AGMA/ABMA 2012 Annual Meeting Fork in the road growing or slowing?

Transcription

1 AGMA/ABMA 2012 Annual Meeting Fork in the road growing or slowing? March 17, 2012 James P. Meil Vice President, Chief Economist 2012 Eaton Corporation. All rights reserved.

2 Key points on global economy Economies falling into three camps Surprising strength: U.S., Canada, Mexico, Germany Soft landing with downside risk: China, India, Brazil, Australia Recessionary: Europe What tops the worry list? Volatility of Europe, now in abeyance Iran, Israel and vulnerability of Persian Gulf/Straits of Hormuz Bubble in China s opaque economy; India s inflexible bureaucracy Politics U.S. elections, Europe snail s pace to crisis resolution Construction, industrial, transport & capital goods markets Global PMIs, other data show two speed industrial economy - NAFTA, and the rest Resi gradually rising; non-resi growing in U.S., troubled in Europe Capital goods back to 2008 peaks in U.S., struggling elsewhere Risk and uncertainty unusually high for the 3 rd year of a recovery Confidence is critical; unfortunately vulnerable Thesis: 2012 below trend growth as Europe double-dips Updated: March 11,

3 Citigroup G10 Economic Surprise Index and Eaton Financial Stress Index Citigroup Economic Surprise Index Eaton Financial Stress Index Higher Levels Indicate Positive Economic Data Surprises May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar Source: Citigroup via Bloomberg, Eaton Economics Data through March 13,

4 Evidence lead indicators Equity markets Yield curve (spread between long/short rates) Commodity prices Purchasing Managers Indices 4 4

5 Global Equity Markets 1 year U.S. Stocks S & P 500 Europe Stocks DJ Stocks 50 (EUR) Brazil Stocks Bovespa China Stocks Shanghai Composite Source: Daily data through March 13,

6 U.S. 10-Year Treasury Rates and 90-Day T-bills Percent Year Treasury Rate Day T-Bill Rate Source: U.S. Federal Reserve Board Data through February

7 Germany IFO Index 125 Current Situation 125 Index, 2000=100 (SA) Future Expectations Ifo Index Source: Ifo Institute Data through February

8 NFIB Small Business Optimism Index Index (1986 = 100) Source: NFIB 8 Monthly data through February

9 Global Oil and U.S. Gasoline Prices Weekly Retail Regular Self-serv Gasoline Price ($/gallon) Brent Crude (right) Retail Regular Gasoline Price (left) Brent Crude Spot Price ($ / barrel) Source: U.S. DOE, Energy Information Agency Weekly data through March 12,

10 Global Purchasing Managers Indexes: New Orders Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Global United States Canada Eurozone Germany France Italy Spain UK Russia Japan China India Brazil Color Key > <25 Sources: Markit Economics Ltd., Eaton Economics Data through February

11 Central Bank Actions March 2012 Central Bank Inflation Target Current Inflation European Central Bank 2.0% 2.7% Central Bank of Russia 7.0% 6.8% People's Bank of China 4.0% 4.5% Tightening/ Easing Start Duration (months) Extent Tighten 2011-Apr bps Ease 2011-Nov 3-50 bps Tighten 2010-Feb bps Ease 2011-Dec bps Tighten 2010-Oct bps Ease 2011-Nov 4-50 bps* Bank of Canada 2.0% ± 1.0% 2.9% Tighten 2010-Jun bps Banco Central do Brasil Reserve Bank of India Reserve Bank of Australia % 3.5% U.S. Federal Reserve 2.0% 4.5% ± 2.0% 6.0% % 7.4% 3.6% total 1.6% core Tighten 2010-Apr bps Ease 2011-Aug bps Tighten 2010-Mar bps Ease 2012-Jan bps* Tighten 2009-Oct bps Ease 2011-Nov 3-50 bps Sources: Respective Central Banks, Eaton Economics 11 Updated: March 9, 2012; * China, India eased RRR, non interest rate measure 11

12 Eurozone Manufacturing IP Indices GY IT SP FR Index, 2005=100 (3 mma) IP Growth Trends, (Annualized %) Type France Germany Italy Spain 12 Mos (Dec11/Dec10) Mos (Dec11/Jun11) Source: Eurostat via Haver Analytics Data through December

13 Germany Fluid Power Industrial Production Trend (Annualized %) Production Orders Index, 2005 = 100 (SA, 3 mma) Mos (Dec11/Dec10) Mos (Dec11/Jun11) German Production German Orders Index, 2005 = 100 (SA, 3 mma) Source: Eurostat via Haver Analytics Data through December

14 Western Europe Passenger Car Registrations Production Annual Production Levels 2009, 2010, 2011(fore) Millions (SAAR, 3 mma) Sources: ACEA, IHS Global Insight, LMC Automotive (JD Power) Data through January 2012, February 2012 estimates 14 14

15 China Industrial Production Index 25 Y/Y Ind Prod Growth Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 JanFeb % 13.8% 13.2% 12.4% 12.8% 11.4% Y/Y % Change % average growth rate Sources: Chinese National Bureau of Statistics and Eaton Economics Data through January-February

16 China Motor Vehicle Sales CAGR ( ): Total: 26% PV: 28% CV: 20% Y/Y Growth Nov-11 Dec-11 Jan-12 Feb-12 Total -2.4% -1.2% -26.7% 23.7% PV 0.3% 4.9% -24.9% 25.4% CV -15.9% -10.9% -37.2% 18.1% Thousand Units, SA Total Motor Vehicles Passenger Vehicles Commercial Vehicles Sources: China Association of Automobile Manufacturers via CEIC; Eaton Economics 16 Data through February

17 Brazil Manufacturing Industrial Production Index Mfg IP Growth Trend (Annualized %) 12 Mos (Dec11/Dec10) Mos (Dec11/Jun11) Index (2002=100), SA Source: IGBE Data through December

18 Brazil Farm Machinery 100 Growth CAGR % Production Registrations Mos (Feb12/Feb11) 4.7% -2.1% 6 Mos (Feb12/Aug11) 38.7% 8.7% Thousand Units (SAAR, 3 mma) Net Exports Registrations Production Source: ANFAVEA Data through February

19 U.S. Housing Starts Millions of Units (SAAR, 3 mma) Total Units Single-Family Units Source: U.S. Census Bureau Data through January

20 U.S. private non-residential construction spending detail by sector q-to-same-q prior year 2011H2/ 2010H Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 % Chg B 2005 $ % of Total Total Private Nonresidential Construction Commercial and Health Care Structures Office Health Care Other Commercial Manufacturing Structures Power and Communication Structures Power Communication Mining Structures, Shafts, and Wells Petroleum and Natural Gas Mining Transportation Other Nonresidential Structures Religious Educational and Vocational Amusement and Recreational Other Source: U.S. Bureau of Economic Analysis (NIPA Table 5.4.5U) Data from GDP release (2011Q4 revised) 20 20

21 ($) Millions (SAAR, 3 mma) U.S. Light Vehicle Retail Sales Auto Sales SAAR in last 4 mos: Nov 13.6 / Dec 13.5 / Jan 14.1 / Feb Detroit-3 average incentive per vehicle $3027/vehicle in CY 2011 $3026/vehicle in Jan $3038/vehicle in Feb Sources: Ward s Automotive and Motor Intelligence Data through February

22 U.S. Manufacturing Industrial Production Indices: Non-durables and Durables Industries Durable s Index, 2002 = Non-durable s Recent Growth Trend (Annualized % ) Non-dur Durables 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) Source: U.S. Federal Reserve Board Data through January

23 U.S. Non-defense Cap Goods ex-aircraft Orders Billions of $'s (3 mma) Shipments Recent Shipments Trend (Annualized %) 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) Source: U.S. Census Bureau Data through January

24 U.S. Capacity Utilization & Growth in Industrial Equipment Investment Capacity Utilization % Change in Industrial Equipment Inv (right - bars) Capacity Utilization (left - line) % Change (2 qma) Sources: U.S. Bureau of Economic Analysis, U.S. Federal Reserve Board Data through 2011q4 (Ind Equip Inv) and January 2012 (Capacity Utilization) 24 24

25 U.S. Industrial Machinery Billions of $ (3 mma) Shipments Orders Shipments Growth Trend (Annualized %) 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) Source: U.S. Census Bureau Data through January

26 U.S. Technology Consumption Domestic Machine Tool Orders Orders Trend (Annualized %) 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) Billions of $ (3mma) Source: Association for Manufacturing Technology 26 Data through January

27 U.S. Metalworking Machinery Billions of $ (3mma) Orders Shipments Trend (Annualized %) 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) 30.7 Shipments Source: U.S. Census Bureau Data through January

28 U.S. Total Hydraulics Real Index, 2010 = 100 (SA, 3 mma) Shipments Trend (Annualized %) 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) 1.9 Shipments Orders Source: National Fluid Power Association Data through January

29 Civilian Aircraft Deliveries Boeing Airbus January February March April May June July August September October November December YTD % Change YTD -3% -8% -6% 38% 1% -12% 9% 15% 2012 Projections Actuals % Change 28% -4% 3% 24% 3% 2% 5% 7% Sources: and Data through February

30 ATA Truck Tonnage Index and U.S. Manufacturing Industrial Production Index 1993 = 100 (SA, 3 mma) Recent Activity Trends (Annualized %) Mfg IP ATA Tonnage 12 Mos (Jan12/Jan11) Mos (Jan12/Jul11) ATA Truck Tonnage Index Manufacturing Industrial Production Sources: American Trucking Association and U.S. Federal Reserve Board 30 Data through January

31 NAFTA Class 6-7 Buses & Trucks (excluding RVs) Thousands (SA, 3 mma) Orders Build Actual & Build Plan Source: ACT; Orders and Build data through January 2012 Plan forecast through July

32 NAFTA Class 8 Trucks Thousands (SA, 3 mma) Orders Build Actual & Build Plan Source: ACT; Orders and Build data through January 2012 Build Plan through June

33 U.S. Macroeconomic Outlook 2011 Forecast 2012 Forecast Qtr 3* Qtr 4* Qtr 1* Qtr 2* Qtr 3* Qtr 4* Actual Actual Forecast act act f f f f Real GDP Consumer Spending Capital Spending Equipment Structures Government Spending Net Exports (Y2K$B) Mfg Industrial Production Housing Starts (M) US Light Vehicle Sls (M) NA Lt Veh Production (M) Unemployment Rate (%) Day Treasury Yield Year Treasury Yield GDP Deflator Percent Changes except where indicated Updated March 4, 2012 * changes expressed as q/q seasonally adjusted annualized rates 33 33

34 Global Macroeconomic Outlook GDP and Mfg Industrial Production Real GDP Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Actual A/F Forecast Forecast act act act f f f f World United States Brazil Europe EU Eurozone China* Japan India* Manufacturing IP Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Actual A/F Forecast Forecast act act act a/f f f f f World United States Brazil Europe EU Eurozone China* Japan India* Percent changes at seasonally adjusted annual rates, using market exchange rates Updated March 8, 2012 * China, India are y/y rates 34 34

35 EU-27 Industrial Markets/Production Outlook Actual Actual Actual Fcst Fcst Light Vehicle Production (M) Medium Comm'l Veh Prod (K) Heavy Comm'l Veh Prod (K) Mfg Industrial Production Agricultural Equipment Mining,Quarry & Constr Eq Lifting and Handling Eq Fluid Power Equipment Percent Change (except where indicated) 35 Updated: March 4,

36 NAFTA/U.S. Industrial Markets / Production Outlook Actual Fcst Actual Fcst Fcst NAFTA Lt Veh Production (M) NAFTA Cl 6-7 Truck Prod (K) NAFTA Class 8 Truck Prod (K) US Ag Equipment Shp US Constr, Min, Matl Handling Eq US Hydraulics US Industrial Eq Purchases Housing Starts (M) Mfg. Capacity Utilization % Oil Prices (Refiners Acq Cost) Percent Change (except where indicated) 36 36

37 Key points on global economy Economies falling into three camps Surprising strength: U.S., Canada, Mexico, Germany Soft landing with downside risk: China, India, Brazil, Australia Recessionary: Europe What tops the worry list? Volatility of Europe, now in abeyance Iran, Israel and vulnerability of Persian Gulf/Straits of Hormuz Bubble in China s opaque economy; India s inflexible bureaucracy Politics U.S. elections, Europe snail s pace to crisis resolution Construction, industrial, transport & capital goods markets Global PMIs, other data show two speed industrial economy - NAFTA, and the rest Resi gradually rising; non-resi growing in U.S., troubled in Europe Capital goods back to 2008 peaks in U.S., struggling elsewhere Risk and uncertainty unusually high for the 3 rd year of a recovery Confidence is critical; unfortunately vulnerable Thesis: 2012 below trend growth as Europe double-dips Updated: March 11,

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