Transcript YAMARONE060309 - Philadelphia Council for Business

“What We’re Watching to Identify the Economic Recovery”
June 3, 2009
Richard Yamarone
Director of Economic Research
Argus Research Corp.
Hoping for a “V”-Shaped Recovery
Real GDP (%)
10
8
6
4
2
0
-2
-4
-6
Source: Bureau of Economic Analysis
-8
'95
'97
'99
'01
'03
'05
'07
'09 F
Leading Indicators Signal Some Degree of Recovery
Leading Economic Indicators
vs. Real GDP Growth (Y/Y%)
GDP
10
10
LEI
8
8
6
6
4
-2.5%
4
2
2
0
0
-2
-3.0%
Source: Bureau of Economic Analysis, The Conference Board, Argus Research Corp.
-4
'85
'95
'05
-2
-4
The Most Convincing Argument of Recovery
ECRI Weekly Leading Index
15
10
5
0
-5
-10
-15
Source: Bloomberg, ECRI
-20
-25
-30
'99
'01
'03
'05
'07
'09
Fed Indices Point to More Prosperous Times
Chicago Fed National Activity Index
Three Month Moving Average
1.00
0.50
0.00
-0.50
-1.00
-1.50
-2.00
-2.50
-3.00
Source: Federal Reserve Bank of Chicago
-3.50
-4.00
'90
'93
'96
'99
'02
'05
'08
A-D-S Business Conditions Index Improving
Source: Federal Reserve Bank of Philadelphia
Anecdotal Reports Starting to Improve
UPS Volume
U.S. Average Daily Package Volume UPS
vs. Real GDP
Real GDP
7
6
5
5
4
3
3
2
1
1
-1
0
UPS Volume
-1
Real GDP
-3
-2
Source: United Parcel Service, Bureau of Economic Analysis, Argus Research
-5
-3
2000
2002
2004
2006
2008
Fiscal Policy Arriving at the Spigots
Direct Outlays, Stimulus Package ($Blns)
250
200
150
Source: CBO
100
50
0
-50
2009
'10
'11
'12
'13
'14
'15
'16
'17
'18
2019
Monetary Policy…
Source: Federal Reserve Bank of St. Louis
Business Investment has Collapsed
Capital Spending (%)
Non-Residential Investment
30
20
10
0
-10
-20
-30
Source: Bureau of Economic Research
-40
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
Little Reason for Hope in New Orders Data
New Orders
NonDefense Capital Goods Ex-Aircraft (Y/Y%)
24
16
8
0
-8
-16
-24
-32
Source: Department of Commerce
-40
'94
'96
'98
'00
'02
'04
'06
'08
Key Index Implying Strong Recovery
ISM New Orders - Inventories vs. Real GDP
NO-I
GD P Y / Y %
25
9
20
15
6
10
5
3
0
-5
0
GDP
NO-INV
-10
Source: B EA , ISM , A rgus Research
-15
1983
-3
1988
1993
1998
2003
2008
Little Need to Build With Glut of Commercial Property
Structures Spending (%)
30
15
0
-15
-30
Source: Bureau of Economic Analysis
-45
'94
'96
'98
'00
'02
'04
'06
'08
Signs of Stabilization
New & Existing Home Sales
New
Existing
1350
7300
1200
New
Existing
6550
1050
900
5800
750
5050
600
4300
450
Source: US Dept. of Commerce, National Association of Realtors
300
3550
'96
'99
'02
'05
'08
Home Prices Returning to Pre-Bubble Levels
S&P/Case Shiller Home Price Indices
AZ-Phoenix
300
CA-Los Angeles
CA-San Diego
275
CA-San Francisco
CO-Denver
250
DC-Washington
FL-Miami
225
FL-Tampa
GA-Atlanta
200
IL-Chicago
MA-Boston
175
MI-Detroit
Source: S&P
150
MN-Minneapolis
NC-Charlotte
125
NV-Las Vegas
NY-New York
100
OH-Cleveland
OR-Portland
75
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
TX-Dallas
WA-Seattle
Encouraging Signs in the Housing/Construction Market
Architecture Firms' Billing Index
65
60
55
50
45
40
35
Source: American Institute of Architects
30
1996
1998
2000
2002
2004
2006
2008
“Stimulus” May Help Ailing Construction Sector
Construction Spending (Y/Y%)
30
20
10
0
-10
-20
Non-Residential
Residential
-30
Source: Department of Commerce
-40
2003
2005
2007
2009
Trade, the Unsexy Savior
Contribution to GDP
Residential Spending & Trade
3.5
2.93
Residential
3
Trade
2.5
2.18
2.03
2
1.66
1.33
1.5
0.5
1.05
0.94
1
0.77
0.59
0.09
0
-0.5
-0.12
-0.23
-0.15
-0.52
-0.6
-1
-1.11
-1.5
-1.18
-0.91
-1.2
-1.4
-0.6
-0.8
-1.06
-1.12
-1.33
Source: BEA, Argus Research
-1.39
-2
'06 QI
QII
QIII
QIV
'07 QI
QII
QIII
QIV
'08 QI
QII
QIII
QIV
'09 QI
Some Recovery in Container Traffic
Outbound Container Statistics (TEU)
Port of Long Beach
170,000
150,000
130,000
110,000
90,000
70,000
Source: Port of Long Beach
50,000
'95
'97
'99
'01
'03
'05
'07
'09
Some Signs of Peak in Unemployment
'Jobs Hard-to-Get' &
Unemployment Rate
U Rate
Jobs Index
10
50
9
40
8
Jobs Index
30
7
6
20
Unemployment Rate
5
10
4
Source: Conference Board, Bureau of Labor Statistics
3
0
'90
'92
'94
'96
'98
00
'02
'04
'06
'08
Unemployment Benefit Claims Point to Economic Trough
Weekly Initial Claims
700,000
650,000
600,000
Source: US Department of Labor
550,000
500,000
450,000
400,000
350,000
300,000
250,000
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
Ever-Resilient Consumer Tossed in Towel
Real Consumer Spending (%)
10
5
0
Source: Bureau of Economic Aanalysis
-5
1992
1995
1998
2001
2004
2007
‘Fab Five’ – Dining Out
Spending: Meals at Other Eating Places (Y/Y%)
8
6
4
2
0
-2
-4
Source: Bureau Economic Analysis, NBER
-6
'98
'01
'04
'07
‘Fab Five’ – Jewelry & Watches
Spending: Jewelry & Watches Y/Y%
16
12
8
4
0
-4
-8
-12
Source: Bureau Economic Analysis, NBER
-16
'98
'01
'04
'07
‘Fab Five’ – Cosmetics & Perfumes
Spending: Cosmetics & Perfumes (Y/Y% )
6
3
0
-3
-6
Source: Bureau Economic Analysis, NBER
-9
'98
'01
'04
'07
‘Fab Five’ – Women’s Dresses
Spending: Women's Clothing (Y/Y%)
12
10
8
6
4
2
0
-2
-4
-6
Source: Bureau Economic Analysis, NBER
-8
'98
'01
'04
'07
‘Fab Five’ – Casino Gambling
Spending: Casino Gambling Y/Y%
24
20
16
12
8
4
0
-4
-8
-12
Source: Bureau Economic Analysis, NBER
-16
'98
'01
'04
'07
‘Fab Five’ Recovery…
Post Recession, Fab-Five
December 2001=100
145
140
135
130
125
120
Dining Out
Perfumes
Women's
Jewelry
Casino
115
110
105
100
95
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Bad Signs for Summer Spending
Real Spending: Hotels & Motels (Y/Y% )
16
12
8
4
0
-4
-8
-12
-16
Source: Bureau Economic Analysis, Argus Research, NBER
-20
'98
'01
'04
'07
Auto Industry is the Wildcard
America Still Loves Those Trucks
Total Vehicle Assemblies (Mlns)
9
Source: Federal Reserve System
Trucks
8
Autos
7
6
4.12
3.97
5
3.72
4
3.11
3.05
3.2
1.33
1.66
1.87
1.84
Jan-09
Feb-09
Mar-09
Apr-09
3
2.52
2
3.72
3.34
2.95
1
0
Oct-08
Nov-08
Dec-08
Prices Aren’t ‘Collapsing’
The Economist Commodity Price Index
275
All Items
260
245
Industrials
Food
230
215
200
185
170
155
140
2005=100
125
110
2/14/2001
2/13/2002
2/12/2003
2/11/2004
2/9/2005
Market Inflation Expectations Rising
5-Year Treasury Note - Five Year TIPS Spread
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50
-2.00
Source: Federal Reserve Bank of St. Louis, Argus Research
-2.50
2003
2004
2005
2006
2007
2008
2009
Consumer Inflation Expectations on the Rise
Reuters/U. Michigan Inflation Expectations (%)
6.0
5.0
4.0
3.0
2.0
Source: Bloomberg
1.0
0.0
'03
'04
'05
'06
'07
'08
'09
Broad Inflation Measures Still Elevated
GDP Deflators (%)
6
4
2
0
-2
PCE Deflator
GDP Deflator
-4
Source: Bureau of Economic Analysis
-6
2004
2005
2006
2007
2008
2009
No ‘Deflation’ in this Respected Measure
Dallas Fed Trimmed-Mean PCE Inflation (Y/Y%)
3.1
2.9
2.7
2.5
2.3
2.1
1.9
1.7
Source: Federal Reserve Bank of Dallas
1.5
'95
'97
'99
'01
'03
'05
'07
'09
Inflation Pressures Appear to be ‘Well-Anchored’…
For Now
Core Personal Consumption Expenditure Deflator
(Y/Y%)
4.5
4.0
3.5
3.0
2.5
2.0
1.5
Federal Reserve 'Comfort Zone'
1.0
0.5
Source: Bureau of Economic Analysis, Argus Research
0.0
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
Monetary Policy Getting Easier Every Month
Real Fed Funds Rate
Core Personal Consumption Deflator (%)
6.0
4.0
2.0
0.0
-2.0
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
Internal Fed Gauge Implies Fed to Remain on ‘Hold’
Argus Leading Fed Funds Index
FF %
Index
9
130
37.16
8
120
FED FUNDS
ALFFI
7
110
100
6
90
5
80
4
70
3
60
2
50
1
40
0
30
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
Risks to “V”-Shaped Recovery…
 Auto Industry Collapse
 Commodity (Food), Energy, Healthcare Inflation
(price pass alongs announced during the quarterly earning season)
 Stimulus Fails to Generate Jobs
 Consumers Decide to Save
 Jobs Climate Deteriorates Further
Reasons for Optimism…
 Massive Monetary Stimulus in Pipeline
 Large Stimulus of Falling Energy Prices
 Government Has Approved Whopping Fiscal Spending Program
 Home Prices Have Returned to Pre-Bubble Levels
 Frozen Credit Markets Have Thawed Considerably