Transcript Real GDP Growth – US - Economics & Country Risk

Global Insight City Travel &
Tourism Teleconference
U.S. Regional Economic Outlook
Prospects for International Travel to the United States
Quantifying Tourism for Cities
November 12, 2003
Copyright © 2003 Global Insight, Inc.
U.S. Regional Economic Outlook
Presented to:
Global Insight Teleconference Forum
Presented by:
Phil Hopkins
Principal
U.S. Regional
[email protected]
Copyright © 2003 Global Insight, Inc.
Purpose: Provide U.S. to MSA-level Economic
Context for Travel & Tourism Demand

U.S. macro near-term overview

Five-year forecasts by Census region

Describe near-term (2003-05) outlook for states

Describe near-term (2003-05) outlook for large
MSAs

Identify high income growth MSAs that are major
tourist markets

Focus on key demand indicators—income growth
Copyright © 2003 Global Insight, Inc.
3
Recent U.S. Macro Indicators
Favorable
Unfavorable

Sales

Employment

Orders

Bond yields, mortgages

Stock market

Exports

House values

Balance of payments

Industry data

Profits

Income growth
Copyright © 2003 Global Insight, Inc.
4
Exiting the Growth Recession:
Unemployment Lags, Better Sentiment Needed
12
40
10
60
8
80
6
100
4
2
60
65
70
75
80
85
Unemployment rate, percent (left scale)
Consumer sentiment, 1996=100 (right scale)
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90
95
00
120
5
Household Debt Loads—High But Acceptable
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6
Consumption Boosted by Tax Cuts:
Not “Tapped Out”
10
8
Real Consumption Spending, % Change vs. Year Ago
Real Disposable Income, % Change vs. Year Ago
Nominal Savings Rate
Percent
6
4
2
0
-2
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
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7
Quarterly Outlook: U.S. Macro November Forecast
Real GDP
Consumer Spending
Disposable Income
Bus. Fixed Investment
Industrial Production
Employment
Unemployment Rate
Exports
CPI
Housing Starts
2003q3 2003q4 2004q1 2004q2 2004q3 2004q4
7.2
3.6
4.1
3.7
3.9
3.9
9.1
2.4
4.5
5.2
6.3
6.1
9.8
2.0
9
3.9
5.8
5.5
11.5
10.3
10.8
7.5
10.7
10
3.3
4
4.7
5.3
6.2
5.7
-0.3
-0.3
0.2
0.8
1.6
2.1
6.1
6.1
6.1
6
5.9
5.8
11.2
7.3
8.4
10.8
15
12.7
2.4
1.1
0.9
1.1
2.0
2.0
1.86
1.82
1.77
1.75
1.7
1.66
Copyright © 2003 Global Insight, Inc.
8
Forecasts for Census Regions:
Annual Growth Rates, 2003–08
New England
Middle Atlantic
South Atlantic
East North Central
East South Central
West North Central
West South Central
Mountain
Pacific
Personal Household
Income
Income
4.30
4.90
4.90
5.30
4.30
5.80
3.80
4.40
4.00
4.90
4.50
5.40
4.20
5.70
4.00
5.90
3.70
5.20
Copyright © 2003 Global Insight, Inc.
Total
Employ.
1.10
1.10
1.90
1.10
1.40
1.40
1.30
2.20
1.60
Leisure &
Hospitality
Employ.
1.10
0.90
1.60
1.20
1.20
1.30
2.00
2.20
1.30
9
Growth Rate in Disposable Income, 2003–05
5.5
5.2
4.5
3.1
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to
to
to
to
6.5
5.4
5.1
4.4
10
Growth Rate in Total Employment, 2003–05
1.4
1.1
0.8
0.0
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to
to
to
to
3.3
1.3
1.0
0.7
11
Service Sectors Provide Job Growth
State Employment Growth Rates 2003–05






Professional and business services: 3.9%
Other services: 2.5%
Construction: 2.3%
Leisure and hospitality services: 1.5%
 Arts, entertainment, and recreation: 2.1%
 Accommodation and food services: 1.4%
Education and health services: 2.3%
Trade, transportation, and utilities: 1.1%
 Retail trade: 0.5%
 Wholesale trade: 1.5%
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12
Personal Income/Hhhld (thousands $)
Large MSA Household Income Levels, 2003
$160.0
San Jose
$150.0
San Francisco
$140.0
$130.0
New Haven
$120.0
New York City
Honolulu
$110.0
$100.0
New Orleans
$90.0
Las Vegas
$80.0
Orlando
$70.0
$60.0
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Tourism Employment Index
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13
Disposable Income/Household in Large
MSAs in 2003: Top 20

San Jose: $131,900

Seattle: $97,800

San Francisco: $131,700

Wet Palm Beach: - $97,700

New Haven: $115,000

Anchorage: $97,500

Bergen/Passaic: $112,000

New York: $96,400

Nassau/Suffolk: $110,400

Houston: $93,600

Middlesex: $110,200

Chicago: $93,100

Newark, NJ: $109,400

Boston: $92,400

Washington, DC: $102,200

Honolulu: $92,000

Orange Co.: $101,900

Minneapolis: $90,200

Oakland: $100,900

Ventura, CA: $89,200

Large MSAs: $83,200

United States: $77,500
Copyright © 2003 Global Insight, Inc.
14
Annual Growth Rates in Total Disposable Income
in Large MSAs 2003–05: Top 20

Austin: 6.7%

Orlando: 5.6%

Phoenix: 6.3%

Houston: 5.6%

Atlanta: 6.2%

Tucson: 5.6%

Washington, DC: 6.0%

Richmond: 5.6%

Las Vegas: 6.0%

Riverside: 5.5%

Wilmington, DE: 5.9%

Middlesex: 5.5%

Raleigh: 5.8%

Seattle: 5.5%

Dallas: 5.7%

Baltimore: 5.5%

Fargo: 5.7%

San Antonio: 5.4%

Charlotte: 5.7%

Charleston, SC: 5.4%
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15
Final Thoughts

Income Growth: disposable and per household is strongest
in Sunbelt, Pacific, Mountain, and South Atlantic States.

High levels of household disposable income are still in the
Northeast, Great Lakes, and Pacific MSAs.

Major domestic destinations/convention centers are
important drivers for MSAs.

Job growth would help—confidence leads to willingness to
spend disposable income.

Travelers are still price sensitive, but leisure travel has been
sustained over the past several years.

Business travel is expected back (at different price points)
next year.
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16
Prospects for International
Travel to the United States
Presented to:
Global Insight Teleconference Forum
Presented by:
Adam Sacks
Managing Director
Travel & Tourism
610.490.2784
[email protected]
Copyright © 2003 Global Insight, Inc.
U.S. Inbound: Cities Hold Greatest Stake
Distribution of Overseas Inbound Travel, Top 10 Cities, 2002
Chicago
6%
Metro DC
6%
Boston
5%
New York
City
23%
•
Las Vegas
7%
Honolulu
9%
San
Francisco
9%
Los Angeles
13%
Orlando
10%
•
Overseas international
inbound to cities
registered approximately
27 million in 2002
Over 90% of international
trips
Miami
12%
Source: Office of Travel & Tourism Industries, International Trade Administration
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18
U.S. Inbound: The Big Picture
Apocalypse now: 9/11, security tightening, SARS, and Iraq.
The “big question” ($23 billion): Are we in the midst of a
cyclical or structural shock?
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2006
2004
2002
2000
1998
1996
55,000,000
50,000,000
45,000,000
40,000,000
35,000,000
30,000,000
1994
Total International Inbound to US
1992
•
•
International inbound travel to the United States is currently
at 1990 levels.
1990
•
19
Cycle versus Structure?
•
Arguments in favor of cyclical recovery
– All other shocks have experienced a
recovery to trend (Gulf War I, Asian
economic crisis)
– Pent-up demand
•
– Economy
Arguments in favor of structural shift
– Ongoing security fears
– Ongoing security-related restrictions
– Shift in preferences
Copyright © 2003 Global Insight, Inc.
20
International Travel in 2003
(Growth rates 03/02)
-1.0%
-5.0%
-2.1%
-6.5%
-3.3%
-3.4%
3.1%
2.8%
5.5%
-3.8%
4.2%
-7.9%
World -2.0%
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21
The Balance of Things
To what extent is suppressed U.S. outbound making
up the difference for U.S. inbound?
•
•
•
Inbound will register 10.8 million fewer trips in 2003 than in
2000, while outbound will register 6.8 fewer trips.
On a balance of trade basis, that equates to a net loss of 4
million trips—and $8.9 billion. This is dependent on wouldbe outbound trips being converted into domestic travel.
There is good evidence of this, as domestic leisure travel
has held up relatively well in the United States throughout
the recession and slow economic recovery.
Copyright © 2003 Global Insight, Inc.
22
World Economy Overview and Issues
•
•
•
•
•
•
The world economy’s performance in this cycle—marked by
subpar, stop-and-go growth—has been disappointing.
The U.S. rebound should lift the rest of the world, but the
pace of recovery will be uneven across regions.
World real GDP growth will pick up from 2.4% this year to
3.3% in 2004. Global output will remain below potential.
Beginnings of modest recoveries in Western Europe and
Japan.
Asia’s expansion, disrupted by SARS, is regaining strength.
Take-home point: Economic fundamentals are aligning to
produce the beginnings of a recovery of travel to the United
States.
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23
Sluggish Growth in the World Economy
The world economy is in recession when
real GDP growth is below 2%
6
5
4
3
2
1
0
-1
-2
-3
(Percent change)
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Real GDP
Industrial Production
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24
Fiscal and Monetary Policy Will
Boost Growth Later This Year
Net Cumulative Cut in Policy
Fiscal Balance
Rates Since January 2001
(Percentage of GDP, 2003)
(Basis points)
Australia
-1.0
150
United Kingdom
-2.7
250
0.5
275
-6.8
25
1.3
125
Switzerland
-2.2
325
United States
-4.0
550
Eurozone
-2.5
275
Canada
Japan
Sweden
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25
Canada’s Economic Growth Has Slowed
•
•
•
•
•
Consumer spending, home-building, and public
investment are leading Canada’s expansion.
Exports have declined in 2003, however, in response to
currency appreciation, Toronto’s outbreak of SARS, and
beef and lumber trade restrictions.
The Canadian dollar has appreciated in response to a
trade surplus and attractive interest rates spreads. Yet, it
remains below its PPP value of 81 U.S. cents.
Travel to the United States is down 13% from its 2000
peak.
Stronger Canadian dollar presents significant
opportunities to attract the Canadian traveler.
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26
Exchange Rate Remains Effective at
Predicting Canada to United States Travel
15%
8%
6%
10%
4%
5%
2%
0%
0%
-2%
-5%
-4%
-6%
-10%
-8%
-15%
-10%
Canada to US
Real exchange rate
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27
The Widening U.S. Current Account Deficit
200
(Billions of dollars)
(Percent of GDP)
2
0
0
-200
-2
-400
-4
-600
-6
-800
-8
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Current Account Deficit
Deficit as % of GDP
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28
The Canadian Dollar Is Rising
80
(U.S. cents per Canadian dollar)
76
72
68
64
60
56
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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29
Mexico: Stability Under NAFTA
•
•
•
•
•
Mexico has achieved remarkable macroeconomic stability
under NAFTA. Cautious monetary policies have lowered
inflation from 35% in the mid-1990s to 4% today.
Mexico’s sluggish recovery is led by consumer spending
and government-funded construction. Manufacturing
remains weak, awaiting a recovery in exports.
Capital inflows and an overvalued peso have hurt
competitiveness against emerging markets, notably China.
2003 travel will be only 6% below the 2000 peak.
Full recovery by 2005 based on economic cycle.
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30
Mexico’s Real GDP Growth Will Resume
8
(Percent change, real GDP)
6
4
2
0
-2
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Mexico
United States
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31
South America Recovers, But Risks Are High
•
•
•
Argentina’s economy is turning around as exports respond to
a 65% peso depreciation. However, full recovery will take a
decade and risks remain high under the current government.
Brazil faces conflicting challenges: revive growth, subdue
inflation, meet debt payments, and improve social conditions.
High interest rates are undermining the domestic economy.
In Venezuela, recovery from a deep recession will not arrive
until President Chavez leaves office, perhaps in 2004.
•
Chile’s economy will accelerate sharply in 2004 as a free trade
agreement with the United States takes effect and exports
strengthen.
•
•
Peru’s strong economic growth is threatened by social unrest.
Overall, South American travel to the United States is down
50% from the 2000 peak, with the slow recovery beginning
next year.
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32
Real GDP Growth in South America
6
(Percent change)
3
0
-3
-6
-9
-12
Brazil
Argentina
2001
Venezuela
2002
2003
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Colombia
2004
Chile
2005
33
A Delayed Upturn in Western Europe
•
•
•
•
Europe’s recovery is lagging. Unemployment is near 9%, and
confidence remains depressed. A strong euro, uncompetitive
labor costs, and cautious policies have undermined growth.
Once inflation falls below 2%, the European Central Bank is
expected cut its key rate by early 2004.
An aging population, inflexible labor markets, costly pension
systems, and anti-immigrant sentiments will limit long-term
economic growth to 2.0-2.5%.
Western European travel has begun to slowly recover. It will
continue through the next two years given a strong euro and
economic rejuvenation. Still, the forecast reflects a structural
shift.
Copyright © 2003 Global Insight, Inc.
34
Real GDP Growth Rates in European Countries
(Percent change)
4
3
2
1
0
France
Germany
2001
Italy
2002
2003
Spain
2004
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U.K.
2005
35
The Euro Will Appreciate Further
(Dollars per euro)
1.30
1.20
1.10
1.00
0.90
0.80
0.70
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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36
Slow Progress in Japan
•
The economy’s acceleration in 2003 reflects broad gains in real
exports, consumer spending, and business investment.
•
Japan’s economy suffers from several long-term problems:
asset deflation, bad bank loans, rising government debt,
ineffective monetary policies, and structural inefficiencies.
•
•
•
A more expansionary monetary policy has emerged, easing the
pain of restructuring in the banking and industrial sectors.
The Bank of Japan will intervene in currency markets to keep
the yen from appreciating much beyond 110 per dollar.
Despite a decline of 44% from its 1997 peak, Japan is our #2
overseas market and must be fostered. However, a shift to
closer destinations is structural. Full recovery is not expected
in the next five years.
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37
Japan’s Economy Has Limited Growth Potential
Japan’s long-term real GDP growth trend is only 1.8%;
the country’s population will peak in 2007
(Percent change, real GDP)
7
6
5
4
3
2
1
0
-1
1987
1990
1993
1996
1999
Copyright © 2003 Global Insight, Inc.
2002
2005
2008
38
Other Asia/Pacific: A Bright Spot
•
•
Asia’s rapid growth is led by a boom in exports and high-tech
industries. Monetary and fiscal policies are accommodating.
In South Korea, consumer spending and home-building have
retrenched after the borrowing binge of recent years.
•
China’s strong expansion is driven by foreign direct
investment, exports, and public infrastructure spending.
•
China, Hong Kong, and Malaysia will benefit from the dollar’s
depreciation. By 2006, China will be forced to revalue.
•
•
Certain key markets have declined only slightly since 2000
(India, Philippines, and South Korea). Australia is on the
mend.
Beginning in 2004, there’s a full-swing turnaround for Asian
travel to the United States, but it is still 10% below the 2000
peak in 2007.
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39
Asian Outbound Travel: Rebound to Come
(Compound
Annual
Growth,
2003-2008)
(Compound
annual
growth,
2004-08)
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40
U.S. Inbound: At a Turning Point
Annual Percentage Change
10.0%
5.0%
Ea
st
si
a
M
id
d
le
A
ce
an
ia
O
er
ic
a
So
u
th
A
m
Eu
ro
pe
W
es
te
rn
-10.0%
M
ex
ic
o
C
-5.0%
an
ad
a
0.0%
-15.0%
-20.0%
-25.0%
-30.0%
2002
2003
2004
Copyright © 2003 Global Insight, Inc.
2005
41
Conclusions
•
•
•
•
•
U.S. and global economic expansions are underway;
economic growth will strengthen in the months ahead.
South America, Japan, and Europe are experiencing
systemic challenges, slowing their economic recoveries.
Widening current account imbalances will lead to more
dollar depreciation. This will help Canadian and European
recovery in particular.
Declines in many markets represent a structural shift in
demand for travel to the United States—not a typical cycle.
Best opportunities for recovery lie with Canada, the United
Kingdom, Germany, and selected Asian markets.
Copyright © 2003 Global Insight, Inc.
42
Quantifying Tourism for Cities
Presented to:
Global Insight Teleconference Forum
Presented by:
Adam Sacks
Managing Director
Travel & Tourism
1.610.490.2784
[email protected]
Copyright © 2003 Global Insight, Inc.
Outline
•
•
•
•
Challenges to measuring tourism at the
city level
Data sources for measuring city tourism
Techniques for measuring city tourism
A solution: City Tourism Impact
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44
Challenges to Measuring City Tourism
•
Geographic distinctions
•
•
Limited samples on syndicated data
•
•
MSA, counties, and partial counties
After top 40-50 cities, data breaks down
Determining economic linkages
•
Determining the value of travel to a city’s
economy, employment, payroll, and tax base is
not straightforward
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45
Data Sources for City Tourism
•
Demand side
•
•
•
OTTI in-flight survey
Supply side
•
•
•
•
Syndicated national surveys (DK Shifflet)
4-5 digit sales and employment
BLS, BEA, and Global Insight
Hotel data (Smith Travel)
Economic Model
•
IMPLAN
Mijk = APMijk * Mijk / ^Yi * Y
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46
Data Sources for City Tourism, DEMAND
•
DK Shifflet PERFORMANCE/MonitorSM
•
•
•
•
•
•
Largest sample of domestic travelers in the industry
allows deeper measurement
Comparable survey results across the United States
with representative stratified sample
Provides city-level traveler volume and profile
information to approximately 30 cities
135,000 households contacted for each month of the
year (ask about past 3 months travel behavior)
Census-balanced, projectable to U.S. population
Travel to every U.S. destination tracked at the city and
county level since 1992—over ten years of trends
analysis
Copyright © 2003 Global Insight, Inc.
47
Data Sources for City Tourism, DEMAND
•
OTTI Data
•
•
•
Volumes: Immigration and Naturalization Service
(INS) partnership (all U.S. non-citizens must
complete INS I-94 to enter the United States)
Details: OTTI In-flight survey provides activities,
traveler profile, and destinations
Challenges with in-flight survey: limited sample, some
issues with coverage, and excludes Canada and
Mexico
Copyright © 2003 Global Insight, Inc.
48
Data Sources for City Tourism, SUPPLY
•
•
Supply Side Data
•
•
•
Provides information on identifiable sectors
(accommodation, recreation, transportation)
NAICS vs. SIC
NAICS provides new opportunities!
•
•
•
•
Sales and employment
350 new industries
Transportation, entertainment, recreation, and lodging all
have new industry definitions and categories
By early next year, Global Insight will have completed
complete historical conversion of its county-level
databases at the four-digit level
Remaining challenge – How to determine tourism’s share of
food and beverage and retail, esp. when related to day trips.
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49
Techniques for Measuring City Tourism
Bottom line: Combination of demand, supply,
and economic modeling
Demand Side
Supply Side
Copyright © 2003 Global Insight, Inc.
Expenditures
Output: volumes,
spending, jobs,
wages, taxes,
economic impact
Estimation
Techniques
•
Economic
Model
50
Techniques for Measuring City Tourism
•
Sample of Estimation Techniques
•
Option 1: Reconcile discrepancies between demand
and supply side
– Use this reconciliation to estimate non-identifiable
tourism expenditures
•
•
•
– Day trips and international are particularly
important
Option 2: Use destination-specific information
wherever possible
Option 3: For smaller cities, need to rely more on
supply side and local information/educated
assumptions
Option 4: Determine ratio of day trips to overnight
trips using multiple-year aggregation of demand
data. Can apply this to supply side data on lodging to
estimate day trip component.
Copyright © 2003 Global Insight, Inc.
51
City Tourism Impact Study
•
•
A partnership product between Global Insight
and DK Shifflet and Associates.
Objective: Provide affordable and comparable
visitor and economic impact results for top
U.S. cities.
•
•
•
•
•
•
Benchmarking of top 100 cities
Consistent approach using all available data
(includes both domestic and international)
Industry rankings for each city
Composition of tourism impact
Provides total visitor volume, expenditures, and
economic impact (production, wages, employment
,and taxes)
Official launch in spring 2004
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52
Thank you!
Adam Sacks
Managing Director
Travel & Tourism
1.610.490.2784
[email protected]
Copyright © 2003 Global Insight, Inc.
53