Transcript No Slide Title

CFC Economic & Interest Rate Update
John Suter
Vice President Capital Markets Research &
Analysis
June 2015
CFC: Created and Owned by America’s Electric Cooperative Network
2014 10-Year Treasury Yields
3.20
3.00
3.00
One Big Miss for Economic Forecasters
• Projection for closing yield in December 2014: 3.52%
• Actual at Year End: 2.17%
2.80
2.60
2.40
2.20
2.17
2.00
Created and Owned by America’s Electric Cooperative Network
What the Economic Forecaster Got Right – and Wrong in 2014
Indicator
Full-Year 2014
Consensus
Actual
Comments
GDP Growth
2.8%
2.4%
After experiencing a bad,
weather-driven contraction
first quarter, it appears that
the economy has pickedup from 2013.
Unemployment Rate
6.3%
5.8%
Almost every economist
saw the jobless rate at or
above 6% by the end of
2014.
Inflation
1.9%
1.3%
The plunge in energy prices
caused the miss in
forecasting overall inflation.
Interest Rates (10-Year U.S.
Treasury Yield)
3.52%
2.17%
Every economist in the WSJ
survey in January 2014 was
far off the mark in
expectations for interest
rates in 2014
Crude Oil
$94.65/barrel
$53.27/barrel
The year’s plunge in crude
oil prices, from a peak of
$107.26 in June, was easily
the biggest economic
surprise of 2014.
Created and Owned by America’s Electric Cooperative Network
3
World Growth Just Incrementally Higher
Region/Country 2015 2016
World
Australia
Canada
China
eurozone
India
Japan
U.K.
U.S.
Asia-Pacific
Latin America
3.2
2.7
2.7
7.1
1.5
6.3
1.3
2.5
3.0
5.4
2.6
3.4
3.2
2.8
7.0
1.7
6.5
1.2
2.2
3.1
5.4
2.4
Exports as Percent of GDP
South Korea
54%
Germany
51%
Eurozone
44%
U.K.
31%
Russia
28%
China
26%
India
25%
Japan
15%
U.S.
14%
Brazil
13%
0%
20%
40%
60%
GDP Component: Net Exports (X-M)
Created and Owned by America’s Electric Cooperative Network
World Inflation Non-Existent!
2015 Average CPI
3.00%
2.74%
2.50%
2.00%
1.91%
1.64%
1.46%
1.50%
1.00%
0.79%
0.61%
0.45%
0.50%
0.21%
0.00%
Canada
France
Germany
Italy
Japan
UK
United
States
Euro Zone
Created and Owned by America’s Electric Cooperative Network
5
U.S. Dollar the Big Surprise in 2015
1.5
1.4
1.4
1.3
1.3
1.2
1.2
$1.13
High on 03/18/14: 1.12/Euro
Average:
1.29/Euro
Low on 03/13/15: 1.05/Euro
1.1
1.1
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
1.0
Dollar versus Euro
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6
U.S. Companies Less Competitive Abroad

Caterpillar’s dismal earnings spell trouble for global economy
due to the sharp drop in the price of oil and other commodities
– sales will fall roughly 9% in 2015.
– Disappointing earnings from other big-name companies
like Dupont, Pfizer, Proctor & Gamble and Bristol-Myers
Squibb

Energy and mining companies are reducing their investment –
these companies account for the bulk of Caterpillar’s sales.
Construction and mining equipment functions as an engine of
global economic growth.

China and Europe have reduced their growth forecasts.
Emerging markets like Brazil, Turkey, and Russia are reeling
amid falling oil prices and whipsawing foreign investment.

Weakness abroad certainly isn’t good for the American
economy and it is a bad sign for export-heavy companies like
Caterpillar.
Company
Intel
Dow Chemical
McDonald's
Proctor & Gamble
Caterpillar
IBM
Dupont
Pfizer
General Electric
Ford
Nike
Bristol-Myers
Exxon-Mobil
Amazon
Boeing
Wal-Mart
Bank of America
Marriott
Mckesson
Overseas
Sales
85%
67%
66%
66%
65%
64%
60%
60%
54%
51%
50%
50%
45%
45%
41%
26%
20%
16%
9%
Created and Owned by America’s Electric Cooperative Network
Changes Over the Past 52 Weeks
04/01/2015 05/07/2015
DJIA
1.3%
17,698
17,924
NASDAQ
1.3%
4,880
4,946
S&P 500
1.4%
2,060
2,088
1.86%
2.18%
10 - Year Yield 0.32%
Crude Oil
17.7%
$50.09
$58.94
Gold
-2.1%
$1,208
$1,182
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8
High Rates are the Exception, Not the Rule
16
14.59
14
12
10
8
6
4
2
2.18
1.95
0
1939
$93.5b
1954
1969
1984
1999
2014
$18.1t
Created and Owned by America’s Electric Cooperative Network
Stock Market In Not Economy!
Quarterly GDP Growth vs. Dow Performance
17776.12
10.0
Dow Average Annual Increase - 15.19%
GDP Average Annual Increase - 3.52%
18000
16000
5.0
12000
10000
0.2%
0.0
8000
Dow Level
GDP Growth Percentage
14000
6000
-5.0
4000
Quarterly GDP
Dow Jones Industrial
Average
-10.0
2000
0
Created and Owned by America’s Electric Cooperative Network
10
Problem With Low Interest Rates
MOM
DAD
BELOVED PARENTS AND
GRANDPARENTS
PLAYED IT TOO SAFE,
DIED BROKE
Created and Owned by America’s Electric Cooperative Network
-
S&P 500 (LHS)
NASDAQ (LHS)
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
What Will Be the Next Bubble?
6,000
120
5,000
100
4,000
80
3,000
60
2,000
40
1,000
20
-
Barclay's Bond Fund (RHS)
Created and Owned by America’s Electric Cooperative Network
12
Created and Owned by America’s Electric Cooperative Network
2014 GDP Final Releases
6.00%
5.00%
4.60%
5.00%
4.00%
3.00%
2.20%
2.00%
1.00%
0.00%
-1.00%
-2.00%
-3.00%
-2.11%
2014Q1
2014Q2
2014Q1
2014Q2
2014Q3
2014Q3
2014Q4
2014Q4
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14
Reliability of the Economic Statistics
6.00%
5.0%
5.00%
4.6%
4.0%
4.00%
4.2%
3.9%
3.5%
2.6%
3.00%
2.2%
2.2%
2.00%
1.00%
0.3%
0.1%
0.00%
-1.00%
-1.0%
-2.00%
-2.1%
-3.00%
-2.9%
-4.00%
Created and Owned by America’s Electric Cooperative Network
Revisions in Non-farm Payroll Significant
450
423
400
353
350
329
295
300
252
250
266
257
223
201
200
150
126
85
100
50
0
November
December
January
Nonfarm Payrolls
February
March
April
Revised Nonfarm Payrolls
Created and Owned by America’s Electric Cooperative Network
Service & Manufacturing Sectors
70.0
57.8
60.0
51.5
50.0
40.0
30.0
20.0
10.0
ISM Non-manufacturing
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
0.0
ISM Manufacturing
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17
Weak Global Demand & Strong Dollar Hurt ISM
60.0
58.0
56.9
55.5
56.0
54.0
56.9
53.5
52.6
52.0
51.5
50.0
48.0
Quarterly ISM (avg.)
Monthly ISM
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18
Fed’s Expected Path Drifts Lower
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6
US Economy: Four Engine Plane
I
C
G
X
Created and Owned by America’s Electric Cooperative Network
Quarterly Real GDP Growth
6%
4%
4.90%
3.90%
3.90%
2.80%2.80%
2% 1.30%
1.60%
2.80%
1.40%
2.50%
1.20%
2.60%
5.00%
2.19%
1.10%
0.25%
0.10%
0%
-2%
4.10%
3.70%
3.20%
4.60%
-1.30%
-2.10%
-4%
-6%
-8%
-10%
Created and Owned by America’s Electric Cooperative Network
Consumption Driven: Slow Growing GDP
1%
18%
10%
71%
Consumption - Goods (30%), Services
(41%)
Business Fixed Investments Nonresidential (12%), Residential (5%)
Governement Spending
Change in Business Inventories
Created and Owned by America’s Electric Cooperative Network
What's Driving or Dragging Economic Growth?
Contribution to Percent Change in Real GDP & Real GDP Growth
4.60%
5.0%
4.97%
3.0%
2.22%
1.0%
0.25%
-1.0%
-2.11%
-3.0%
-5.0%
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Government consumption expenditures and gross investment
Net exports of goods and services
Gross private domestic investment
Personal consumption expenditures
US Real GDP Growth
Created and Owned by America’s Electric Cooperative Network
Non-Farm Payrolls Slowing
350
295
300
257
262
223
250
200
150
126
100
50
0
2014
2015
2014 (3ma)
Created and Owned by America’s Electric Cooperative Network
U/E Now Inside of NAIRU Zone!
7.0
6.5
6.0
5.5
5.4
5.0
4.5
4.0
NAIRU (Upper)
Unemployment
NAIRU (Lower)
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Why Isn’t Labor Participation Rising?
50.0
68.0
45.0
67.0
40.0
66.0
35.0
65.0
30.0
29.8
25.0
64.0
20.0
63.0
15.0
62.0
11.0
10.0
61.0
5.0
5.5
Labor Participation Rate
Underemployment
Jan-15
Jun-14
Nov-13
Apr-13
Sep-12
Feb-12
Jul-11
Dec-10
May-10
Oct-09
Mar-09
Aug-08
Jan-08
Jun-07
Nov-06
Apr-06
Sep-05
Jul-04
Unemployment
Feb-05
Dec-03
May-03
Oct-02
Mar-02
Jan-01
Aug-01
Jun-00
Nov-99
Apr-99
Sep-98
Feb-98
Jul-97
Dec-96
May-96
Oct-95
Aug-94
Mar-95
60.0
Jan-94
0.0
LT Unemployment
Created and Owned by America’s Electric Cooperative Network
Wage Gains Show Little Acceleration
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
Nominal Avg. Hourly Earnings
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
-3.0
Real Avg. Hourly Earnings
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Wal-Mart Raises Base Wage
90.0
88.0
86.0
84.0
82.0
80.0
78.0
76.0
74.0
72.0
70.0
86
Wal-Mart Stock Price (Ticker: WMT)

Walmart raised its base wage to $9.00
an hour on 2/19/2015

Walmart employs roughly 2.2 million
employees

The increase will cost the firm $1 billion
this fiscal year

Is the raise a see of change in the retail
sector?

“Fordism” – referring to Henry Ford’s
historic 1914 decision to double wages
in his factors, which not only boosted
productivity and reduced turnover but
also created more customers for his
company’s products.
Created and Owned by America’s Electric Cooperative Network
Confidence Measures Peaking
Conference Board
High
01/31/2015
Average 1/01/2008 - 3/31/2015
Low
02/28/2009
120
100
University of Michigan
High
01/31/2015
Average 1/01/2008 - 3/31/2015
Low
11/30/2008
103.8
64.6
25.3
98.1
73.5
55.3
101.3
93.0
80
60
40
20
Conference Board
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
0
University of Michigan
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29
Inflation Remains Tame
3.00
2.50
2.00
1.50
1.31
1.00
Average: 1.51
High on 6/30/08: 1.31
Low on 12/31/10: .95
0.50
-
Core PCE (YOY)
Fed Target During QE
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30
Recovered – Autos Not Housing
9
24
8
22
7
20
6
18
5
16
4
14
3
Existing Home sales (mn)
Jul-14
Dec-13
May-13
Oct-12
Mar-12
Aug-11
Jan-11
Jun-10
Nov-09
Apr-09
Sep-08
Feb-08
Jul-07
Dec-06
May-06
Oct-05
Mar-05
Aug-04
Jan-04
Jun-03
Nov-02
8
Apr-02
-
Sep-01
10
Feb-01
1
Jul-00
12
Dec-99
2
30-year MBA mortgage rate
U.S. Auto sales annualized (mn)
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31
Homeowners Drive Consumer Spending
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Housing Dilemma
Gross
Domestic
Product
Housing
Demand
Credit
Availability
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33
Missing from the Housing Equation
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34
Negative Home Equity Trending Down
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Still Weighing Down Housing Market
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36
States With Troubled Housing Statistics
Nevada
New Jersey
Florida
Maryland
Illinois
Florida
Rhode Island
Illinois
Michigan
Nevada
Ohio
Delaware
Connecticut
Ohio
Missouri
Indiana
Maryland
Connecticut
Arizona
North Carolina
0%
10%
20%
30%
Negative Home Equity
40%
-
1.0
2.0
3.0
4.0
5.0
Home Foreclosures
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Fed Ramifications Across World
Fed Funds Liftoff
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38
I tried to find out from Ben Bernanke!
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Normalization & Shifts in the Yield Curve
3.00%
2.50%
2.00%
Fed Controlled
1.50%
1.00%
0.50%
Function of : GDP Growth, Inflation
O/N
1-wk
1-mth
2-mth
3-mth
1yr
2yr
3yr
4yr
5yr
6yr
7yr
8yr
9yr
10yr
11yr
12yr
13yr
14yr
15yr
16yr
17yr
18yr
19yr
20yr
21yr
22yr
23yr
24yr
25yr
26yr
27yr
28yr
29yr
30yr
0.00%
Yield Curve
Created and Owned by America’s Electric Cooperative Network
Where Should FF Be with U/E at 5.4%?

Full Employment
– “Dove”
– The dove wants
maximum
employment
5.0 to 5.5 percent

Price Stability (Inflation)
– “Hawk”
– The hawk worries
about inflation and
stands for sound
money.
2 percent
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41
Ben Bernanke Cites This Mistake!
Importance of Overnight Interest Rates Relative to GDP
10
8
6
4
2
0
-2
-4
-6
-8
Eurozone GDP Growth
Sweden GDP Growth
ECB Overnight Rate
Libor Euro Overnight Rate
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42
Is The Fed Boxed In or Not?
Slowing Non-farm
Payrolls
Strong Dollar
International Capital
Funds Flow into U.S.
Falling Labor
Participation Rate
Low Annualized
Wage Growth
Low Inflation
(deflation?)
Low European
Interest Rates
Erratic
GDP Numbers
ECB QE?
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43
Prior Fed Funds Movement
25.0
Fed Funds Recap
Average:
5.29
Maximum:
20.00
Minimum:
0.25
Neutral:
3.75
20.0
15.0
10.0
Last Tightening Cycle
5.0
Aug-15
Mar-14
Oct-12
May-11
Dec-09
Jul-08
Feb-07
Sep-05
Apr-04
Nov-02
Jun-01
Jan-00
Aug-98
Mar-97
Oct-95
May-94
Dec-92
Jul-91
Feb-90
Sep-88
Apr-87
Nov-85
Jun-84
Jan-83
Aug-81
Mar-80
Oct-78
May-77
Dec-75
0.0
Fed Funds
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Future Fed Hikes – No Stairway to Normalization
6.00
5.25
5.00
4.00
Alan Greenspan
Ben Bernanke
3.00
“For monetary normalization, a
smooth path upward in the federal
funds rate will almost certainly not
be realized” Vice Chairman Stanley
Fischer, March 23,2015.
2.00
1.00
1.00
Aug-07
Jun-07
Apr-07
Feb-07
Dec-06
Oct-06
Aug-06
Jun-06
Apr-06
Feb-06
Dec-05
Oct-05
Aug-05
Jun-05
Apr-05
Feb-05
Dec-04
Oct-04
Aug-04
Jun-04
Apr-04
Feb-04
Dec-03
Oct-03
Aug-03
Jun-03
0.00
Fed Funds Last Tightening Cycle
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45
Short-Term Rate Forecast Disconnect
2.50%
2.00%
1.875%
1.50%
1.175%
1.00%
0.50%
0.625%
This has already moved down 16 bps
since the last time I updated
Fed Futures
Federal Reserve
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
0.00%
Economist Consensus
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46
Fed Funds Rate
USGG5YR Index
USGG10YR Index
01/03/2015
01/03/2014
01/03/2013
01/03/2012
01/03/2011
01/03/2010
01/03/2009
01/03/2008
01/03/2007
01/03/2006
01/03/2005
01/03/2004
01/03/2003
01/03/2002
01/03/2001
01/03/2000
01/03/1999
01/03/1998
01/03/1997
01/03/1996
01/03/1995
01/03/1994
01/03/1993
01/03/1992
01/03/1991
01/03/1990
01/03/1989
01/03/1988
01/03/1987
01/03/1986
01/03/1985
01/03/1984
01/03/1983
Movements in Fed Funds & Term Rates
16
14
12
10
8
6
4
2
0
USGG30YR Index
Created and Owned by America’s Electric Cooperative Network
LT Rates Rise First Year of Fed Hikes
On average, 1 year after the first Fed hike, the 10yr UST
has risen by ~54% of the move higher in Fed Funds
2015-2016
JPM
Implied by
Forecast
FOMC
Source: JP Morgan Forecasts
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48
Fixed Rate Loans Dominate
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Perfect World
Liabilities
Assets
Member
Loans
Debt Service
Debt Service
Loan Funds
Bond Funds
Bondholders
Member Owner
Equity
Created and Owned by America’s Electric Cooperative Network
The Main Street to Wall Street Connection
Home Equity Loan
Collateral Package:


Collateral Strengths Per Investors:
Distribution system member has
equity ratio of at least 20%.
Distribution system member has an
average coverage ratio of at least
1.35x

Essential Service – Electricity

Defined Service Territory

Limited Competition

Geographically Disbursed

Mostly Rate Unregulated
Loans
Debt Capital
Rated: A1/A
Created and Owned by America’s Electric Cooperative Network
The Complete Funding Picture
Variable Rate Loan Program
Fixed Rate Loan Program
10% of loan portfolio
Monthly interest rate reset
Quarterly amortization
Term: 1–35 years
90% of loan portfolio
Fixed rate to selected term
Quarterly amortization
Term: 1–35 years
supported by
supported by
Interest Rate Swaps
(pay fixed/ receive floating)
Fixed Rate Funding Sources
Variable Rate Funding Sources
Commercial Paper Programs
Select Notes & Daily Liquidity Fund
Bank Bid Notes
Floating Rate Notes
Fixed–term Debt Swapped to Floating
Members’ Equity
Interest Rate Swaps
(pay floating/ receive fixed)
Collateral Trust Bonds
GUP Bonds
Farmer Mac Notes
Medium–term Notes
Subordinated Deferrable Notes
Clean Renewable Energy Bonds
Floating-term Debt Swapped to Fixed
Members’ Equity
Created and Owned by America’s Electric Cooperative Network
52
4 Entities to Differentiate Regarding Cost
Federal Reserve
Federal Government
National Rural Utilities CFC
Member
AAA/AA+
A1/A
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53
Rate Setting – Both Art and Science
Credit Spread
Pricing
Rate
Build
(incl.
Other
Costs)
Market
Forces
Index – CP, 3ML
Treasury
CFC
Rates
“Given current state of world and U.S.
economies, biggest risk on rates lies with
underlying Treasury yield, not CFC’s
credit spread and business cost adders”
– John Suter 4/07/2015
Created and Owned by America’s Electric Cooperative Network
54
2015 Economic Forecast
Bank of America Merrill Lynch
Bank of Tokyo Mitsubishi
Barclays
Credit Suisse Group
Deutsche Bank
Goldman Sachs
JP Morgan
Moodys
RBC
Scotia
Wells Fargo
Bloomberg High
Bloomberg Low
Bloomberg Consensus
GDP (YoY %) CPI (YoY %) Core PCE (YoY %) Unemployment 10-Yr UST
3.00
0.90
1.30
5.00
2.35
2.60
2.60
1.80
4.90
3.3
3.00
1.10
1.20
5.00
2.25
3.00
1.70
1.40
5.10
2.85
3.20
1.50
1.50
4.70
2.35
3.00
0.80
1.10
5.20
3
2.50
0.80
N/A
5.20
2.4
2.60
1.20
1.30
5.20
2.55
2.90
1.50
0.80
5.40
3.1
2.80
1.20
1.10
5.20
2.4
3.00
0.80
0.90
5.20
2.45
0.00
0.00
0.00
0.00
3.80
2.90
2.10
5.60
3.9
1.40
0.00
0.20
4.70
1.9
3.40
1.20
1.10
5.20
2.63
Created and Owned by America’s Electric Cooperative Network
55
What To Look For In Coming Months:
Economic Indicator
Economic Highlights
GDP

Labor Market


Inflation

Dollar

Fed Funds

Year-over-year growth in 4Q14 of 2.2%; 2015 GDP
growth ranges from 3.0-3.3% which is closer to
historical average of 3.3% the strongest annual
performance since 2004; mediocre global growth, with
U.S. continuing to lead
Continued +200k per month on Non-farm payrolls,
weighted towards sub-par positions (i.e. part-time and
low paying positions) – keep in mind that 90% of
headline payroll numbers since January 2013 (so 19
out of 25 reports) have witnessed upward revisions on
average of 23,000
Limited wage growth potential which has been a
hindrance
Global dis-inflation to persist; inflation to remain
below Fed target through 2015 in U.S. due to lower oil
prices
Well positioned to extend its upward momentum due
to dropping oil prices; capital inflows from developing
and advanced economies increasingly attracted to
safer and higher investment returns
Fed is still projected to make their first move at the
end of Q215, but could be pushed one meeting back
from June to September; “Terminal” Fed funds rate
of 2.25%; below historical cycle peaks
Created and Owned by America’s Electric Cooperative Network
56
Labor Market
AREA
Labor Force
MEASURE
NUMERICAL TREND
CURRENT TREND
Nonfarm Payrolls (Establishment Survey) - This indicator measures the
net change in number of employees on payrolls; employed full-or parttime who received pay for any part of the pay period that includes the
12th day of the month. A pace of 200,000 + per month is consistent
with 3.0% GDP growth.
Nov ember-14
December-14
January-15
February-15
March-15
April-15
423,000
329,000
201,000
266,000
85,000
223,000
Initial Unemployment Claims - Workers who lose their jobs and are
Week of:
covered by these programs typically file claims ("initial claims") that
serve as notice that they are beginning a period of unemployment. This
number represents an inflow of people receiving unemployment
benefits.
27-Mar
03-Apr
10-Apr
17-Apr
24-Apr
01-May
267,000
282,000
295,000
296,000
262,000
265,000
11.4%
11.2%
11.3%
11.0%
10.9%
10.8%
Underemployment Rate - Underemployment includes three
classifications of persons -unemployed workers who are actively
looking for work, involuntarily part-time workers who want full-time
work but have had to settle for part-time hours, and marginally
attached workers who want and are available for a job, but are not
actively looking. Together, they provide a more comprehensive
measure of slack in the labor market.
Unemployment Rate (Household Survey) - Tracks the number of
unemployed persons as a percentage of the labor force (the total
number of employed plus unemployed). Persons are classified as
unemployed if they do not have a job, have actively looked for work
in the prior 4 weeks, and are currently available for work.
Labor Force Participation Rate - The total labor force (the total number
of employed plus unemployed) as a percentage of the working age
population.
Nov ember-14
December-14
January-15
February-15
March-15
April-15
Nov ember-14
December-14
January-15
February-15
March-15
April-15
Nov ember-14
December-14
January-15
February-15
March-15
April-15
5.8%
5.6%
5.7%
5.5%
5.5%
5.4%
62.9%
62.7%
62.9%
62.8%
62.7%
62.8%
Created and Owned by America’s Electric Cooperative Network
572
Consumer
AREA
MEASURE
NUMERICAL TREND
Conference Board Consumer Confidence - The Consumer Confidence
Survey measures the level of confidence individual households have in
the performance of the economy. Survey asks a nationwide
representative sample of 5,000 households, of which approximately
3,500 responses. Expectations account for 60% of the index, while the
current situation is responsible for the remaining 40%.
U. of Mich. Consumer Sentiment - The University of Michigan Consumer
Research Center conducts a telephone survey of about 500 consumers.
Consumers are asked questions about personal finances, business
conditions and buying conditions. Expectations account for 60% of the
index, while the current situation is responsible for the remaining 40%.
Consumer
Retail Sales (mom %) - The Monthly Advance Retail Trade Survey (MARTS)
includes merchandise sold (for cash or credit at retail or wholesale) by
establishments primarily engaged in retail trade. Data are one of the
timeliest indicators of consumer spending patterns. Release provides
information on a wide range of retail establishments.
Retail Sales Ex Autos (mom %) - Excludes automobile sales.
Vehicle Sales (SAAR) - Light vehicle sales are divided between cars
and light trucks (sport utility vehicles, pickup trucks, and vans). Light
vehicle sales include both sales of vehicles assembled in North America
that are sold in the U.S. and sales of imported vehicles (not assembled
in North America) sold in the U.S. The total includes sales to consumers,
business, rental fleets and government. Units sales also include leased
vehicles.
Nov ember-14
December-14
January-15
February-15
March-15
April-15
Nov ember-14
December-14
January-15
February-15
March-15
April-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
Nov ember-14
December-14
January-15
February-15
March-15
April-15
CURRENT TREND
91.00
93.10
103.80
98.80
101.40
95.20
88.80
93.60
98.10
95.40
93.00
95.90
0.40%
0.50%
-0.90%
-0.80%
-0.50%
0.90%
0.30%
0.20%
-0.90%
-1.10%
-0.10%
0.40%
17.08
16.80
16.56
16.16
17.05
16.46
Created and Owned by America’s Electric Cooperative Network
58
Business Conditions
AREA
MEASURE
NUMERICAL TREND
ISM Manufacturing Index - The ISM manufacturing index is based on
surveys of 400 purchasing managers nationwide regarding
manufacturing in 20 industries. Below 50 indicates contraction and
above 50 indicates expansion.
Business Conditions
ISM Nonmanufacturing Index - The ISM nonmanufacturing survey
measures the rate and direction of change in activity in the
nonmanufacturing industries, which represent just over 80% of the U.S.
economy. Questionnaires are sent to more than 370 purchasing
managers in over 17 industries. Below 50 indicates contraction and
above 50 indicates expansion.
Durable Goods Orders - Provides broad-based monthly statistical data
on current economic conditions and indications of future production
commitments in the manufacturing sector. The report on Durable
Goods provides statistics on manufacturers' value of shipments, new
orders (net of cancellations), end-of-month order backlog (unfilled
orders), and end-of-month total inventory (at current cost or market
value).
Industrial Production - Industrial production is a pure measure of
output, untainted by the effects of price swings, in the industrial part of
the U.S. economy. Every month, the Federal Reserve calculates an
index of industrial production after collecting data on 312 industry
components representing manufacturing, mining, and the electric and
gas industries.
Business Inventories - The report compiles data from the Census' retail
trade report, wholesale trade report, and factory orders (M3) report.
Analysts look for long-term trends pointing toward rising or falling
inventory levels and changes in the inventories-to-sales ratio.
Nov ember-14
December-14
January-15
February-15
March-15
April-15
Nov ember-14
December-14
January-15
February-15
March-15
April-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
September-14
October-14
Nov ember-14
December-14
January-15
February-15
CURRENT TREND
57.6
55.1
53.5
52.9
51.5
51.5
58.8
56.5
56.7
56.9
56.5
57.8
-0.70%
-1.40%
-3.20%
2.20%
-1.00%
2.90%
0.00%
1.10%
-0.10%
-0.40%
0.10%
-0.60%
0.20%
0.20%
0.20%
0.00%
0.00%
0.30%
Created and Owned by America’s Electric Cooperative Network
593
Housing Market
AREA
MEASURE
NUMERICAL TREND
Existing Home Sales - On or about the 25th of each month, the NAR
releases statistics on sales and prices of existing-single family homes for
the nation and the four regions. These figures also include condo and
co-ops, in addition to single-family homes. Existing-home sales generally
account for 85% to 90% of total home sales, are based on a large
sample, and are not subject to large prior-month revisions.
Supply of Existing Homes - The inventory sales ratio, or months' supply
of homes, tells you how many months it takes to sell off the existing
inventory of used homes on the market based on the latest monthly
sales rate. If the ratio is too low, it's a sign that supplies are tight, which
may lead to stronger price appreciation. A ratio above 6 typically
denotes a soft housing market, which may lead to lower prices.
Housing Market
New Home Sales - The Census Bureau tracks monthly new-home sales
based on telephone or personal interviews with about 10,000 builders
or owners of about 15,000 selected building projects. A sale is recorded
when a buyer signs a contract to purchase a house. This will typically
lag the actual sale by several months. Data are available for the U.S.
and the four census regions.
Foreclosures - The concept tracks residential properties where
mortgage payments are in default and the lender is in the process of
recoverying the balance of the loan from the borrower by seizing
and/or forcing the sale of the property.
S & P Case Shiller Index - The monthly S&P/Case-Shiller indices are a
three-month moving average of the selling prices of houses in 20
metropolitan statistical areas (MSA) across the United States. Measuring
arms-length transactions of single-family houses, the indices serve as an
indicator of the average change in house prices over time.
October-14
Nov ember-14
December-14
January-15
February-15
March-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
October-14
Nov ember-14
December-14
January-15
February-15
March-15
September-14
October-14
Nov ember-14
December-14
January-15
February-15
CURRENT TREND
5.16
4.95
5.07
4.82
4.89
5.19
5.2
5.0
4.4
4.6
4.7
4.6
469,000
448,000
496,000
514,000
543,000
481,000
123,109
112,498
114,222
106,505
101,938
122,060
4.76%
4.43%
4.26%
4.43%
4.48%
5.03%
Created and Owned by America’s Electric Cooperative Network
60
Normalization & Shifts in the Yield Curve
3.00%
2.50%
2.00%
Fed Controlled
1.50%
1.00%
0.50%
Function of : GDP Growth, Inflation
O/N
1-wk
1-mth
2-mth
3-mth
1yr
2yr
3yr
4yr
5yr
6yr
7yr
8yr
9yr
10yr
11yr
12yr
13yr
14yr
15yr
16yr
17yr
18yr
19yr
20yr
21yr
22yr
23yr
24yr
25yr
26yr
27yr
28yr
29yr
30yr
0.00%
Yield Curve
Created and Owned by America’s Electric Cooperative Network
Historical Interest Rate Data
Financial Sector
Fed Funds Rate (%)
Fed Reserve Prime Rate
Fed Funds Effective Rate
1-Week LIBOR
1-Month Libor
3-Month Libor
6-Month Libor
12-Month Libor
3-Month T-Bill Rate (%)
2-Year Treasury Yield (%)
3-Year Treasury Yield (%)
5-Year Treasury Yield (%)
7-Year Treasury Yield (%)
10-Year Treasury Yield (%)
30-Year Treasury Yield (%)
Equity Market (S&P 500 Index)
Dow Jones Industrial
NASDAQ Index
VIX Index
US$ Major Currency Index
Non-Financial CP - 30 Day
1-yr Avg
0.25
3.25
0.10
0.13
0.16
0.24
0.34
0.59
0.02
0.50
0.93
1.59
2.02
2.32
3.04
1988.55
17184.29
4529.95
14.62
81.51
0.072
3-yr Avg
0.25
3.25
0.11
0.15
0.19
0.29
0.44
0.72
0.05
0.36
0.64
1.23
N/A
2.21
3.18
1712.27
15339.25
3790.18
15.26
77.32
0.088
5-yr Avg
10-yr Avg 20-yr Avg 30-yr Avg
0.25
1.62
2.83
3.93
3.25
4.62
5.84
6.69
0.12
1.53
2.81
3.98
0.18
1.67
N/A
N/A
0.21
1.72
2.95
N/A
0.32
1.86
3.04
N/A
0.49
2.02
3.16
N/A
0.79
2.24
3.36
N/A
0.06
1.36
2.59
3.65
0.41
1.73
3.07
4.31
0.70
1.90
3.33
4.60
1.34
2.45
3.69
4.93
N/A
N/A
N/A
N/A
2.43
3.26
4.29
5.48
3.46
3.99
4.87
5.95
1519.30
1374.31
1206.82
917.60
13840.92
12443.45 10621.23
7970.22
3308.86
2755.30
2347.98
1729.36
18.41
20.13
20.83
N/A
75.49
77.25
86.32
89.27
0.113
1.524
N/A
N/A
High
20.00
21.50
22.36
7.76
10.31
10.63
11.00
11.25
17.14
16.96
16.59
16.27
16.05
15.84
15.21
2117.39
18288.63
5048.62
80.86
148.12
6.59
High Date
05/29/1981
12/31/1980
07/22/1981
01/00/1900
01/00/1900
01/00/1900
01/00/1900
01/00/1900
12/11/1980
09/09/1981
09/09/1981
09/30/1981
09/30/1981
09/30/1981
10/26/1981
03/02/2015
03/02/2015
03/10/2000
11/20/2008
02/25/1985
01/00/1900
Low
0.25
3.25
0.04
0.12
0.15
0.22
0.32
0.53
-0.04
0.15
0.28
0.54
0.88
1.39
2.22
68.56
616.24
59.82
9.31
67.99
0.02
Low Date
04/03/2015
04/01/2015
12/30/2011
05/20/2014
05/20/2014
05/02/2014
10/09/2014
06/06/2014
12/04/2008
09/19/2011
07/24/2012
07/24/2012
07/24/2012
07/24/2012
01/30/2015
12/31/1974
12/31/1974
01/00/1900
01/00/1900
05/02/2011
02/19/2015
Created and Owned by America’s Electric Cooperative Network
62
Annual High/Low Libor Ranges
7.0
Period
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015 YTD
6.0
5.0
4.0
3.0
High
5.420
5.824
4.588
0.564
0.354
0.296
0.296
0.208
0.171
0.179
Low
Average
4.398
5.096
4.600
5.250
0.436
2.675
0.231
0.334
0.228
0.274
0.185
0.232
0.208
0.236
0.164
0.189
0.148
0.155
0.166
0.172
2.0
1.0
0.0
2006
2007
2008
2009
High
2010
2011
Low
2012
2013
2014
2015 YTD
Average
Created and Owned by America’s Electric Cooperative Network
63
Historical Treasury Yield
Current
Average
High
Low
10-Yr.
1.90
4.40
15.84
1.39
30-Yr.
2.51
4.97
15.21
2.22
Date
April 2, 2015
Sep. 30, 1981 / Oct. 27, 1981
July 24, 2012 / July 24, 2012
Created and Owned by America’s Electric Cooperative Network
64
Selected Treasury Yield Forecast
4.50%
4.00%
3.55%
3.30%
3.50%
3.10%
2.90%
3.00%
2.50%
2.00%
1.50%
2.40%
2.25%
1.85%
Present
2Q15
2.70%
2.45%
2.15%
1.92%
2.52%
2.25%
2.05%
2.40%
2.25%
2.35%
4Q15
1Q16
1.00%
0.50%
0.00%
High
3Q15
Median
Low
J.P. Morgan
Created and Owned by America’s Electric Cooperative Network
65
Flatter Yield Curve Anticipated
% Change Q/Q
Real U.S. GDP
Core Consumer Price Index
Unemployment Rate (%,sa)
Interest Index
Fed funds target
Three-month LIBOR
2-year U.S. Treasury
3-year U.S. Treasury
5-year U.S. Treasury
7-year U.S. Treasury
10-year U.S. Treasury
30-year U.S. Treasury
2s/10s Curve
5s/10s Curve
10s/30s Curve
4Q14
2.2%
1.5%
5.7%
Fed Funds
3ML
2yr
3yr
5yr
7yr
10yr
30yr
1Q15
2Q15
3Q15
4Q15
1Q16
0.6%
3.0%
2.5%
2.5%
2.5%
1.6%
1.7%
2.0%
2.0%
2.0%
5.6%
5.3%
5.2%
5.1%
4.9%
Present
2Q15
3Q15
4Q15
1Q16
0.13%
0.13%
0.50%
0.75%
1.00%
0.27%
0.50%
0.80%
1.05%
1.30%
0.54%
0.80%
1.05%
1.25%
1.45%
0.88%
1.20%
1.40%
1.55%
1.75%
1.37%
1.65%
1.80%
1.95%
2.15%
1.69%
1.90%
2.10%
2.25%
2.35%
1.92%
2.15%
2.25%
2.40%
2.45%
2.54%
2.65%
2.80%
2.85%
2.90%
138bps 135bps 120bps 115bps 100bps
55bps
50bps
45bps
45bps
30bps
62bps
50bps
55bps
45bps
45bps
Source: J.P. Morgan forecasts as of 4/03/2015
4.00%
3.00%
2.00%
1.00%
0.00%
Fed Funds
3ML
2yr
Present
3yr
2Q15
5yr
3Q15
7yr
4Q15
10yr
30yr
1Q16
Created and Owned by America’s Electric Cooperative Network
66
Created and Owned by America’s Electric Cooperative Network
67