Market Trends February 2018

2/14/2018

Smart Cities Growing
Bosch’s vision for the future was outlined by Mike Mansuetti, president, Bosch North America and Stefan Hartung, member of the board of management of Robert Bosh GmbH at the Consumer Electronics Show in January. Much of their vision is aimed at the growing smart cities market. Globally, the smart city market is booming, with sales expected to grow 19% annually, reaching as much as $800 billion worldwide by 2020. Mansuetti predicted that at least 80 urban areas worldwide will be smart by 2025. Barcelona, Seoul and London were cited as places already pursuing smart city initiatives, as well as Columbus, Ohio, winner of the US Department of Transportation Smart City Challenge. Las Vegas recently announced a $500 million dollar investment in smart city infrastructure over the next seven years. The arrival of the Internet of Things (IoT) has made smart city initiatives both possible and economically viable. They predicted that by 2025, 34 cities worldwide will have a population of more than 10 million, and by 2050, two-thirds of the world’s population will live in these megacities. Bosch says their sensors are the eyes and ears of the connected city, and their software is the city’s brain. Of Bosch’s nearly 400,000 associates worldwide, more than 20,000 are software engineers, nearly 20% of whom work exclusively on the IoT. Over the past 18 months Bosch has implemented some 100 IoT projects and plans to launch the Bosch IoT cloud in North America later this spring. This year’s Consumer Electronics Show featured a section dedicated to Smart Cities technologies, with more than 40 exhibitors.

Artificial Intelligence 2018
Search Marketing Daily interviewed many of the top marketers in the AI industry and reviewed their predictions for this year. They believe that AI and audience targeting will become more important this year and will drive change across disciplines. Machine learning will be integrated into tools to make sense of the data and optimize messaging and campaigns in real time. Marketers will develop a keyword and audience strategy as audience-targeting capabilities expand and become more complex. The use of chatbots to help brands communicate with consumer will grow as voice search becomes more widespread. New search engines will emerge, including Facebook and Pinterest, companies that have not yet commercialized the billions of searches that take place on their platforms. Google rolled out Knowledge Panel-based Q&A last year and the technology is expected to impact retailers of all sizes this year, as it shifts control of the discussion for branded local results to the consumer.

The AI Revolution
Alibaba's deep neural network and an AI software developed by Microsoft have outscored humans on a Stanford University reading comprehension test, which demanded answers to more than 100,000 questions. The win has broader implications for how companies deploy machine learning to replace customer service jobs that have so far relied on call-center employees to handle inquiries. Scores: Microsoft 82.65; Alibaba 82.44; Humans 82.30.

The Housing Market in 2018
NAHB says that recent tax reform should spur job and economic growth and keep single-family housing production on a gradual upward trajectory. NAHB expects tax reform to boost GDP growth to 2.6% this year. NAHB also says that there may be some adverse effects in high-tax jurisdictions where people taking out new mortgages over $750,000 will no longer be able to deduct the interest they pay on the excess amount. NAHB Is projecting 2.7% growth in overall housing starts this year to 1.25 million units and 5% growth in single-family starts to 893,000 units. Single-family starts are expected to gradually increase from 63% of what is considered normal to 73% by the fourth quarter of 2019. Residential remodeling activity is expected to grow 7% this year as more homeowners decide to stay put and invest in their home rather than move. Multifamily starts are expected to drop 1.6% this year to 354,000 units, a level that is seen as sustainable. NAHB Chief Economist Robert Dietz said that tax reform could lead to 1 million workers entering the labor force during the next 10 years, but this year builders will continue to deal with ongoing supply-side headwinds, including an increasing number of unfilled construction jobs, a shortage of buildable lots and slow growth in acquisition, development and construction loan activity that is not keeping pace with rising demand. Regulatory costs, including building codes and land use, have gone up 29% over the past five years. The softwood lumber dispute between the US and Canada has increased the price of softwood lumber by 20% over the past year.

Artificial Intelligence Powers Amazon Go
Amazon opened their artificial intelligence-powered Amazon Go store in downtown Seattle after more than a year of testing the concept with employees. The store is on the bottom floor of Amazon’s Seattle headquarters. Shoppers scan their smartphone with the Amazon Go app at a turnstile, pick out the items they want and leave without needing to go through a checkout line. The concept combines computer vision, machine learning algorithms and sensors to tell what people have purchased and then automatically charges their Amazon account. If someone picks up an item and then puts it back, they’re not charged. Amazon says the store still has plenty of employees making fresh food, stocking shelves and helping customers.

Top Ten Best-Perceived Brands
Ad awareness was down across the board even for the brands in the top ten, according to the annual brand perception and awareness study from YouGov BrandIndex. Half of the top 10 best-perceived brands were new, an usually high number. The top 10 were: Amazon, Netflix, Amazon Prime, YouTube, Google, Nike, Dawn, M&Ms, iPhone and Apple. Falling off the top 10 were Lowe’s and Home Depot. Among the brands with the largest gains in positive perception was Walmart. Brands with the highest ad awareness included Walmart and Home Depot.

Fortune’s Most Admired Companies
Several retailers made Fortune Magazine’s Global Top 50 List, including Amazon (2), Costco (12), Home Depot (22) Walmart (26) Target (38). Apple took the top spot on the list and Google’s parent company Alphabet was number 3. Fortune surveyed 680 executives from more than 50 industries. The publication specifically asked about the companies that executives admired most inside and outside of their own fields of work. In total, Fortune uses the opinions of 3,900 executives, directors, and securities analysts to create its list.

Consumer Prices Rise 1.9%
The consumer price index (CPI) rose 1.9% in December on a year-over-year basis after rising 2.1% in November, according to Statistics Canada. CPI-trim, which filters out extreme price changes, rose to 1.9% from 1.8% in November and CPI-common, which filters out prices that changed due to extraordinary circumstances, climbed to 1.6% from 1.5%. CPI-median was unchanged compared to November at 1.9%. Economists said the consumer price index provides a bit more confirmation that the interest rate hike was justified from an economic fundamentals point of view. The Bank of Canada aims to keep inflation at 2%, the midpoint of a target range of one to three percent over the medium term. A stronger Canadian dollar could lead to some deflationary price pressure, but inflation is likely to accelerate over the rest of the year. Prices were up in seven of the eight major categories, with the transportation index, which includes gasoline, and the shelter group leading the way. Transportation prices were up 4.9% from December 2016, with gas climbing 12.2% after jumping 19.6% in November. The shelter index climbed 1.4%.

Canada U.S. Trade Updates
The latest round of NAFTA talks showed promising signs of flexibility among the trading partners on the thorniest issues. The sixth round of negotiations were marked by cautious optimism, with broad discussion about the biggest sticking points. President Donald Trump toned down his rhetoric over the North American Free Trade Agreement, and economists are generally predicting that despite all the saber-rattling, NAFTA will be renegotiated. Only four of 45 economists polled by Reuters said they thought the deal would be terminated, with the rest expecting an updated trilateral agreement that would not differ radically from the current one.

Housing and Construction News
Housing starts fell 13.8% month on month in December after jumping 13.1% in November. Starts fell to 216,980 annual units, still a very healthy level. Urban housing starts fell sharply, declining 15.1%, mostly due to a 22.0% drop in multifamily units. Urban single-family units and rural housing starts increased 4.7% and 3.3% respectively. In 2017 housing starts averaged 220,544 units, a 10-year high. Housing starts are expected to average about 200,000 this year. Rising interest rates and more stringent lending rules are expected to weigh on the market this year.

The value of building permits issued by Canadian municipalities declined 7.7% to $7.7 billion in November, the first decrease in three months. Nationally, the value of permits for all building components declined, with the exception of single-family dwellings, which remained at $2.6 billion in November after hitting a peak of $2.9 billion in October. The value of building permits for non-residential structures fell 12.3% to $2.9 billion in November, following two monthly increases. The decline was spread over the three non-residential components (commercial, industrial and institutional).

As of November, Canadian municipalities had issued over $100 million more in building permits in 2017 compared to the 2016 total, led by higher construction intentions for universities, hospitals and manufacturing plants. Ontario led the rise in November, as the value of permits issued for single-family dwellings in the province rose 4.3% to $1.2 billion, accounting for 46.0% of the national total.

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