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$noun mo men tum \ mō-ˈmen-təm, mə- \ 1 b : the strength or force that$ allows something to continue or to grow stronger or faster as time

1 MAINTAINING MOMENTUM: 2018 National Economic Update September 12, 2018 noun mo men tum \ mō-ˈmen-təm, mə- \ 1 b : the strength or force that allows something to continue or to grow stronger or faster as time passes - Merriam-Webster, LearnersDictionary.com Prepared by: Prepared For:

2 Leading Economic Index for the U.S. Increasing Steadily Source: The Conference Board.

3 Real GDP Growth Rate and NBER Cycles 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% Recession CAGR Real GDP Sources: U.S. Bureau of Economic Analysis, chained 2012 dollars; National Bureau of Economic Research.

4 U.S. GDP Increasing Faster than Expected 5% Recent Quarterly Data: 1q2018=+2.2%; 2q2018=4.2% (seasonally adjusted at annual rates) 4% 4.1% 3.8% 3.5% 3% 2% 1.7% 2.9% 2.9% 1.9% 2.6% 1.6% 2.2% 1.8% 2.5% 2.9% 1.6% 2.2% 2.9% 2.7% 1% 1.0% 0% -0.1% -1% -2% -3% -2.5% Source: U.S. Bureau of Economic Analysis, Chained 2012 Dollars. 2018e=DRP Estimate; 2019f=DRP Forecast.

5 C+I+G+NX=?

6 Components of Real GDP (billions of 2012 chained dollars) $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 -$1,000 Total 2017 GDP = $18 trillion Recession Consumption Investment Government Net Exports Source: U.S. Bureau of Economic Analysis.

7 CONSUMPTION +I+G+NX=GDP

U.S. Population = 325.7 million (July 1, 2017) U.S. Population increases by 1 person every 12 seconds Source: U.

8 U.S. Population = million (July 1, 2017) U.S. Population increases by 1 person every 12 seconds Source: U.S. Census Bureau.

9 Value of Personal Consumption Expenditures (billions of 20 chained dollars) $14,000 $12,000 $10,000 $8, Consumption = $12.6T Average 66.5% Current 68% $6,000 $4,000 $2,000 Recession Consumption Durable Goods Nondurable Goods Services $0 Source: U.S. Bureau of Economic Analysis.

10 Consumer Confidence Index Retail Trade Growth Rate Consumers Are Confident & Spending % 10% 5% % % -10% U.S. Retail Trade Growth U.S. Consumer Confidence Sources: U.S. Census Bureau; The Conference Board. 2018e=DRP estimate.

11 National Retail Sales by Category (Total = $5.8 Trillion in 2017) Largest: $611 billion Motor Vehicles and parts dealers Food and beverage stores Food services and drinking places General merchandise stores Non-store retailers Gasoline stations Building materials and garden equipment Health and personal care stores Clothing and clothing accessories stores Miscellaneous store retailers 2018 YTD 2017 Smallest: $37 billion Furniture and home furnishing stores Electronics and appliance stores Sporting goods, hobby, book and music stores Source: U.S. Census Bureau.

12 Total Personal Income Concentrated in States with Largest Populations

13 Total Personal Income Generally Increasing the Fastest in the West

14 Household Debt and Savings Rates at Reasonable Levels % Household Debt Service Payments as % of Disposable Personal Income 14% 12% Personal Savings as % of Disposable Personal Income 13% 12% 11% 10% 9% 8% 10% 8% 6% 4% 2% 0% Source: Federal Reserve Bank of St. Louis. Source: U.S. Bureau of Economic Analysis.

15 Dow Jones Industrial Average Resumes Climb 2016 = +13.4% 2017 = +25.7% 2018 = YTD +4.5% 30,000 25,000 20,000 15,000 10,000 5,000 0 Source: Yahoo! Finance.

16 Wages Increasing Faster than Inflation, but not Faster than Housing Costs 15% YOY Percentage Change 10% 5% 0% -5% -10% -15% CPI Avg Annual Pay Median Home Price Sources: U.S. Bureau of Labor Statistics; National Association of REALTORS.

17 Median Home Prices Changing at Variable Rates Across the U.S. 2Q17-2Q18 Change in Median Home Price Honolulu, HI $795.2 Seattle, WA $530.3 Denver, CO $462.9 Portland, OR $407.1 Salt Lake City, UT $331.6 Baltimore, MD $297.2 Portland, ME $294.2 Las Vegas, NV $291.4 Chicago, IL $275.1 Dallas, TX $268.2 Bismarck, ND $263.2 Trenton, NJ $259.4 Charlotte, NC $252.4 Philadelphia, PA $236.1 Atlanta, GA $228.8 New Orleans, LA $216.1 Des Moines, IA $211.6 Dover, DE $202.6 Indianapolis, IN $194.1 Jackson, MS $180.7 Oklahoma City, OK $164.5 Charleston, WV $ % U.S. Median Home Price -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% Source: National Association of REALTORS.

18 Home Sales Slowing due to Lack of Inventory, Rising Prices Number of Existing Homes Sold in the U.S. (millions) e Source:

19 51% of Permits Issued in South; Fastest Growth in Midwest (+4.6% July 2018 YOY) 2,500 2,000 National Building Permits (000s)* Multi-Family (5+ units) Single-Family Attached (2-4 units) Single-Family Detached (1 unit) 1,500 1, e * The Census Bureau tracks building permits by the number of housing units in the structure. Source: U.S. Census Bureau, Building Permits. 2018e=DRP Estimate.

20 The Case for Consumer Momentum Decreasing Rising interest rates Rising inflation rate Housing costs increasing faster than wages Lack of affordable housing Increasing Continued job growth Tax Cuts and Jobs Act influence Some tempering in residential markets Increasing wealth effect (stock, home prices)

21 C+INVESTMENT+G+ NX=GDP

22 Value of Private Domestic Investment (billions of 2012 chained dollars) $3,500 $3, Investment = $3.2T $2,500 $2,000 $1,500 $1,000 $500 $0 -$500 Recession Private domestic investment Nonresid Structures Equipment Intellectual property products Residential Average 17.3% Current 17.6% Change in inventories Source: U.S. Bureau of Economic Analysis.

23 Millions of Jobs U.S. Employment Gains/Losses by Year Recession U.S. Source: U.S. Bureau of Labor Statistics. 2018e=DRP estimate.

24 U.S. Employment Growth by Supersector Total U.S. Employment = million Largest: 23,495,000 workers Education and Health Services Government Professional and Business Services Leisure and Hospitality Retail Trade Manufacturing 2018 YTD 2017 Financial Activities Construction Wholesale Trade Other Services Transportation and Warehousing Information Mining and Logging Smallest: 553,000 workers Utilities -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Source: U.S. Bureau of Labor Statistics, Current Employment Statistics.

25 Employment Growth Varies Across the Country Alaska & North Dakota Employment Lower in 2018 than 2017 Source: U.S. Bureau of Labor Statistics.

26 Proprietors Are Another Significant Component Of Employment 45,000,000 Proprietors Employment = 22.6% of United States Total Employment 40,000,000 35,000,000 30,000,000 25,000,000 20,000, Source: U.S. Bureau of Economic Analysis.

27 Labor Force Continues to Expand with Continued Low Unemployment e 68% 67% U.S. Labor Force Participation Rates (seasonally adjusted) 10% 9% 8% U.S. Unemployment Rate 66% 65% 64% 63% 62% 61% 60% 59% 7% 6% 5% 4% 3% 2% 1% 0% Source: U.S. Bureau of Labor Statistics, Local Area Unemployment Statistics. 2018e=DRP Estimate; 2019f=DRP Forecast.

28 Pockets of Higher Unemployment Exist Throughout Country U.S. Unemployment Rate = 3.9% (July 2018, seasonally adjusted) Source: U.S. Bureau of Labor Statistics.

29 Cycle Monitor Dr. Glenn Mueller, Black Creek Group

30 Most Office Markets In Expansion Phase 2Q 2018 Vacancy Rate: 9.2% Full Service Rent: $25.19 Completed: 43.8 MSF Under Construction: MSF Source: CoStar Group Source: Black Creek Group, Cycle Monitor, Second Quarter 2018 Analysis.

31 Most Industrial Markets at Equilibrium 2Q 2018 Vacancy Rate: 4.9% NNN Rent Direct: $7.37 Completed: 54.6 MSF Under Construction: MSF Source: CoStar Group Source: Black Creek Group, Cycle Monitor, Second Quarter 2018 Analysis.

32 Most Retail Markets at Equilibrium 2Q 2018 Vacancy Rate: 4.6% NNN Rent Direct: $17.41 Completed: 11.6 MSF Under Construction: 71.2 MSF Source: CoStar Group Source: Black Creek Group, Cycle Monitor, Second Quarter 2018 Analysis.

33 The Case for Business Momentum Decreasing Hard to find workers Rising interest rates Rising wages and costs Tariffs on raw materials National debt concerns Increasing Diversity of economic base Confident consumers Technology driving major changes Active commercial real estate market

34 C+I+ GOVERNMENT+NX= GDP

35 Value of Government Expenditures (billions of 2012 chained dollars) $3,500 $3, Government= $3.1T $2,500 $2,000 $1,500 Average 19.1% Current 17.2% $1,000 $500 $0 Recession Government National Defense Nondefense State and Local Source: U.S. Bureau of Economic Analysis.

36 Increase in Annual Deficit due to Rising Mandatory Outlays and Interest Payments $400 $200 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 U.S. Federal Deficit ($billions) Source: Congressional Budget Office.

37 Interest Rate Comparisons Recession 2-Yr Treasury 10-Yr Treasury 30-Yr Fixed Rate Mortgage Source: Federal Reserve Bank of St. Louis.

38 C+I+G+NET EXPORTS=GDP

39 Value of U.S. Imports and Exports (billions of 2012 chained dollars) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Recession Exports Imports 2017 Exports = $2.5T Imports = $3.3T Net Exports = -$859B $0 Source: U.S. Bureau of Economic Analysis.

40 Trade Weighted U.S. Dollar Index (Mar 1973 = 100) e Major currencies index includes the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden Source: St. Louis Federal Reserve.

41 GDP Growth by Country 20% 15% 10% U.S Top Trading Partners Canada 18% Mexico 16% China 8% 5% 0% -5% -10% Canada Mexico China United States Source: International Monetary Fund, World Economic Outlook.

42 Questions? Development Research Partners West Belleview Avenue, Suite 100 Littleton, Colorado (303) Patricia Silverstein, President

Transitions: 2019 Economic Forecast for Metro Denver February 6, 2019

Transitions: 2019 Economic Forecast for Metro Denver February 6, 2019 Prepared by: Can Stock Photo / jkirsh In Partnership with: Consumer Changes and Influences Slowing population growth Aging of the population