive, it may pose some challenges to US exporters selling into these markets. Many of you have seen this slide before as well. And this is our budget list of actions to take before the 2019 recession. 10 bullet items that we think will be applicable to a wide variety of US producers, regardless of what space they're in. I'm not going to go through these because they're old had at this point, but I want to leave them up here. I want you to take a look at them at your leisure and make sure that you are not just moving into the 2019 recession, not just expecting it, but being proactive and leading the business cycle, taking steps to ensure that you can eke out some growth in 2019 or mitigate some of that weakness that your major industries are going to be seeing in 2019 because ultimately that is the impetus for signing into these webinars today. It's not just to be informed, it's to be informed and be prepared to take actionable steps to accelerate growth and mitigate weakness. I appreciate all of your time here today and I thank you for attending our first quarter economic outlook. As always, if you would like to subscribe to ITR's monthly economic updates, where you get brief bulletins regarding the health of the US economy, please email updates at ITREconomics.com Thank you very much and I believe I will be turning it over to Rebecca for questions. Chris, thank you for the great reflection of the current economy and the issues at hand for the packaging and processing industry. I would like to open up the session for questions. Any questions that you have that you would like answered, you can type them into the message chat box in the bottom of your screen or you can press star two to unmute your phone and ask the question that way and we'll give it just a moment here to see if there's any questions that come through. Once again, if you have any questions that you would like Chris to answer you can type them in the bottom chat box at the bottom of your screen or press star two to unmute your phone. And at this time it looks like we Yeah, go ahead Chris. I was going to say while we wait to see if any questions come in, I just want to remind everyone that if you have any questions that you don't feel like bringing up now or that pop into your head at a later date feel free to email questions at ITREconomics.com with the subject line PMMI and either I or one of my colleagues will get back to you. And to everyone who's attending the webinar you may also email myself or Paula Feldman with any questions and we will be happy to pass them on to Chris and his colleagues at ITR. It doesn't look like we have any questions at the moment. It's probably because this was a great presentation Chris. Thank you very very much. On behalf of PMMI thanks everyone for participating today. As a final note you'll receive an email to complete an evaluation on today's webinar. This really lets us know how we're doing and if there's anything that we can change. It would be great if you could complete that brief, brief evaluation. Within a day or two this webinar will be posted on PMMI.org so you can go back and review anything that you'd like to see again. Thanks everyone for attending and have a great day.