Sustainable Water Management Conference

© 2012 Water Research Foundation. ALL RIGHTS RESERVED.© 2014 Water Research Foundation. ALL RIGHTS RESERVED. No part of this presentation may be copied, reproduced, or otherwise utilized without permission.

© 2014 Water Research Foundation. ALL RIGHTS RESERVED.© 2014 Water Research Foundation. ALL RIGHTS RESERVED.

Sustainable Water Management Conference

Denver, ColoradoMarch 31, 2014

Presentation by Jack C. Kiefer, PhD

© 2014 Water Research Foundation. ALL RIGHTS RESERVED.© 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


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 channels1. Prepare White Paper on Macro-Economic Linkages to

Water Demand2. Conduct Survey of Utility Experiences


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 Forecasting2. Recommend Methods and Future Research


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


Direct Economic Pathways of Influence

Source: original construct by Jack C. Kiefer (2013)


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


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)



• 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)



13110907050301999795939189878583817977

400

300

200

100

0

2.5

2.0

1.5

1.0

0.5

0.0

Recessions and the Housing MarketGray Bars Indicate Recessions

FHFA Housing Prices, 1980 Q1=100Housing Starts

Source of statistics: Federal Housing and Finance Agency; Department of Commerce, US Census Bureau



131211100908070605040302

105.0

100.0

95.0

90.0

85.0

80.0

Industrial Production(2007=100)

Industrial ProductionSource of statistics: Federal Reserve System Board of Governors



Source of statistics: Federal Reserve System Board of Governors



131211100908070605040302

100.0

90.0

80.0

70.0

60.0

50.0

Consumer Confidence

University of Michigan Consumer SentimentSource of statistics: Thomson Reuters/University of Michigan Surveys of Consumers


Macroeconomic Pathways and Indicators


Majority of survey sample experienced declines in water

use


Reported decreases in use suggest a considerable range

of impacts


Observed declines in demand associated with many factors


Majority of utilities reporting a decrease in water use have not

fully recovered


The recent economic downturn affected planned investments for some utilities


Majority of respondents expect flat or continuing

declines in demand


Trends in use prior to the Great Recession


~15% drop








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


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


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, [email protected]

618.889.0498

mailto:[email protected]

Sustainable Water Management Conference

Documents

water research foundation

water use

supplied water

water utilities

water demand forecasting

water demand pathwaysassess

future research

principal research themes