The election of Donald Trump as president of the United States will likely have a profound effect for years to come. I cannot remember another point in my lifetime where there is the possibility of so much change and disruption to established norms and principles of business. How do we prepare for what could be a roller coaster four or eight years in North America and around the world?
Knowledge is power. The intent of this blog is to propose a set of KPIs that we can all use to measure the impact of the new president and his policies. Mr. Trump has made a number of bold promises in his pre- and post-election speeches. Specifically, he has promised to “Make America Great Again,” to stem the flow of manufacturing jobs overseas and to renegotiate NAFTA. By monitoring these KPIs, they will help us determine how his presidency is impacting our countries, our companies, and our personal wealth. Here are few KPIs to consider.
1. Gross Domestic Product
GDP represents the total dollar value of all goods and services produced over a specific time period (Source: https://www.bea.gov/national/index.htm#gdp ); you can think of it as the size of the economy. The US economy advanced an annualized 3.5 percent in the three months to September of 2016. (Source: http://www.tradingeconomics.com/united-states/gdp-growth )
The new president has promised to elevate the level of economic growth in the United States. These statistics are published monthly, usually the first week of the month. They will tell us about the growth in the United States. Similar data is available in other countries.
2. Employment
Employment levels are a key indicator of job growth and of economic growth. (Source: https://www.bls.gov/ ) Since president-elect Trump has focused on increasing manufacturing jobs in America, this should be tracked on a regular basis. (Source: https://fred.stlouisfed.org/series/MANEMP )
3. Manufacturing
The Institute of Supply Chain Management publishes a monthly index. (https://www.instituteforsupplymanagement.org/ismreport/mfgrob.cfm?SSO=1 ) The ISM Manufacturing Index monitors employment, production, inventories, new orders and supplier deliveries. This index will also tell us, over time, if the president-elect is achieving success in this area.
4. NAFTA Trade
Trade is critical to all three NAFTA partners. The new president has suggested that the NAFTA trade agreement, that has been in place since 1994, needs to be renegotiated. NAFTA data is published monthly and displays trade statistics between the three countries. (Source: https://www.google.ca/search?q=nafta+statistics+2016&sa=X&rlz=1C2WPZA_enCA710CA710&biw=1536&bih=735&tbm=isch&tbo=u&source=univ&ved=0ahUKEwirudWz6bDRAhUDymMKHVz_DLIQsAQIOA&dpr=1.25 )
5. The Stock Market Indices
North American stock markets have been trending upwards since Mr. Trump’s election as companies anticipate higher profits. The new president has promised to reduce corporate taxes and regulations to create a more positive business environment. The stock market trends are telling us that people believe the new administration can make a difference in the levels of corporate and personal wealth. The question is how long will it take the new administration to “prime the pump” and will the reality be consistent with the current high expectations? The performance of North America’s major stock markets (i.e. the Dow Jones Industrial Average and the Toronto Stock Exchange) can be monitored throughout the day. (Source: https://www.bloomberg.com/markets/stocks )
6. Exchange Rates
The American dollar has strengthened over the past year while the Canadian dollar and Mexican peso have drifted downwards. The value of these currencies is a good proxy for how people perceive the impact of the new president’s policies on trade and jobs. This can be tracked 24/7. (Source: http://www.x-rates.com/ )
7. Interest Rates
Interest rates have remained low since the Great Recession. This huge downturn began almost a decade ago, before president Obama was elected. The argument has been that these low interest rates have been necessary to stimulate the weak economy. Most experts agree that this has been a rather slow and extended recovery. Rising interest rates would be one sign of a more rapidly recovering economy and of the need to restrain inflation during what people hope will be a period of enhanced growth. (Source: http://www.tradingeconomics.com/united-states/interest-rate )
8. Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time, resulting in a loss of value of currency. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money. This index is published monthly. (Source: http://www.tradingeconomics.com/united-states/inflation-cpi )
9. Cost per Barrel of Crude Oil
Crude oil is a fossil fuel, and it exists in liquid form in underground pools or reservoirs, in tiny spaces within sedimentary rocks, and near the surface in tar (or oil) sands. Petroleum products are fuels made from crude oil and other hydrocarbons contained in natural gas. Petroleum products can also be made from coal, natural gas, and biomass. After crude oil is removed from the ground, it is sent to a refinery where different parts of the crude oil are separated into useable petroleum products. These petroleum products include gasoline, distillates such as diesel fuel and heating oil, jet fuel, petrochemical feedstocks, waxes, lubricating oils, and asphalt. A 42 U.S. gallon barrel of crude oil yields about 45 gallons of petroleum products in U.S. refineries.
The price of crude oil is a key element of many costs including transportation costs. President-elect Trump has spoken frequently about his skepticism about climate change as has his no ERA chief. This will be an important index to monitor. (Source: http://www.nasdaq.com/markets/crude-oil.aspx )
10. Wage Growth
Wage growth has been a concern of many of Trump’s supporters, particularly working class Americans who have not achieved much of an increase in their wages in recent years. The new president has spoken about improving the financial well-being of these individuals. This indicator will be an important measurement of the Trump Effect. (Source: http://www.tradingeconomics.com/united-states/wage-growth )
11. The Dow Jones Transportation Index
Like many of you who follow this blog, I work in the Transportation Industry, in the United States, Canada and Mexico. The Dow Jones Transportation Average (DJTA, also called the “Dow Jones Transports”) is a U.S. stock market index from S&P Dow Jones Indices of the transportation sector, and is the most widely recognized gauge of the American transportation sector. The index is a running average of the stock prices of twenty transportation corporations, with each stock’s price weighted to adjust for stock splits and other factors. For those of us in the freight transportation industry, this will be an important index to monitor. (Source: https://www.google.ca/search?q=exchange+rates&rlz=1C2WPZA_enCA710CA710&biw=1536&bih=735&source=lnms&sa=X&ved=0ahUKEwiyhabT6rDRAhVl0oMKHSNZAkYQ_AUIBSgA&dpr=1.25#q=dow+jones+transportation+index )
12. Freight Rates
Freight rates and fuel surcharges represent another barometer of the economy. Rising freight rates typically suggest a strengthening economy and tight capacity. Modest rate increases or rate decreases signify a weak economy. (Source: http://www.freightrateindex.com/ )
13. Home Prices
For many people, their personal wealth is comprised of their investments and their home. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated monthly. (Source: http://ca.spindices.com/indices/real-estate/sp-corelogic-case-shiller-us-national-home-price-nsa-index )
14. Consumer Confidence
The U.S. consumer confidence index (CCI) is an indicator designed to measure consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. (Source: http://www.tradingeconomics.com/united-states/consumer-confidence )
15. President Trump Popularity Rating
This is clearly one of the best measurements of the Trump effect. The incoming president has demonstrated that he is very much influenced by the words of others. He is avid viewer of cable news and a devoted Twitter user. While in office, president Trump’s popularity rating will be a key measurement of how citizens’ perceive his performance in office. (Source: http://www.rasmussenreports.com/public_content/politics/ )
16. Your company’s profits
17. Your personal investment portfolio
Managing the Data
Here are a couple of options to manage this set of indicators. To simplify the task, go to http://www.georgia.org/business-resources/georgia-centers-of-innovation/center-innovation-logistics/resources/ and sign up for their monthly logistics report. This excellent document contains a wide range of transportation related and economic indicators.
If you wish to customize the exercise to your unique requirements, open your browser and create a Trump Effect folder. In this folder, insert the links above that are relevant to you and any others that highlight the impacts on your company and/or personal portfolio. To more easily spot trends over time, create a set of spreadsheets or utilize those tools above that provide historical data. The next four or eight years promise to be unpredictable and impactful. Managing this data will keep you informed and allow you to make decisions that are good for you, your family, and your business.
To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).
