Business Cycles From Boom to Bust and Back Again Dr. Dale S. Rogers Professor, Logistics & Supply Chain Management Interim Chair, Supply Chain Management Department Arizona State University Tuesday, May 23
Business Cycles From Boom to Bust and Back Again One constant in business is change. Prices, revenues, and markets go up and go down. These changes impact people around the world, and change how purchasing organizations must deal with suppliers and sourcing decisions. In this session Dr. Dale S. Rogers, will describe economic cycles that impact all of us and how to develop strategies to manage against disruptive fluctuations.
Setting the Stage 2008 2009 Recession has given way to a new normal of: Low growth Rising Income inequality Political Dysfunction Social tension
GDP 1969-2016 Billions GDP 1969-2016 20,000.0 18,000.0 16,000.0 14,000.0 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 0.0
Increased Stability Great Moderation 1. Shift in employment to less cyclical, service-based industries. Inventory and dura le goods production tend to be destabilizing. 2. Increased size of acyclical government sector. 3. Increased role of automatic (mainly fiscal) stabilizers 4. Reduced frequency and intensity of fiscal crises. 5. Some favorable fiscal (mainly tax) policies 6. Reduced volatility of monetary growth 7. Greater confidence in private economic agents, both induced by business cycle moderation itself and inducing behavior favorable to more stable economic growth. Source: Zarnowitz, Victor (1992). Business Cycles. University of Chicago Press.
GDP However, GDP is only a measure of finished goods and services in the last tier before the consumer. GDP first came into use in 1937 in a report to the US Congress in response to the Great Depression after Russian economist Simon Kuznets conceived the system of measurement. GDP is Keynesian Purchasing managers intuitively understand problems with GDP. Dr. John Hoagland
Purchasing Managers Index 1948-2017
ISM Most Recent Results MANUFACTURING AT A GLANCE April 2017 Index Series Index Apr Series Index Mar Percentage Point Change Direction Rate of Change Trend* (Months) PMI 54.8 57.2-2.4 Growing Slower 8 New Orders 57.5 64.5-7.0 Growing Slower 8 Production 58.6 57.6 +1.0 Growing Faster 8 Employment 52.0 58.9-6.9 Growing Slower 7 Supplier Deliveries 55.1 55.9-0.8 Slowing Slower 12 Inventories 51.0 49.0 +2.0 Growing From Contracting Customers' Inventories 45.5 47.0-1.5 Too Low Faster 7 Prices 68.5 70.5-2.0 Increasing Slower 14 Backlog of Orders 57.0 57.5-0.5 Growing Slower 3 New Export Orders 59.5 59.0 +0.5 Growing Faster 14 Imports 55.5 53.5 +2.0 Growing Faster 3 OVERALL ECONOMY Growing Slower 95 Manufacturing Sector Growing Slower 8 1
Index Performance
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 U.S. Average Inventory to Sales Ratio 1992-2017 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
Great Recession
US Real Estate Supply Chain
Employment for the largest occupations in the United States, May 2016
Annual mean wages for the largest occupations in the United States, May 2016
Major occupational groups as a percentage of total U.S. employment, May 2016
Logistics Managers Index LOGISTICS AT A GLANCE Index Mar/April Index Jan/Feb Index MoM Change Projected Direction Rate of Change LMI 65.6 66.0-0.5 Growing Slowing Inventory Levels 66.0 56.2 +9.8 Growing Increasing Inventory Costs 68.9 65.4 +3.5 Growing Increasing Warehousing 57.1 59.5 Capacity -2.4 Growing Slowing Warehousing 70.5 76.3 Utilization -5.8 Growing Slowing Warehousing Prices 61.0 69.7-8.7 Growing Slowing Transportation 62.0 57.8 Capacity +4.2 Growing Increasing Transportation 68.2 67.9 Utilization +0.3 Growing Increasing Transportation 70.5 prices 75.3-4.8 Growing Slowing
THE LAST 3 READINGS Month Mar/April LMI 65.5 Average for previous 3 readings 64.8 High 66.0 Jan/Feb 66.0 Nov/Dec 2016 62.9 Oct 2016 54.9 Sep 2016 63.9 Low 54.9
LMI Inventories Inventory Levels 62.2 58.6 56.2 66.0 45.9 September October Nov/Dec Jan/Feb Mar/April
Jan/Feb - Mar/April Index Change: Inventory Levels 0.80 0.60 0.40 0.20 0.00-0.20-0.40
Inventory Costs Inventory Costs 68.9 67.6 65.5 65.4 59.5 September October Nov/Dec Jan/Feb Mar/April
Inventory Costs by Industry 0.60 Jan/Feb - Mar/April Index Change: Inventory Cost 0.40 0.20 0.00-0.20-0.40-0.60
Warehousing Capacity Warehousing Capacity 58.2 55.2 59.5 57.1 44.2 September October Nov/Dec Jan/Feb Mar/April
Warehousing Capacity by Industry 0.40 Jan/Feb - Mar/April Index Change: Warehouse Capacity 0.30 0.20 0.10 0.00-0.10-0.20-0.30-0.40-0.50
Warehousing Utilization 76.3 68.3 62.5 67.0 70.5 September October Nov/Dec Jan/Feb Mar/April
Jan/Feb - Mar/April Index Change: Warehousing Utilization 0.20 0.15 0.10 0.05 0.00-0.05-0.10-0.15-0.20-0.25
Warehousing Prices 76.9 68.9 71.8 69.7 61.0 September October Nov/Dec Jan/Feb Mar/April
Jan/Feb - Mar/April Index Change: Warehousing Price 0.10 0.05 0.00-0.05-0.10-0.15-0.20-0.25-0.30-0.35-0.40
Transportation Capacity 54.5 57.8 62.0 49.1 34.1 September October Nov/Dec Jan/Feb Mar/April
Jan/Feb - Mar/April Index Change: Transportation Capacity 0.40 0.30 0.20 0.10 0.00-0.10-0.20-0.30
Transportation Utilization 68.5 67.9 68.2 57.7 59.3 September October Nov/Dec Jan/Feb Mar/April
0.30 Jan/Feb - Mar/April Index Change: Transportation Utilization 0.20 0.10 0.00-0.10-0.20-0.30-0.40
Transportation Prices 75.3 70.5 67.2 65.6 65.1 September October Nov/Dec Jan/Feb Mar/April
Jan/Feb - Mar/April Index Change: Transportation Price 0.15 0.10 0.05 0.00-0.05-0.10-0.15-0.20-0.25-0.30
End of presentation Extra slides follow
Sectoral Dynamics (Industrial Production)
Contribution of Sectoral Changes to GDP Growth Volatility
most frequent source of financing for postsecondary education
Recessions (Shaded Regions)
Y O U R F E E D B A C K I S I M P O R T A N T Please take a few minutes to complete this brief survey. Survey link: www.instituteforsupplymanagement.org/fa17 or Scan the QR code on your smartphone.