ACA Industry and Economic Update

Allen Irish

Director, Industry Affairs & CounselChicago Paint & Coatings Association Meeting

Illinois Paint Council

February 9, 2016

Oak Brook, IL

Agenda•American Coatings Show 2016

•ACA State Affairs

•Political outlook

•Economic outlook•Manufacturing

• Chemical industry indicators

•Construction•Energy

Politics!

•Washington is consumed with primary season.•The Republican race is messy, but might sort out after New Hampshire…or not• The Donald ahead in NH polls• Rubio has (had?) momentum on the “establishment”

side

•The Democrats are possibly in for a long slog• Planned “coronation” might not happen right away• Sanders in for long haul• Email problems won’t go away for Clinton

Republican field likely narrows soon

Democrats down to two

Trump appears to hold lead in NH

While Sanders does as well…

Public polling done since Feb. 1

State Advocacy

•Programs•ACA•PaintCare•Graffiti Resource Council

• Tools•Paint Council Network•Individual Lobbyists•PaintPAC•CoatingsCONNECT•Government Affairs Update/Committee

Paint Council and Lobbyist Network

NSI Evaluation of ACA State Advocacy

•National Strategies, Inc., a consulting firm for government affairs efficiency evaluated ACA’s program in 2015

•Review and Assessment of Paint Council Network; state lobbyist structure; state legislative tracking; and member/lobbyist communications

• Interviewed staff and members responsible for

government affairs activities as well as all lobbyists

NSI Findings

•Overwhelmingly positive findings:•ACA’s government affairs team was described by

both members and lobbyists as the “best Association we have ever worked with”•The team was praised for being knowledgeable on

all ACA issues both on a technical and political level• Interviewees stated that the team is always

responsive with timely and thorough responses and accessibility•The Paint Council and lobbying network is needed

in each of the states in which it operates

NSI Recommendations

•Active participation by all members in the Paint Councils and Government Affairs as a whole is needed as it is a valuable asset to the ACA• Need top-down support for Paint Council participation

•Paint Industry Days to raise the profile of the industry at state capitols are not being done except in Texas• Organize “Paint the Capitol” days in states where ACA has

relevant issues and members

ACA Congressional and Federal Affairs Program

•Advancing the paint and coatings industry’s profile and agenda at the federal level

•Establishing the Association and its members as a resource to Congressional staff

•Utilizing PaintPAC to support candidates with a commitment to business

Federal Issue Priorities and Policy Statements

•Identified Issue Priorities for the 114th

Congress for ACA Executive Committee•potential impact• likelihood of movement

•Developed policy statements to guide our advocacy efforts •Will continue to monitor and act on all federal legislation impacting the industry

Current Congressional Priorities

•Chemicals Management•Energy Policy•Immigration Reform•Infrastructure•Legal/Tort Reform•Regulatory Reform•Tax Reform/Budget•Trade

Chemicals Management

•Provide Federal Risk-Based Public Health Protection Based on Sound Science•TSCA Reform•Manchin Bill

•Need federal action in lieu of piecemeal state by state approach

•Need scientifically sound decisions based on actual risk of harm

Energy Policy

•Embrace Domestic Energy Production Strategy While Expanding Efficiency Efforts •H.R. 3; Keystone XL Pipeline

•Provide for energy security; investments in energy efficient technologies that result in lowered energy consumption; and expansion of our domestic energy supply

Infrastructure

•Modernize the Nation’s Infrastructure while Stimulating Jobs and the Economy•House/Senate

•Investment in aging infrastructure will stimulate the economy

•Paint and coatings provide a significant contribution to infrastructure support

Legal/Tort Reform

•Secure the Nation’s Economy and Provide a Simpler, Fairer and Faster Civil Process for Consumers•Civil Justice Reform Initiative

•Over used and improperly used legal system stifles new product research and development•Unpredictability and costs often preclude introduction of new products

Regulatory Reform

•Promote Congressional Accountability of Regulatory Actions to Ensure Sound and Fair Administrative Processes•H.R. 185, the Regulatory Accountability Act

•Renewed Congressional oversight authority to provide for a more open, thoughtful, and accountable regulatory process

Tax Reform/Budget

•Modernize Tax Administration and Balance the Budget to Generate Revenue and Reduce Spending •Tax Extenders/Comprehensive Reform

•Higher tax costs puts U.S. manufacturing industry at a significant competitive disadvantage in the global marketplace•High levels of federal deficit and the accumulated national debt is a drain on the economy

Trade•Strengthen International Competitiveness•TPP/TTIP•Cuba

•Ensuring a level playing field for U.S. exports; using trade agreements to overcome foreign governments that have erected barriers against U.S. goods and services

U.S. Economic Outlook

So…what the heck is going on with the U.S. economy?

GDP

•U.S. GDP has grown since the end of the recession, but at a relatively slow pace compared with past economic recoveries.

•Equities markets are exhibiting huge volatility in 2016

•Q4 2015 growth was lower than many anticipated (0.7% to $18.13B).

•What were the reasons for this?

U.S. GDP growth

-9

-7

-5

-3

-1

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Currency woes for U.S. exporters?

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Trade Weighted U.S. Dollar Index: Broad (Jan 1997=100)

Trade Weighted U.S. Dollar Index: Major Currencies (Mar 1973=100)

Rise and fall of drilling

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Total Intl. Canada U.S. Rig Count

Source: Baker Hughes

Rig counts follow the pricing

Sources: Baker Hughes, EIA

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Total World Rig Count Europe Brent Spot Price FOB (Dollars per Barrel)

Mining investment

-80%

-60%

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$0

$20

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Chart Title

Mining exploration; shafts; and wells: Private Fixed Investment by Type: $ Billions SAAR

Mining exploration; shafts; and wells: % Change From Preceding Period in Real Private Fixed Investment SAAR (Rt. Axis)

Producer Prices in tandem

125

175

225

275

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375

PPI: Basic organic chemicals; 1982=100, NSA ACA Paint Materials (1991=100) PPI: Paint Colors; 1982=100, NSA

Energy expenditures as share of GDP (percent)

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What next for energy?•Drillers in the U.S. idled 519 rigs in the past 10 weeks, a 33 percent reduction.•U.S. production continues to grow because of improvements in technology.•OPEC strategy appears to be to hold production levels in order to force more expensive from the market.•EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bblin 2016,

Industrial production

20

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100

120

140

Industrial Production Index: Total index; 2012=100; SA

Industrial Production Index: Motor vehicles and parts NAICS=3361-3; 2012=100; SA

Industrial Production Index: Organic chemicals NAICS=32511,9; 2012=100; SA

Industrial Production Index: Drilling oil and gas wells NAICS=213111; 2012=100; SA

Paints, etc. vs. Basic Chemicals

2000

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Manufacturing: Basic Chemicals: Value of Shipments: Millions of Dollars: SA

Manufacturing: Paint, Coating and Adhesive Manufacturing: Value of Shipments: Millions of Dollars: SA

Source: American Chemistry Council

Construction

-$100,000

$100,000

$300,000

$500,000

$700,000

$900,000

$1,100,000

$1,300,000

Residential; Value of construction put in place; Millions of dollars; SAAR Nonresidential; Value of construction put in place; Millions of dollars; SAAR

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Chemical; Value of private construction put in place; Millions of dollars; SAAR

Chemical manufacturing construction

Questions?