Transcript Slide 1
Current Economic Issues Subtitle text can go here [email protected] Director Seidman Research Institute Issues to Consider in Digesting Consensus Forecasts • You have just seen the consensus forecasts • I want to spend a few moments thinking through issues that will likely have an influence on the actual course of the economy • Summarize the Headwinds and Tailwinds that prevail • Brief look at AZ activity as reflected by recent revenue flows. 2 The Pace of Growth in the Current recovery remains the weakest in Decades And Consumption and Lack Thereof Remains the Major Culprit Overall Austerity is dominating Fiscal Policy relative to prior recessions Taste for Deleveraging (reducing private debt loads) is having a huge impact on the economy To many, Debt is Simply another four Letter word!! Radio Personalities are raging against Debt And the private sector Is responding accordingly To some it’s literally a sin To take on debt Households are responsible for most of the Recent Deleveraging First Boomers Hit 60!! First Boomers Hit Peak Spending Age!! And with this de-leveraging came dramatic declines in consumption So how important have the boomers been and how much impact will we have going forward • Boomer bubble aligns with trend growth nationally and especially in AZ • Boomers have been major producers and consumers • Now they(we) expect legacy entitlements • We may have burned our draft cards but we sure aren’t planning to burn our social security cards. 9 Let’s not forget about automation and productivity. Robots vs. jobs So What will the FED do and will it hurt the Economy • • • • • • 11 They say they are “data driven” They want to raise Interest Rates Many small HH savers wish they would ?? Choke of Expansion, especially Housing ?? Impact on Exports ?? Impact on Equity Markets Fuel Prices and the Economy • Will add approximately 1 % to disposable income growth in AZ in 2015. – Spend it – Save it – Will it have an impact on Auto purchases? • National Effects Mixed but AZ should see benefits 12 First Quarter GDP Growth was Anemic, lets look at the components 13 Issues for the Nation Positives • Balance Sheets • Most Private De-leveraging is now done • Among the best economies in the world • Potential of immigration and trade reforms • Baby boomer retirements mean new opportunities Negatives • Demography is now a headwind- Legacy entitlements • Value of the Dollar • Dis-functional Federal Government • Susceptible to major shocks, natural or otherwise • FED Headwind and Potential bubbles in credit markets and equities So are there any signs of life in the AZ Economy? • Consensus suggests another sluggish but positive growth year • Many people are sitting on the sidelines waiting for liftoff. • State Revenue does indeed look far better than it did at this point last year 15 April Final and Est Individual Income Tax Payments (thous dollar) $800,000 Anomalies triggered by Fiscal Cliff Debate in 2012 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 16 So what about the rest of State Revenues (all based on yr/yr comparisons) • • • • • • Hotel Motel up 22% first quarter R&B up 10% first quarter Total Sales Tax up 6.3% Jan-Apr (estimated) Individual Final and Est Payments up 18% in April Dec-Apr Individual Final/Est Payments up 16% Q1 2015 Individual Est payments up 22% -- sets a positive tone for 2015 • Dec-Apr Corp Final and Est Payments up 21% • So its raining money right now, suggesting that the AZ Economy is clearly improving Issues for Arizona Positives Negatives • Positive Business Climate • Neighbors more costly • West is improving so froth likely to spill over • Housing/Land affordable in comparison with much of the west • Still the State of Opportunity • Will Benefit from Lower Gas Prices • State Budget Improving • Net Domestic Migration not back to where it was • Reliance on DoD is high so Sequester still lingers • Image may be a problem with young, innovative and mobile • Employer sanctions binds labor markets • Competitors use lack of education and skills against us.