© 2012
Water Research
Foundation.
ALLwithout
RIGHTSpermission.
RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED. No part of this presentation may be copied,
reproduced,
or otherwise
utilized
Sustainable Water
Management Conference
Denver, Colorado
March 31, 2014
Presentation by Jack C. Kiefer, PhD
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Water Demand Forecasting in
Uncertain Times: Isolating the
Effects of the Great Recession
WRF Project #4458
Jack C. Kiefer, PhD
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Overview
• Project goals, objectives, and principal
tasks
• Progress and selected findings to date
— Great Recession
— Utility Survey
— Analysis of utility data
• Next steps
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Principal Research Themes
and Objectives
Economic Reasoning and Water Demand Pathways
Assess how water demand is affected by short-term economic
shocks and through which economic channels
1.
Prepare White Paper on Macro-Economic Linkages to Water
Demand
2.
Conduct Survey of Utility Experiences
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Principal Research Themes
and Objectives
Enhancing the Quality and Effectiveness of Water Demand Forecasts
Analyze how water utilities may be better able to anticipate, adapt to,
and minimize impacts of future economic cycles on water
demand planning
1.
Formulate Models for Use in Forecasting
2.
Recommend Methods and Future Research
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
What do we know about the economy
and water use?
• Water use is influenced by economic factors
• Municipally-supplied water is a “normal good” — higher (lower)
household incomes increase (decrease) demand
• Production of goods and services requires water as a direct or indirect
input
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Direct Economic Pathways of
Influence
Source: original construct by Jack C. Kiefer (2013)
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Defining a Recession
• The National Bureau of Economic Research (NBER) Business Cycle Dating
Committee:
“A significant decline in economic activity spread across the economy, lasting
more than a few months, normally visible in real GDP, real income,
employment, industrial production, and wholesale-retail sales.”
Two consecutive quarters of
negative growth in gross domestic
product sufficient but not necessary
condition
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Qualities and Characteristics of
the “Great Recession”
• “Great Recession” lasted 18 months from peak to trough
— December 2007 — June of 2009
— Longest in official duration and (arguably) the most severe recession
since the Great Depression (which lasted 43 months)
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Qualities and Characteristics of
the “Great Recession”
• Real GDP  5.1%
• Unemployment rate 100%
• Under-employment rate 100%
• Real household mean
income  11.1%
• Real household median
income  7.7%
• Median family net worth
 38.8%
Source of statistics: Federal Reserve System Board of Governors
(2012)
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Qualities and Characteristics of
the “Great Recession”
Recessions and the Housing Market
Gray Bars Indicate Recessions
400
2.5
2.0
300
1.5
200
1.0
100
FHFA Housing Prices, 1980 Q1=100
Housing Starts
0
77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
0.5
0.0
Source of statistics: Federal Housing and Finance Agency; Department of Commerce, US Census Bureau
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Qualities and Characteristics of
the “Great Recession”
Industrial Production
(2007=100)
105.0
100.0
95.0
90.0
85.0
80.0
02
03
04
05
06
07
08
09
Industrial Production
10
11
12
13
Source of statistics: Federal Reserve System Board of Governors
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Qualities and Characteristics of
the “Great Recession”
Source of statistics: Federal Reserve System Board of Governors
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Qualities and Characteristics of the
“Great Recession”
Consumer Confidence
100.0
90.0
80.0
70.0
60.0
50.0
02
03
04
05
06
07
08
09
10
11
University of Michigan Consumer Sentiment
12
13
Source of statistics: Thomson Reuters/University of Michigan Surveys of Consumers
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Macroeconomic Pathways and
Indicators
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Majority of survey sample
experienced declines in water use
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Reported decreases in use suggest a
considerable range of impacts
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Observed declines in demand
associated with many factors
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Majority of utilities reporting a decrease
in water use have not fully recovered
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The recent economic downturn affected
planned investments for some utilities
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Majority of respondents expect flat
or continuing declines in demand
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Trends in use prior to the
Great Recession
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~15% drop
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Interim Observations
• Firm conceptual basis for linking economic activity to
water use
• Water use was impacted (reduced) during and after
the recession for many water providers
• Some declines in water sales were large in some
places
• There were multiple reported manifestations of
impacts (on revenue, customer base and other)
• Historical time series data show the association of
declining sales with recession and economic
indicators
• Must attempt to differentiate or account for the
effects of other factors
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Current and Future Activities
• Search for and collect additional data for
economic indicators
— Especially “leading” indicators
— Regional indicators where available
• Statistical modeling
— Regression
— Time-series econometrics
• Reporting
• Communication
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.
Thanks!
• Utilities
— Tampa Bay Water
— San Diego County Water
Authority
— Fairfax Water (VA)
— San Antonio Water System
— New York City
Department of
Environmental Protection
— City of Phoenix
— Miami-Dade County
— Anderson Regional Joint
Water System (SC)
• American Water Works
Association
• Maureen Hodgins, Water
Research Foundation
• Other research team
members
— Grace Johns (Hazen and
Sawyer)
— Snaith Economic Advisory
Services
— Ben Dziegielewski
Jack C. Kiefer, Ph.D.
jkiefer@hazenandsawyer.com
618.889.0498
© 2014 Water Research Foundation. ALL RIGHTS RESERVED.