 specific verticals and end markets and what it means for you here at PMMI. I know that a lot of you are recurring members and are familiar with both the report that PMMI puts together and also our terminology and methodology and work here at ITR but for the sake of you that are first-time viewers or first-time listeners or who are just coming back for the first time in a long time, before I dive into the guts of the report I'd like to go over some of the terminology and methodology that we use here at ITR because the lingo and the terms can be a little confusing at first and I want to make sure that we're all on the same page as we move forward. Now Rebecca we can progress the slide. Okay is it showing up on your end Chris? No I'm still getting a loading screen on my side Rebecca but I have a copy I'd like computer that I can move through if you want to just walk forward with me. Sure. Great. So I've included the slide as a kind of shotgun intro to what we do it here at ITR and also some of the terms and methods that we use as I mentioned before. I encourage you to come back to this slide at any time when you're either viewing this presentation or listening to it at a different time. If you are at all confused about any of the metrics that I'm using or what exactly I'm referencing. So first there are four primary metrics that we use here at ITR to determine where your business or where an industry is within the business cycle. First we have our moving totals or our moving averages. We use the three MMT or the three month moving total or the 12 MMT or the 12 month moving total. We also refer to these obviously as quarterly totals or annual totals. We use moving totals when the metric that we're looking at makes logical sense to be summed up added together. Things such as sales revenue profits or units shipped. However we use the moving averages when it doesn't make sense logically to use an arithmetic sum. For example interest rates or indexes or percentiles. So again we have our three month moving total which is simply the some of the most recent three months of data and the 12 month moving total which is the sum of the most recent 12 months of data. We then also have our rates of change analogs for both our three MMT and our 12 MMT. You'll hear me refer to these either as the three 12 or quarterly rate of change or the 12 12 or annual rate of change. Rates of change are the primary metrics determining where we are in the business cycle because it gives us an idea of progressive gain or progressive decline as opposed to getting lost in the nominal and sometimes trendless raw data. The three 12 or quarterly growth rate is simply the most recent three MMT compared to the three MMT one year ago. So the most recent quarter of data, third quarter data or second quarter data right now compared to the second quarter data of 2016. Similarly the annual rate of change or the year over year growth rate is simply the most recent 12 MMT compared to the 12 MMT from one year prior. As I mentioned before rates of change are our primary metric for determining where we are in the business cycle and you'll hear me consistently throughout this report mentioning the four different phases of the business cycle as we define it here at ITR. You can see down the bottom of my screen we have this four colored stylized sign curve and this is our theoretical representation of the business cycle as we define it. In the bottom left hand quadrant in blue you can see we have phase A recovery. We call this phase A recovery and I like to think of it as the light at the end of the tunnel because this is when your 12 12 is below the zero line so you're declining on a year over year basis. However you're moving up toward that zero line so things are becoming progressively less and less bad as we move forward hence you're still in the tunnel but you can see the light coming ahead of you. Once your 12 12 rises over that zero line we transition to phase B accelerating growth. Again this is defined quantitatively as when the 12 12 is above the zero line and it is rising so every month you're growing at a faster and faster clip. Obviously this is the best phase of the business cycle to be in and this is where you run into a lot of structural or managerial tasks that you have to solve typing inventory, rising prices, shortened deadlines, things of that major. Then when your 12 12 reaches a peak and it begins to decline but it's still above the zero line you enter phase C slower growth. I like to consider this phase C because it's the cautionary phase of the business cycle. You're still above the year-go-level, you're still expanding your business so the industry is still expanding on a year over year basis. However that pace of growth is slowing and beginning to decline. Once your 12 12 falls below the zero line you fall into phase D recession. I know none of you likely need a formal description of phase D recession as it's often on our minds especially during troubling times like we had last year but it's important to note that this as I mentioned before is a stylized or theoretical model of the business cycle. In real life, in real industry, we don't always see all four cycles or phases of the business cycle move one after the other in a nice fashion like this. Instead we can have what's considered a soft landing. This is where you're in phase C. Your 12 12 is declining but it reaches a bottom it reaches a trough and transitions directly back to phase B without declining on a year over year basis. Again, obviously the ideal form of the business cycle that we all want to see all the time. However we know that's not always possible especially during times of economic duress or recession for example in the 2008, 2009, 2010 time period we can have the opposite happen with what we describe as a hard landing. This is when you're in phase A recovery of the business cycle. Your 12 12 is rising. You're starting to see that light at the end of the tunnel but before you transition into phase B that year over year arrives you reach a peak in fall directly back into phase D recession. So throughout this report when you hear me mentioning phase A, B, C and D in your mind think back to this little sine curve we have if at any point you forget you know the technical definition of what those different phases of the business cycle are. It's also important to note that while we look at the 12 12 in determining where a business or an industry is in the business cycle which phase it's in, it's also important to realize that the 312 the quarterly growth rate being a more reactive growth rate acts as a leading indicator to your company sales. So imagine that your 12 12 is falling toward that zero line. You're in a late phase C and you're nervous that you may fall into phase D recession. Obviously a lot hinges on calling whether growth is going to continue. You're going to have a soft landing or you are going to fall into phase D recession and you have to start you know perhaps tightening your budget, tightening your belt and dealing with that period of decline. Getting that right can be very important in the long-term growth in health of either an industry or your company as a whole. So if you're in that late phase C for example and you see that your quarterly growth rate falls below the year ago level is declining on a quarterly basis that's some strong statistical evidence that your 12 12 is going to follow in the phase D recession in the next one to two quarters. Similarly if your 12 12 is falling toward that zero line but your 312 quarterly growth rate ticks up and begins to rise again once it upwards passes that 12 12 that's a good indicator that you're going to have a nice soft landing or very brief and mild recession and transition back to that phase B accelerating growth trend. So as we go through this report we'll be looking at a lot of different leading indicators for your company and for the economy as a whole. But remember that you don't always need leading indicators for short-term decision-making processes because your 312 if you break out your sales on a quarterly or on a rate of change basis your 312 actually acts as a de facto leading indicator of between three to six months for your 12 12. So that's very important to keep in mind when judging the near term health of an industry or of your company. Then Rebecca we can move on to the next slide. Here we have US industrial production for those who have been with us for a while you know that this is one of our primary benchmarks for the US economy as a whole. It comprises three main components mining, manufacturing and public utilities. You can see that throughout the majority of 2016 even late 2015 we were in a relatively significant industrial recession in the US primarily driven by the oil patch busts and the resulting decline in commodity prices. This put a lot of downward negative pricing pressures on companies and they really cut back on their investment and production levels. As the last quarter you know that we were forecasting a growth period of accelerating growth in the second half of 2017 into 2018 followed by a period of slower but still healthy growth throughout 2018. I'm excited to say with the most recent data that's come out we have developed into a phase A, phase B trend. We are right on the year-go level at a 12-12 of 0.0% funnily enough. However that 312 that quarterly growth rate is seeing significant growth so we know that there's plenty of upside business cycle pressures to get us into that nice phase B transition during the second half of 2017 and we expect to see that imminently in the industrial economy. But without just taking the numbers for it and you can see that we also have our forecast point down here for you. You can see that as of 2017 we expect about 0.5% growth year over year and by the end of 2018 we expect to be down just about 0.7% so that growth should persist into the late third quarter early fourth quarter 2018 but we don't have to take the numbers for it. We can look at what the leading indicator evidence says. Here we have the ITR leading indicator. This is a proprietary index developed by us here at ITR that is built to lead the industrial economy by between 12 and 16 months. It gives us about a year to a year and a quarter of forward-looking forecasting power for the industrial economy. You can see again we have those business cycle pressures based on our 312 and the ITR leading indicator. We know that that phase B transition is imminent. We can go to the next slide Rebecca. Here we have US industrial production compared to the US total industry capacity utilization rate so the percentage of all of the productive capital in America that is being used at a given time. Again you can see that that utilization rate is rising. We are stressing our equipment. We are spooling up. We are getting to make more. Again very positive leading indicator signaling and positive business cycle pressures for US industrial production and anyone who follows the overall economic trends of the industrial economy as well. We can jump down to the next slide Rebecca. Again another benchmark leading indicator that I'm sure many of you follow and that you here mentioned both here at ITR and also in the news US purchasing managers index developed by the Institute for Supply Management. This is a survey of current economic activity set out to many major purchasing managers at industrial factories of all sizes throughout the US. It's important to stress that it is a survey of current economic activity and current sales and inventories as opposed to something speculative that they might get wrong or might be driven more by a gut feeling. Because of this it acts as a very robust leading indicator for the US industrial economy by about 9 to 14 months so 3 to 4, 3 to 5 quarters. You can see some significant rise up into the last quarter or so which does signal that 1212 accelerating growth trend for US industrial production into the first quarter of 2018. Importantly however you can also see that it has curved over since the last report. It's made that transition to phase C which supports our expectation of growth beginning to slow and diminish in the second third quarter of 2018. The important part of looking at these leading indicators is that it allows us to instead of relying just on theory or just on a gut feeling actually apply a quantitative method to judging or benchmarking on a month-to-month basis whether our overall economic outlook is correct and that allows us to plan for future activity. And again as we've seen from these three benchmark leading indicators our general outlook of accelerating growth into 2018 followed by slower growth throughout the year still seems to be holding. In Rebecca we can jump to the next slide. Here we have US non-defense capital new orders excluding aircraft kind of a mouthful to say but basically all this is this is B2B activity this is business investment you know the sphere of the economy that most of you at PMMI you know live and breathe in on a daily basis. You can see that it's down about 1.5 percentage points on an annual basis but it is in that phase A recovery trend and is expected to transition to year-over-year rise in late 2017 throughout the majority of 2018. Again the majority of the weakness that we saw over the past year and a half or so was primarily commodity driven where purchasing managers saw those really weak returns on investment and because of that didn't want to expand their capital fleet they weren't buying new machinery new equipment new trucks instead they were essentially making do with what they had until the economic environment seems more favorable and they could get more bang for their buck. Luckily as I mentioned before we're seeing a lot of those industrial headwinds receiving and we expect B2B activity and likely activity for most of you at PMMI to improve in late 2017 and 2018 as a result. Then Rebecca we can jump to the next slide. Shown here we have US gross domestic product GDP. The reason I included this is because it's the most holistic capture of economic activity within a country. It tries to capture literally all of the economic activity all of the sales all of the purchasing all of the production that happens within an economy to give one metric that helps describe what's going on. And you can see that we're currently in a phase B celebrating growth trend up about 1.7 percent year-over-year. That's a very healthy growth rate nothing to write home about nothing to jump with joy about but you can see we do expect to accelerate into mid 2018 before slowing through 2018 and just about kissing the zero line in 2019. And the reason this is important to note is that despite a lot of the industrial headwinds we've seen a lot of the weak commodity prices almost paradoxically those have been very healthy trends for a lot of the US economy and we've seen persistent growth since the 2008-2009 recession. And Rebecca we can jump forward a slide. And why are those weak commodity prices low gas prices low oil prices positive well you can see here that the US consumer is king when it comes to GDP. Personal consumption in the US makes up two-thirds of overall economic activity so when gas prices fall when steel prices fall when we have a deflationary pricing environment when you're getting less money for the machinery you sell ultimately that's tough for industry but it's very good for consumers to help keep the economy afloat. These strong consumer trends that we've seen you know fairly strong employment low interest rates you know healthy borrowing costs we expect those to persist in 2019 and to be some of the major drivers of economic growth that we're looking at in the US moving forward because of that while we are expecting an industrial recession in 2019 albeit a mild one industries that are more closely tied to consumer activity are going to be relatively insulated throughout the 2018 time period as the O and G patch recovers for example but moving into 2019 a turn down in consumer activity is actually going to be one of the major causal drivers of this recession that we're expecting so get your growth in now over the next 16 to 18 months but moving into 2019 if you're closely tied to US consumer activity or you have clients who are closely tied to US consumer activity that's going to be a warning sign moving to the second to third possibly even fourth quarter of 2019 depending on where you're positioned within the business cycle and Rebecca we can move on the next slide you can see here we have what I consider a spaghetti chart here of a variety of different primary metals very important commodity prices within the US industrial economy and you can see that across the board there above the year ago level zinc 34 percent lead 25 percent copper 19.8 aluminum 18.6 percent you get the picture those prices have largely recovered from their drop in 2016 and late 2015 but you can see that that 12 those growth rates have turned over they're still above the year ago level but that growth is slowing and that's important if you were here to listen to us speak during the fourth quarter of 2016 or the first quarter of 2017 we talked about the rising prices that we expected and that we're seeing now and mentioned trying to beat that trend lock in your prices do everything you can to get those long-term purchasing plans in place in order to hedge against this rise and that was a great strategy during the first half of the year not so much moving forward into 2017 you can see as those prices turn over we've already realized the majority of the pricing gains for the major commodities that we expect to see through the remainder of 2017 and into early 2018 so while the environment will likely remain steady and remain above the year ago level it's not going to be accelerating like we saw in the first half of the year in rebecca we can go to the next slide another positive trend within the u.s economy here we have us private sector employment if you read the wall street journal or the new york times or any major news that reports on economic and financial trends you'll know that we're seeing very low almost historically low unemployment rates really across the country and that's a positive sign for the u.s economy it means people are getting back to work it means that you know that labor market is tightening and we're absorbing a lot more people a lot more human capital into the production process which bodes well for growth over the next year you can see private sector employment growth is up 1.7 percent job openings are up 2.4 percent and what's important to notice is when we see job openings outpace employment growth that means that that labor market is tightening essentially demand is outpacing supply so while this is a positive trend for the u.s consumer that's ultimately resulting in obviously more jobs more money in your pocket more purchasing power it's also resulting in a rising quick rate as demand for labor increases and kind of surpasses what we can put out with the labor pool people are feeling much more confident that if they were to quit their job right now if i were to leave idr economics i could find a job relatively easily that might even pay better because of that increasing demand for labor because of that one of the big problems that we're going to look at over the next 12 to 18 months that period of prosperity that we're seeing now and expecting it's going to be managing not only rising commodity prices not only your bottom line but ultimately your labor force as well as you all know you simply can't be productive if your turnover rate keeps increasing if you're hiring people as fast as you're losing them you're simply not going to be able to turn out the amount of product that you want to there's a lot you can do to mitigate high employee turnover the most obvious and often the most unpopular one is to increase your wages you know higher prices make people more likely to stick around but also you can look for a little cost of living or quality of living increases for your employees that don't necessarily impact your bottom line directly think about giving them flexible hours maybe 10 to 6 instead of 9 to 5 that works with your production process more flexible dress codes don't make them come into work in that collared shirt and those nice shoes let them wear their jeans and their you know comic t-shirts if that's acceptable perhaps look at giving more flexible time off increased vacation pay most of these will incur costs to you in some form but normally not as directly or as significantly as you would expect to see if you just jacked up your wages and Rebecca we can jump to the next slide and ultimately as I mentioned before when we see commodity prices rise when we see tightening labor market and rising labor costs we see inflation something we haven't seen a lot of in recent years but you can see here that we have the US consumer price index of orange and then the US producer price index in blue the producer price index is what most of you will feel and that essentially is a pure hit to your bottom line that is profitability going down the drain if you keep your prices constant you can see that producer prices are slowing marginally but they're up 2.2 percent year year over year right now so again definitely inflationary pressures that are expected to stick around and that are going to be directly hindering your profitability over this period of rise if you don't find a way to mitigate it and we're back we can jump to the next slide here you can see that we have the federal open market committee that's the Fed the federal reserve the central bank their member interest rate projections this is a poll of the members on the FOMC basically asking them where they expect benchmark interest rates to be in 2017 2018 2019 and then just in the the big nebulous long term think five 10 15 years for that you can see each one of these dots is a member projection in red we have our most recent projections and in blue we have last quarter's projections and you can see that they're right on top of each other we expect to see one and a half to maybe 1.75 percent interest rates by the end of 2017 rising to the mid two and ultimately three percent by 2019 and belong and you know why do we care interest rates often seem kind of a again a nebulous difficult to wrap your mind around financial construct but essentially what this means is that the federal reserve the US central bank is saying that inflationary pressures are not going and the cost of doing business the cost of borrowing money has to increase as we move forward to deal with that because of that we want you to expect not to see as in accommodating lending environment as we've enjoyed since the 2008 2009 recession in the years to come and you want to factor that into your large capital purchases if you're on the fence about expanding new warehouses new distribution channels new machinery 2017 is a better time than 2018 2018 is a better time than 2019 if you're going to be financing this through lending something to keep in mind as we move forward this going to characterize the overall economic trends in the US in likely within most of the major developing nations abroad as well and Rebecca we can jump to the next slide so again a period of economic prosperity that we're entering into especially if you're tied to the B2B sector or the industrial sector about 18 months so a year and a half of strong rise all by a mild downturn in 2019 again a lot of positive indications in the leading indicators that we're seeing and a lot of good stuff coming out of not just the White House but the economy in general people are spending money people are happy people are confident and that's enough to grease the bearings of the US economic machine moving forward for at least the next year and a half however there are lingering concerns historically strong dollar that's going to hurt exports and make domestic products less competitive if you sell into Mexico if you sell into Canada if you sell into Asia or Europe you're going to be facing people who are essentially charging less money for their products and undercutting you just because of the strength of the US dollar and that's something you're going to have to grapple with for the foreseeable future the fundamentals are there the dollar isn't likely going to weaken significantly against most of our major trading partners over at least the next one to two years anyone who sells into verticals who are very reliant on commodity prices like oil natural gas steel copper while we're looking at general rising trends there's going to be a lot of fluctuations in the near term a lot of volatility in that rising trend so especially if you're selling into south america for example there's going to be a lot of uncertainty a lot of weakness and you might have to take strides to make your products more attractive or to mitigate or assuage some of that uncertainty if you want to continue doing business at the pace that you are now and realize your economic potential during this period of prosperity a more long-term problem china's growth going forward china is the second largest economy in the world right after the u.s. it's still significantly behind us and there's been a lot of fears that their economic growth numbers have been artificially propped up in some manner by essentially useless government investment in the past there's the classic horror story or cautionary story of the chinese government funding entire cities to boost those economic numbers to get steel moving on the railroad tracks to get workers back to work and then three years later there's no one living there because the simple market fundamentals aren't there nothing definitive that we've seen in the data going forward but especially again if you sell into china something to keep in mind that their growth rates may not be as robust and you may want to temper your expectations in that market in the long term finally a lingering global uncertainty 2016 has and 2017 has really been a roller coaster of a year when it comes to political economics we've seen brexit we've seen political upsets in the u.s. there is many talks of protectionism not just within the u.s. but within germany france the uk some some of the major economic drivers of the european bloc in protectionism while it has near-term gains economically history isn't on its side it tends to lead to decreased global competitiveness it tends to lead to increased prices domestically and generally a pullback in spending because ultimately economic growth over the past 80 90 years the period really since about the end of world war two has largely been driven by companies focus or countries excuse me focusing on what they do best the u.s. does high tech norway does oil middle east does oil to china does bulk manufacturing by doing that it's essentially one hand washing the other where we get to trade in those services and ultimately enjoy lower costs for all of our goods and services throughout the world any major divergences from that globalist policy that we've seen over the past decades such as a repeal of napda could be detrimental especially to anyone who wants to operate outside of the u.s. as well as inside of the u.s. again something to keep in mind for your long-term planning but right now it looks like napda will be redesigned to the net benefit of most of the countries in north america we've seen political victories in france and germany this suggests the e you open market will continue and ultimately that this period of economic prosperity and economic growth that we're looking forward to through 2018 isn't going to be hindered by any nationalist movements again just a threat that we have to monitor as we go forward and then we can jump forward to the next slide and now we've prepared for you some management objectives to take in 2017 and into the first half of 2018 as well again for those of you who are new to itr or new to pmmi who are here for the first time take note write this down keep it in the back of your mind for those of you who have been listening to us in the first half of 2017 you'll notice that you probably already have this written down because our overall macroeconomic perspective our expectations of growth in 2017 and 2018 have not changed and neither have our management objectives first and foremost you can see you've bolded an underline know where you and your markets are in the business like just because you know what the economy is doing doesn't mean you know what your relationship to the economy is and that ties down to our last and otherwise most important bullet here follow the must watch leading indicators pmmi ikri housing bond deals and work with your team to find out where you are in the production cycle in relation to those primary leading indicators this is the only way that you can truly and fully prepare for the business cycle as we define it moving forward over the next three years continue to budget for growth during the next 18 months and invest in operational efficiencies train up your employees by those machinery your productivity over the next three years has to have to at least match wage and price increases otherwise you're going to be enjoying what we call profitless prosperity a period of growth where you raise your top line but don't manage to raise your bottom line because inflation and higher wages are eating into that profitability and that's really what we expect to see for a lot of people who aren't paying attention to the business like paying attention to the macro economic trends over the next year and a half and finally ensure that your employee development doesn't stagnate we see that quick rate rising we see laborers of all skills are in demand make sure you are satisfying your employees listen to what they want and give them what they need to stay for you and increase that productivity and rebecca we can jump to the next slide now that we have our kind of broad stroke economic update for the US economy as a whole we're going to move into the forecast that you receive on a quarterly basis with the PMI quarterly report and talk about some of the trends that we're seeing within some of the smaller verticals smaller industries within the US here we have food production US food and foods preparation production currently up 2.6 percent year every year and it's just transitioned to a phase c slower growth trend you can see that we expect about six to seven months of that decelerating trend that 1212 moving downward growth slowing but most importantly we are expecting one of those nice soft landings based on the rising wages the rising employment really all the strong consumer trends that put money in people's pocket we see historically that when US consumers have money they eat and they eat out and they buy food and we expect that to bolster this industry over the next three years you can see on the left side of this chart we have the 12 month moving averages for this index and you can see that despite the period of slower growth it really is moving up into the right and if you're involved in the food food preparation or food packaging verticals that's good news for you over the next three years we can jump to the next slide here related we have beverages coffee and tea production when we say beverages we also include soda we include liquid flavorings and also beer and beer brewing you can see that we're up 4.6 percent year over year also in that phase c transition but again we expect the soft landing in a very similar growth profile that we saw in overall food production again you can see that 12 MMA on the left side of this chart moving up into the right signaling that demand will rise consistently for the next three years as is really the norm for this industry except during periods of severe recession like we see all the way over there on the left in late 2007 and 2008 when it comes down to beer the beer industry and brewing in general we really do see that americans love beer and they're buying it and that's showing in the numbers one important trend to keep track of though is the cracked brewery micro brew association the american craft beer association as of 2014 reported that cracked brewing gained as much as 11 percent market share in the overall beer industry in the u.s. it's very significant so imagine one out of 10 beer dollars sold are cracked brewing this is a up-and-coming industry that with millennial tastes for smaller kind of homegrown locally grown more regional goods is likely going to continue to see some significant upward momentum in the coming years especially as millennials move into more senior positions and have more money to spend on the more expensive goods they prefer so having it be a relatively new industry consider targeting the more local or regional producers and distributors if you're involved in canning and bottling that's often in untapped growth industry that we've seen and then we can jump into the next slide which is us pharmaceutical and medical device production down 1.5 percent year over year is in a phase the recessionary trends right now but you can see that there has been some lateral movement here we don't expect to see much more decline in that 1212 and are expecting a transition to phase a recovery in the second half of 2017 however we do expect to finish the year down 1.5 before accelerating up to not quite 2 percent in 2018 and we can jump forward to the next slide here we have us personal care products production i kind of lump these together in my mind again as we saw with food and beverage production these are two relatively closely related industries that both rely to some extent upon the state of health care in the u.s in general again you can see that we expect a phase a transition over the next year and we will finish 2017 down about 2.1 percent year over year before accelerating again through 2018 becoming up 2.2 percent year over year with the news on the aca obama care coming out of washington in the recent days it looks like obama care is around to stay at least for the near term as the republican party didn't quite manage to get the votes they needed to repeal it and now i'm not concerned in this context with whether obama care is good for the u.s or bad for the u.s or if we should do something else but ultimately compared to the alternatives that have been kicked around the american care act obama care looks like it will ensure more americans than the alternatives and again despite the overarching positivity or negativity of that more insured americans means more drugs it means more trips to the dentist to the hospital it means more medical devices it means insurance will pick up more goods that you can get at right aid or at cvs and that will help to bolster this industry over the next three years and ensure that the recession we're moving into in 2019 really doesn't fall any further than the truck we are in right now so while we do expect some growth on a yearly basis in 2018 over the next three years you can really expect these industries remain relatively stagnant relatively steady then we can jump down to the next slide where we have us chemicals and cleaning products production currently up 1.6 percent year over year at a phase v accelerating growth trend we expect that trend to persist into early 2018 finishing 2017 up 2.2 percent year over year before slowing to the low single digit about 0.4 percent growth as of 2018 we do expect a mild recession in 2019 you can see where our forecast error bars kind of just kiss the zero line and move along it you can see that any recession that we see is likely to be just around zero percent growth and will likely be a period of slower growth as opposed to feeling like a true recession that we saw about 10 years ago we can jump to the next slide we have durable hard goods components and parts production this is another one of those economic series that sounds like a bunch of gibberish but essentially what durable hard goods components of parts production is is anything that is expected to last more than two or three years that you buy either as a consumer or as a business this includes things such as computer parts and electronics household appliances consumer goods like jewelry home goods cutlery instruments and toys and auto parts and accessories so you can see it's a very broad economic indicator and there are a lot of different trends going on with it during a different period you can see that it has recently transitioned to 0.4 percent or to phase b that soft landing up about half a percent year over year and we expected to accelerate through 2017 finishing the year up not quite two and a half percent before slowing through 2018 again recessionary pressures are going to be mixed in 2019 and are going to be dependent really upon where your specific verticals are oriented within this market to kind of explicate how there are very different trends going on in the industry household appliances are currently up 5.7 percent earn a slowing growth trend computers parts and electronics goods are up 3.1 percent year over year while auto parts productions are currently in phase b accelerating growth and are up six and a half percent year over year all three of these are likely to be growth segments moving into at least late 2018 so if you're positioned to take use of or make use of growth in these verticals this really is a time of positivity where you want to start thinking about expansions and about what is next within your production cycle and finally now that we've talked about some of the and we can move on to the next slide by the way Rebecca now that we've talked about some of the overarching trends within the U.S. and some of the microeconomic vertical level trends that we're seeing I want to extrapolate that out to the U.S. or to the world as a whole and take a brief look at what we're seeing in various different parts of the international economy you can see here that we have a variety of global leading indicators I in those blue words you can see the OECD that's some of the largest developed countries the five major Asian economies Brazil Canada China India Japan all major economic players of the international team all of their leading indicators are moving up into the right they are signaling positivity they are signaling diminished headwinds against international trade and that's a good thing you can see on this chart in this red orange in blue we have different purchasing managers indexes like the one we saw in the U.S. we have the Eurozone we have the European Union and we have the JPMorgan global manufacturing PMI those are all generally rising but you see how similar to the U.S. there's some early signs of those graphs turning over of transitioning to that phase C which supports our expectation kind of asserts that what we're expecting about that slower growth period in 2018 is really going to be mirrored in the international economy as a whole which again making up about a quarter of the world's dust our economic production it's not unusual to see the international economy follow along with whatever trends we're seeing in the U.S. we can jump down to the next slide Rebecca here you can see we have a variety of graphs showing industrial production the more green you are the more positive the more red you're negative again we've already talked about the U.S. Canada is up 1.6 percent if you're selling into Canada that's a good thing Mexico is kind of a wash just about even with the year ago level there's a lot of volatility within a lot of markets especially those markets in Mexico that are poised to sell into the U.S. border states as we watch what's happening with NAFTA if we do manage to renegotiate NAFTA in a way that's mutually beneficial with the U.S. and Mexico we expect to see those industrial trends picking up right in line with the industrial demand that we're seeing in the U.S. in the second half of 2017 and moving into 2018 getting jumped to the next slide now South America more of a mixed bag in South America she lay down about a point and a half year over year Brazil in a relatively deep prolonged recession obviously the Petrobras scandals presidential scandals a lot of politics interfering with normal market activities coupled with the turn down in oil prices we saw last year that really hit Brazil hard take caution in Brazil 2018 is going to be better for them but you were not likely to see significant growth opportunities especially compared to what you enjoyed in this market in the earlier half of the early 2000s but you can see otherwise Argentina Peru Colombia up between a half a point a point and a half in phase B accelerating growth trends definitely some positivity in South America especially as we move up toward that central region and more of the countries that do some trade with Mexico you can jump to the next slide Rebecca Europe industrial production you can see a lot more grain here France Germany UK most of Eastern Europe in general seeing one two three percent year over year growth very healthy with a few notable exceptions excuse me Germany not France France just about even with the year ago level really grappling with some restrictive labor laws persistently high unemployment in some currency competition from Eastern Europe they do have some upside business cycle potential likely to transition into that light green sphere moving into 2018 not necessarily a period of significant economic growth though like we'll see in the rest of Europe also in the deep red Norway again having trouble recovering from the commodity price shock in the downturn in the oil and gas market that we saw over the last year year and a half we can jump down to the next slide which brings us to Asia much more positive you can see primarily China up six and a half percent as China goes their neighbors go to they are a huge driver of economic activity not just in this region but in the world as a whole we've seen demand for steel and coal increasing from China which does suggest that the economic activity they're seeing is sustainable as they really do have their private and public corporations scrambling for those base industrial materials India another one of the world's best performing emerging markets up 4.1 percent you can see Singapore up 6 percent Philippines up 13 percent Australia again just up 0.2 percent about even with the year ago level and as one of the world's largest producers of coal and steel again the turnout and mining and the commodity price shock really hit them hard but again as their neighbor China starts to ramp up their demand we expect to see that light pink move much closer to the green side of things in 2018 that gives us a nice little global perspective I'd be more than happy to answer more questions as they come after this Rebecca we've moved to the final slide I have for you today and again this is a slide that I want to leave you with that I've had up since the first half of the year and I want to stress it's important actions to take as a manager as a purchasing manager before the 2019 recessionary period again primarily no are your specific verticals going to have a harder soft landing in 2019 if you don't know that you cannot apply these bullet points but once you learn where you are in the business cycle where your specific verticals are moving with PMMI and us here at ITR you can start applying some of these concepts and really position yourself to be an industry leader instead of an industry follower as the market turns down in 2019 that's all I have for you today again thank you for coming thank you for listening and Rebecca I am going to turn it back over to you Chris thank you so much for the great reflection of the current economy and issues at hand for the packaging and processing industry I'd like to open the session up for questions if anyone has any questions that you would like to have answered you can message them in the bottom of your screen there's a message chat box or you can press star two to unmute your phone and we'll give people just a moment to see if we have any questions also Rebecca I'd like to take this moment to mention that if any of your members or their colleagues have questions after the fact that they'd like to answer they can email either you have them forward them over to me and my team or email ITR directly at questions at ITReconomics.com and we would be more than happy to do a little research for you and get back to you thanks Chris that was great I don't think we have any questions at this time and like Chris said if you do have any questions as follow-up please feel free to email Chris or myself or Paula Feldman with those questions and we will get those answered for you on behalf of PMMI thank you so much for participating today as a final note you will receive an email to complete a brief evaluation on today's webinar please complete the evaluation as soon as you can to let us know how we can improve and also this webinar will be posted on PMMI.org and thank you so much to everyone who attended thanks Chris thank you Rebecca