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^ ^ e ~ ~n er etter FORECASTS FOR MANAGEMENT DECISIONMAKING 1729 H St. NW, Washington, DC 20006-3938 • kiplingerbiz.com • Vol. 84, No. 25 Dear Client: Get used to living with less water. Severe droughts are here to stay. Worst off: The South and West. But other areas also must learn to cope with less rainfall. The shortage is not yet a crisis, and with planning, it won't ever become one. But it still means lots of big changes. ® Conservation will be the new norm. Higher prices will help make it happen. Consumers, both business and residential, will pay more...in some places, a lot more, with rates that'll escalate as use increases. Limits on use. Some will be mandatory, as is the case in a few Calif. counties now. But most communities will rely on pleading, cajoling or tax incentives to cut water use. More ways to save. Some businesses will add roofs that can catch rainwater, get rid of fountains, replace thirsty lawns with less-demanding plants or install faucets that shut off automatically after a set time. Washington, June 22, 2007 ~ ~ ~• ~ GDP .......... 2% for the year ...................................... .. . . ... M .. .. . ........... . Interest rates .......... Prime ending '07 at 8.25% ............................................................. N .. I Inflation ~ About 2.5% for the year Employment 1.5 million more jobs • I Trade deficit Narrowing to $761 billion, 5.6% of GDP Crude oil I .......... I Averaging $60 a barrel .............................................................. HOUSInq Sales NEW FORECAST Down 9 6% in '07 u 17% in 'OS ~ ~ . , p Retail sales Slowing to 3% growth Complete economic outlook at k iplingerbiz.com/outlooks Purchases of appliances that use less water... better washing machines, air conditioners, toilets, etc...will spike. Recycling. Las Vegas leans heavily on a capture, collect, treat and redistribute system, offering incentives to consumers and companies. Firms can earn rebates...up to a lifetime limit of $150,000 per property. It's a success story that other cities can learn from: In five years, water use in Las Vegas fell by 18 billion gallons as population surged. Stocking up. To help smooth out dips in supply, Fla. communities plan to skim millions of gallons from rivers, such as the St. Johns. The water w'l1 be d 1 d ,`~.~ U.S. Drought Monitor 3 " ~' i ti , ,~ _ :. f Intensity oI Drought , ~ - ~ Extreme ^ Severe ~ Moderate ADnofmdlly Dry Sources: Climate Pre Diction Center, Ki Dl~nger i pumpe c eane and stored. Other communities are adding reservoir capacity and putting up new water towers to prepare for future droughts. Desalination. San Diego, for one, is pinning hopes on a new plant. The catch: It's a drain on power. Bucks from Congress will help, but the main burden will fall on local leaders, individuals and firms. (More on page 2.) For those involved in water technology, there's money to be made. Demand for water recycling plants will grow sharply. Sales of equipment for filtration, ultraviolet oxidation and vapor compression will rise 15% annually for five years from today's $1.8-billion level. Among the leading manufacturers: CH2M Hill, Separation Dynamics, Mi-T-M Corp., Siemens, Arbortech Corp. and EZ Environmental Solutions. Also: Sun Frost, Applied Energy Recovery Systems, SETS Systems and other makers of water efficient appliances, for both consumer and industrial applications, as the water conservation market grows. Other winners: Firms that dredge reservoirs or make water towers.