The document discusses the economic outlook for building materials and identifies opportunities and risks in the evolving business cycle. It analyzes key economic indicators including GDP growth, retail sales, housing starts, inflation, and interest rates. While composite panel markets are expected to see better conditions with stronger growth in 2015-2016, risks include weak retail spending, recession, and a stronger US dollar. The document advises companies to have flexible operating plans to address potential downside risks or upside surprises.

1. The Economic Outlook for
Building Materials:
New Opportunities and Risks in the
Evolving Business Cycle
Dr. Bill Conerly
for
Composite Panel Association
June 1, 2015

2. 0
1
2
3
4
2011 2012 2013 2014 2015 2016
percentchange
U.S. Real GDP Growth

3. 0
1
2
3
4
2011 2012 2013 2014 2015 2016
percentchange Canada Real GDP Growth
IMF Forecast

4. 0
1
2
3
4
5
2011 2012 2013 2014 2015 2016
percentchange Mexico Real GDP Growth
IMF Forecast

5. 340
360
380
400
420
440
2011 2012 2013 2014 2015
$billions Retail Sales
excluding gasoline

6. 6.5
7.0
7.5
8.0
8.5
2011 2012 2013 2014 2015
$billions Retail Sales: Furniture Stores

7. Singles
Multis
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2011 2012 2013 2014 2015
millionsofunits Housing Starts

8. 2.0
2.5
3.0
3.5
4.0
4.5
2011 2012 2013 2014 2015
permits,millions BuildFax Remodeling Index

9. 20
30
40
50
60
70
2011 2012 2013 2014 2015
$billions Commercial Construction

10. All Items
Ex Food &
Energy
-1
0
1
2
3
4
2011 2012 2013 2014 2015
%change12months Inflation
Consumer Price Index

11. 0
1
2
3
2011 2012 2013 2014 2015
4-quarter%change
Employment Cost Inflation
including wages and benefits

12. West Texas
0
20
40
60
80
100
120
2011 2012 2013 2014 2015
$/barrel Oil Prices

13. 3-month
T-bill
30-year
mortgage
0
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016
percent
Interest Rate Forecast

14. 90
95
100
105
110
115
120
2011 2012 2013 2014 2015
index
Foreign Exchange Value of $
trade-weighted index

16. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
$trillions Bank Reserves

17. 0
5
10
15
20
25
30
percent Risk of Recession
Wall Street Journal survey
May: 12%

19. Sources of Uncertainty
Economy
Technology
Social Attitudes
Government
Competition

22. The Flexible Stance
Operating Plans
What would I do if the recession hits?
What would I do in a strong recovery?
Areas of Concern
Sales/marketing
Inventories
Capital spending
Staff
Working capital
Lines of business

23. The Nutshell
Most likely
Better markets for composite panels
Stronger growth in rest of 2015 & 2016
Higher interest rates
Oil prices around $60 - $70
Downside Upside
Weak retail spend Consumer optimism
Recession Stronger building
Dollar rises Dollar falls

24. Questions?
Bill @ ConerlyConsulting.com
one “n”