First in Forecasts Since 1948

BRIAN BEAULIEU

First in Forecasts Since 1948

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First in Forecasts Since 1948

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

2018 Preliminary Forecast ResultsIf you heard ITR around two years prior… 3

Duration AccuracyUS GDP 24 99.9%US Ind. Production 34 99.4%Europe Ind. Production 24 99.2%Canada Ind. Production 27 97.1%China Ind. Production 30 99.9%Retail Sales 28 99.6%Housing (Single Family Units) 26 99.2%Employment (Private Sector) 30 99.4%

First in Forecasts Since 1948

US Economy Stalls in 2019 and Into 2020US Real Gross Domestic Product

Source: BEA3MMA Data Trend

14

15

16

17

18

19

20

13

14

15

16

17

18

19

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

GDP - 3MMA Before Data Revision

Sep '15 Forecast

GDP - 3MMA

June '18 Forecast

First in Forecasts Since 1948

US and Wisconsin GDP Growth Rate

-6

-4

-2

0

2

4

6

'06 '08 '10 '12 '14 '16 '18 '20U.S. Wisconsin

Source: BEA3/12 Rates-of-Change

First in Forecasts Since 1948

2.2%

4.7% 4.6%

6.4% 6.1%

2.7%

1.3%

-0.8%

2.8%

4.0%3.3% 3.3% 3.2%

-0.7%

3.4%2.6%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Milwaukee GDP Growth Rate

Milwaukee Gross Domestic ProductMilwaukee-Waukesha-West Allis, MSA

Source: BEAYear-over-Year Percent Change

6

First in Forecasts Since 1948

Manufacturing: A Growing Part of AmericaUS Industrial Production Index to US Total Manufacturing Production Index

105.7108.3

30

45

60

75

90

105

120

30

45

60

75

90

105

120

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

ManufacturingUS IP

US IP

Manufacturing

Source: FRBAnnual Data Trends

7

First in Forecasts Since 1948

Manage the Business Cycles to Maximize ProfitsUS Industrial Production to Gross Domestic Product

-6.9%-2.9%

-5.2%

-15.5%

3.9%

-16

-12

-8

-4

0

4

8

12

-16

-12

-8

-4

0

4

8

12

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

GDPUS IP

GDPUS IP

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

8

First in Forecasts Since 1948

Lower Taxes Likely to Provide a Temporary BoostUS Top Marginal Individual Tax Rates to Real GDP Growth Rate

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-4%

-2%

0%

2%

4%

6%

8%

10%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020Real GDP Growth Rate - 3/12 Top Marginal Tax Rate

Sources: Tax Foundation, BEA Tax Rate - Percent, GDP - 3/12

Rea

l GD

P G

row

th R

ate Top M

arginal Tax Rate

First in Forecasts Since 1948

Not All Freed Up Money Went to CapexUS Corporate Tax Rate and Gross Business Investment

0%

10%

20%

30%

40%

50%

60%

70%

0%

10%

20%

30%

40%

50%

60%

70%

'60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16

Corporate Tax Rate %

Gross Business Investment (% of GDP)

Linear (Gross Business Investment (% of GDP))

Sources: Tax Policy Center, FREDPercent

10

Atlanta Federal Reserve Survey W.S. SurveyHard Data

First in Forecasts Since 1948

50

200

350

500

650

800

-180

-120

-60

0

60

120

'06 '08 '10 '12 '14 '16 '18 '20 '22

MMTR-O-C

12MMT

3/1212/12

Rate-of-Change – A Management Tool

11

First in Forecasts Since 1948

Global Issues• Business Cycle• Tariffs

First in Forecasts Since 1948

United States

China

Japan

Australia

Percent of 2017 World GDP by Country

13Source: IMF, *67% are IMF Estimated Figures

24.3%

15.0%

6.1%4.6%3.3%3.3%

3.2%2.6%

2.4%2.1%

1.9%

1.9%

1.7%1.6%1.4%1.3%1.1%1.0%

0.9%0.8%

19.4%

United States

China

Rest of World

Japan

Mexico

*Total 2017 World GDP: $79.865 Trillion US$

First in Forecasts Since 1948

Trade Stress Becomes Acute on the Downside of the CycleWorld Industrial Production Index to G7 Leading Indicator

-6

-4

-2

0

2

4

6

-15

-10

-5

0

5

10

15

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

World IP

Indicator

IndicatorWorld IP

1/1212/12

Sources: CPB Netherlands Bureau For Economic Policy Analysis, OECDRates-of-Change

Fair Trade

Competition

First in Forecasts Since 1948

Brands That Have or Will Be Increasing Prices Due to Tariffs

Source: Business Insider, “These popular brands say Trump's tariffs will force them to raise prices”

TOYOTAWHIRLPOOLCOCA-COLAWINNEBAGOMILLER COORSSAMUEL ADAMSCAMPBELL SOUPLG ELECTRONICSGENERAL MOTORSKLEENEX & HUGGIESPOLARIS INDUSTRIESNEWELL BRANDS (Crock-pot, Rubbermaid, Yankee Candle, & Sharpie)

“I can't just go to the shareholders and say, 'You're just going to have to accept my profit's going to be $40 million less. It doesn't work that way…”

- Gavin Hattersley, CEO MillerCoors

First in Forecasts Since 1948

Leading Indicators

First in Forecasts Since 1948

ITR’s Leading Indicator™ Says Problems AheadUS Industrial Production to ITR Leading Indicator™

-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15

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

IndicatorUS IP

Indicator - Monthly

US IP - 12/12

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

Reported in ITR Trends Report – ITR Advisor

First in Forecasts Since 1948

Leading Indicator System as a Powerful ToolUS Industrial Production Index to Leading Indicators

-60

-40

-20

0

20

40

60

-15

-10

-5

0

5

10

15

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

US IP - 12/12US IP ForecastG7 Indicator - 1/12PMI - 1/12Wilshire Market Cap - 3/12JP Morgan Indicator - 3/12

PMI, Wilshire, G7US IP, JP Morgan

Sources: FRB, OECD, ISM, Yahoo Finance, IHS MarkitRates-of-Change

First in Forecasts Since 1948

Copper is Signaling a Slowdown in SpendingUS Copper Futures Prices to

US Nondefense Capital Goods New Orders(excluding aircraft)

-1.2%

6.1%

-30

-20

-10

0

10

20

-150

-100

-50

0

50

100

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

Capital GoodsCopper

Copper Futures Prices

Capital Goods

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

19

First in Forecasts Since 1948

Financial Markets

Back to the USA

First in Forecasts Since 1948

10

100

1000

10000

10

100

1000

10000

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Raw

12MMA

Perilous Height Is Not the Issue S&P500 Stock Prices Index

Source: Wall Street JournalData Trends

21

First in Forecasts Since 1948

Analysis of the CAPE RatiosJanuary 1900 – January 2019

Analysis prepared by : Baird Family Wealth Group January 2019Source: Robert Shiller – Yale University

First in Forecasts Since 1948

All Except for SteelCommodity Prices

Source: WSJ, London Metal Exchange, BLS3/12 Rates-of-Change

-22.8% Zinc-14.8% Alum

14.5% Steel

-12.6% Copper

-60

-30

0

30

60

90

120

150

-60

-30

0

30

60

90

120

150

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

All Others Copper & Steel

First in Forecasts Since 1948

US Mortgage Rate Will Be Heading HigherUS 30-Year Mortgage Rate

0

1

2

3

4

5

6

7

8

0

1

2

3

4

5

6

7

8

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

Source: Wall Street Journal30-Year, Percent

First in Forecasts Since 1948

People

First in Forecasts Since 1948

State Population Growth Rates

Source: US Census BureauPercent Change from Population Estimates 2010 to 2018

First in Forecasts Since 1948

Retail Sales Ultimately Drive Filling, Packing, Stacking, Moving, Shipping, etc.

US Retail Sales

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

27

10.67.5

7.14.8

4.73.63.5

3.43.2

1.10.8

-6 -4 -2 0 2 4 6 8 10 12

Online Retailers

Jewelry Stores

Furniture Stores

Clothing Stores

Beer, Wine & Alcoholic Beverage

Health and Personal Care Stores

Bldg Materials, Garden, Supplies

Grocery Stores

General Merchandise Stores

Automotive Parts Stores

Light Vehicle Sales

First in Forecasts Since 1948

Searching for a RecessionUS Search Interest for "Recession" on Google to US Retail Sales

Sources: Google, US Census BureauRates-of-Change (Search Interest has a 16 month lead time)

-24

6

36

66

96

126-12

-8

-4

0

4

8

'06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Retail Sales

Retail Sales - 12/12

Search Interest - 3/12

3/12

12/12

Search Interest

First in Forecasts Since 1948

Decline for WI Single-Family Housing Building Permits

Source: Census BureauThousands of Units

29

-5.7%-1.6%

11.70

15

30

45

60

75

90

-120

-90

-60

-30

0

30

60

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

MMTR-O-C

3/1212/12

3MMT

12MMT

First in Forecasts Since 1948

Multi-Family on the Rise in WIWisconsin Multi-Family Housing Unit Building Permits

-1.6%15.4%

6.7

0

7

14

21

28

35

-225

-150

-75

0

75

150

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

MMTR-O-C

3/12

12/12

3MMT12MMT

Source: Census BureauThousands of Units

First in Forecasts Since 1948

Milwaukee Housing Unit Building PermitsMilwaukee-Waukesha-West Allis, MSA

-10.4%0.9%

3.4

0

3

6

9

12

15

18

21

-200

-150

-100

-50

0

50

100

150

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

MMTR-O-C

12MMT3MMT

3/12 12/12

Source: US Census BureauThousands of Units

First in Forecasts Since 1948

Wisconsin Housing Price Index

Source: Federal Housing Finance AgencyRaw Data, 1991 = 100

32

150

175

200

225

250

275

150

175

200

225

250

275

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

Raw

First in Forecasts Since 1948

Milwaukee to Wisconsin Housing Price IndexMilwaukee-Waukesha-West Allis, MSA

0

70

140

210

280

350

420

0

70

140

210

280

350

420

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018Milwaukee Wisconsin

Source: Federal Housing Finance AgencyAnnual Data Trend, 1991 = 100

33

First in Forecasts Since 1948

ITR’s Leading Indicator Says Cyclical Rise in 2019US Private Nonresidential Construction to ITR Leading Indicator

-15

-10

-5

0

5

10

-45

-30

-15

0

15

30

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

ConstructionConstruction ForecastIndicator

IndicatorConstruction

Sources: US Census Bureau, ITR Economics Rates-of-Change

ITRLI Leads by 20 months

First in Forecasts Since 1948

2

3

4

5

6

7

8

9

10

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

US to Wisconsin Unemployment Rates

Source: BLSPercent

35

Dec 2018US 3.9%WI 3.0%

First in Forecasts Since 1948

County Unemployment Rates

Source: BLSRaw Data, %

3.0%

2.1%2.2%2.3%

0

2

4

6

8

10

12

0

2

4

6

8

10

12

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

MilwaukeeOzaukeeWashingtonWaukesha

First in Forecasts Since 1948

In Search of More and More LaborUS Private Sector Employment

88

98

108

118

128

85

95

105

115

125

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

Employment Mils of Jobs

Private Sector Employment GrowthJob Openings 6.6 million 13.5% B

1.9% B

Source: BLSAnnual Data Trend

37

First in Forecasts Since 1948

Wisconsin to County Average Annual Wages

1.4%

2.4%2.6%

2.4%

4.1%

-6

-3

0

3

6

9

-4

-2

0

2

4

6

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22

OzaukeeAll Others

Milwaukee Wisconsin

Washington Waukesha

Ozaukee

Source: BLS12/12 Rates-of-Change

38

First in Forecasts Since 1948

Cyclical Rise in Prices IndicatedConsumer Price Index for Health Insurance

Source: Bureau of Labor Statistics2005 = 100

6.5%1.6%

136.2

100

115

130

145

160

175

-24

-16

-8

0

8

16

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

MMAR-O-C

1/12 12/12

Raw

12MMA

First in Forecasts Since 1948

Automation/Robots Do Not Hurt Mfg EmploymentRIA Shipments to US Total Manufacturing Employment

Sources: Robotics Industries Association, Bureau of Labor StatisticsAnnual Data Trends

11

13

15

17

0

1

2

3

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

RIA Shipments

Employment

EmploymentRIA Shipments

Mfg Employment 2.0% B 12.7m Highest in 11 yrs

Mfg Job Openings 19.3% B 493,000 Near Record High

Mfg Hourly Wage $27.36 Near Record High

First in Forecasts Since 1948

Rising as ExpectedUS National Defense Expenditures to US Defense Capital Goods New Orders

-45

-30

-15

0

15

30

45

60

75

-12

-8

-4

0

4

8

12

16

20

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

OrdersExpenditures

ExpendituresOrders

Obama

Source: Bureau of Economic Analysis, US Census Bureau12/12 Rates-of-Change

41

Reagan Bush Clinton BushCarter Trump

First in Forecasts Since 1948

The Long ViewProsperity in the Age of Decline

First in Forecasts Since 1948

A Model for the FutureUS Industrial Production Index

2

4

6

8

10

12

2

4

6

8

10

12

'20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

12MMA3MMA

12MMA

3MMAGreat Depression

Roaring 20s (3 recessions)

Source: FRBData Trends

First in Forecasts Since 1948

Issues Government Will and Won’t TackleUS Federal Government Receipts and Payments

$0

$375

$750

$1,125

$1,500

$1,875

$2,250

$2,625

$3,000

$0

$375

$750

$1,125

$1,500

$1,875

$2,250

$2,625

$3,000

Current Tax Receipts

Consumption Expenditures

Current Transfer Payments

Interest Payments

Source: BEABillions of Dollars

44

First in Forecasts Since 1948

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