Transcript Slide 1

2010 National Outlook
Phoenix Chamber of Commerce 2010 Economic Outlook
September 30, 2009
Beckie Holmes
Director of Market Intelligence, Cox Communications Arizona
2010 Outlook
•
•
•
•
Is the recession over?
Have consumers changed?
When will companies start hiring again?
Did monetary and fiscal policy work?
7/18/2015
Is the Recession Over?
Probably…Broad Based Improvement in Key Areas
Conference Board Leading Index:
Recession Over
Above 50= Expanding, Below
50=Contracting
10.0%
Year-over-Year Growth
Purchasing Managers:
7.5%
5.0%
2.5%
0.0%
-2.5%
65
60
55
50
45
August '09:
Manufacturing; 52.9
Non-Manufucaturing: 51.3
40
35
30
-5.0%
'00
'01
'02
'03
'04
'05
'06
'07
'08
'00
'09
US Initial Jobless Claims Peaked
8.0%
650
600
6.0%
Hundreds
700
550
500
450
400
350
'01
'02
'03
'04
'05
'06
'07
'08
'09
US Real GDP Growth
Initial Jobless Claims, Seas. Adj
Thousands
Business Conditions Improving
70
Positive 2H'09 Expected
4.0%
2.0%
0.0%
-2.0%
-4.0%
300
250
-6.0%
200
-8.0%
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'00Q1 '01Q2 '02Q3 '03Q4 '05Q1 '06Q2 '07Q3 '08Q4
'05
Sources: Conference Board, US Department of Commerce, US Department of Labor, Institute for Supply Management, Blue Chip Economic Indicators
7/18/2015
Have Consumers Changed?
Real Consumer Spending
10%
Year-over-Year Growth
8%
6%
4%
2%
0%
-2%
Consumption falling for the first time since
1970s; a permanent shift towards thrift?
-4%
'70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09
Source: US Bureau of Economic Research
7/18/2015
Retail Sales Recovering
…thanks to government support…
Real Retail Sales Growth
Food, Health,
Rest. & Bars
5%
Clothing &
General
Merch.
Year-Over-Year Growth
0%
-5%
Total ex. Gas
-10%
Furniture,
Electronics,
Building
Materials
-15%
-20%
Motor Vehicles
-25%
-30%
Jan07
Apr07
Jul07
Oct07
Jan08
Apr08
Source: US Census Bureau, Bureau of Labor Statistics
7/18/2015
Jul08
Oct08
Jan09
Apr09
Jul09
…But Spending Still Below 2007 Peak
Real Retail Sales
Inflation-Adjusted Retail Sales
Relative to Nov '07
5%
Relative to November 2007 Peak
Food, Health,
Restaurants & Bars
+2%
0%
Clothing & Gen. Merch.
-4%
Total
-5%
ex. Gas
-7%
-10%
Furniture, Electronics,
Building Mat'ls
-19%
-15%
-20%
Motor
Vehicles
-17%
-25%
-30%
Nov-07
Feb-08
May-08
Source: US Bureau of Economic Analysis
7/18/2015
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Saving More…For Now
Savings behavior driven by changes in net worth
Household Savings & Net Worth
Billion Dollars, 12 Month Moving Average
$12,500
$250
$7,500
$150
$2,500
$50
($2,500)
($50)
($7,500)
($150)
Change in Net Worth
-$8.9T, -14% (2Q09)
($12,500)
'90
'92
'94
Source: US Bureau of Economic Analysis
7/18/2015
'96
'98
'00
'02
'04
($250)
'06
'08
Changes In Savings
Changes in Net Worth
Change in Savings
+$192B, +94% (2Q09)
Businesses
•
•
•
•
Sharp pullback in response to the crisis
Job growth falls to 30-40 year lows
Aggressive cost cutting keeps profits healthy
As demand comes back, hiring should pick up
quickly
7/18/2015
A Construction and Manufacturing Bust
96% of Losses, 50% of Jobs Lost in Four Sectors
Job Losses Since Dec 2007 Peak
40%
Percent of Jobs Lost
Percent of US Employment
29%
30%
24% 23%
22%
21%
20%
10%
3% 2%
5%
9%
8% 6%
10%
13%
17%
15%
6%
0%
-2%
-10%
Source: US Bureau of Labor Statistics
7/18/2015
Trade,
Transportation,
Utilities
Government
Edu & Health
Srvc
Prof &
Business Srvc
Manufacturing
Financial
Construction
Information
-20%
Leisure &
Hospitality
-11%
Steep Job Cuts Support Productivity
Productivity Growth Leads Job Growth
Productivity and Job Growth
Year-over-Year Growth
6%
Output per Employee
4%
2%
0%
-2%
Job Growth
-4%
-6%
'73
'76
'79
Source: US Departmemt of Labor
7/18/2015
'82
'85
'88
'91
'94
'97
'00
'03
'06
'09
Profits Relatively Healthy
Cost-Cutting Pays off
Corporate Profits as a Share of GDP
13%
Profits/GDP
12%
11%
10%
9%
'70-'09 Average: 8.7%
8%
7%
6%
'70
'73
'76
'79
'82
'85
'88
Source: US Department of Commerce, Bureau of Economic Analysis.
Corporate profits with inventory valuation & capital consumption adjustments
7/18/2015
'91
'94
'97
'00
'03
'06
Did Monetary and Fiscal Policy work?
• Monetary Policy
– What happened and why?
– Exit strategy/consequences?
• Fiscal Policy
– What happened and why?
– Exit strategy/consequences?
7/18/2015
The Fed’s Balance Sheet Explodes….
Better, but still propping up the financial sector
Fed Assets:
Up 121% over 2007, $1.2T*
$2,500
Billion Dollars
$2,000
Other Gov
Bonds
Other Loans
& Swaps
Financial Sector Rescue
+$722B
63% of Increase
$1,500
Housing Rescue
+$559B
48% of Increase
$1,000
Discount Window
Lending
$500
Treasury Securities & Miscellaneous Assets
-$126M, -11% of Increase
$0
2006
2007
'08Q1
*Increases relative to 2007. Source: Federal Reserve
7/18/2015
'08Q2
'08Q3
'08Q4
'09Q1
'09Q2
…And Bank Excess Reserves Soar
Is Future Inflation Inevitable?
Components of the Monetary Base
$2,000
$1,800
Billion Dollars
$1,600
Excess
Reserves
$766B
Required Reserves
$63B
$1,400
$1,200
$1,000
$800
$600
Currency in Circulation
$899B
$400
$200
$0
Jan
'07
7/18/2015
May
'07
Sep
'07
Jan
'08
May
'08
Sep
'08
Jan
'09
May
'09
Inflationary Pressure Contained For Now
Can the Fed Unwind In Time?
Inflation and Money Growth
10%
5-Year Moving Average Growth
Core Inflation
(Excludes Food & Energy)
8%
Money Growth
in Excess of
Real GDP Growth:
6%
Aug '09: 4.4%
4%
4% Avg Inflation
1960-2009
2%
0%
'65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07
-2%
Source: Federal Reserve Bank, Bureau of Labor Statistics
7/18/2015
Massive Fiscal Stimulus
Falling Tax Revenues, Rising Expenditures
Federal Government
State & Local Government
15%
26%
14%
24%
Percent of GDP
Receipts
14%
13%
Spending
13%
Percent of GDP
Spending
22%
20%
18%
12%
16%
12%
Receipts
14%
11%
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07
Source: Bureau of Economic Analysis
7/18/2015
'80 '83 '86 '89 '92 '95 '98 '01 '04 '07
Massive Fiscal Stimulus: Deficits Rising
State & Local is Cyclical, Federal is Structural
Government Deficit/Surplus as a Share of GDP
6%
State & Local Balance
Percent of GDP
-0.1% 2Q09
Percent of GDP
4%
2%
0%
-2%
-4%
Federal Balance
Percent of GDP
-9% 2Q09
-6%
-8%
-10%
'47 '51 '55 '59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07
Source: Bureau of Economic Analysis
7/18/2015
Outlook and Summary
• Deepest recession since the Depression ending
– 2010 will be better than 2009, but still below average
• Consumers are repairing balance sheets;
– Savings rates to stay elevated until net worth improves
• Businesses are relatively healthy but are cautious
• Government support will play a crucial role in 2010
– Need continued stimulus until recovery is self-sustaining
• Inflation not a threat in short run
– Unwinding deficits and monetary stimulus critical to
controlling long term inflation
7/18/2015