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:
Leading Economic Index for the U.S. Increasing Steadily Source: The Conference Board.
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.
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.
C+I+G+NX=?
Components of Real GDP (billions of 2012 chained dollars) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $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.
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.S. Census Bureau.
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Value of Personal Consumption Expenditures (billions of 20 chained dollars) $14,000 $12,000 $10,000 $8,000 2017 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.
Consumer Confidence Index Retail Trade Growth Rate Consumers Are Confident & Spending 160 140 120 100 15% 10% 5% 80 60 0% 40 20 0-5% -10% U.S. Retail Trade Growth U.S. Consumer Confidence Sources: U.S. Census Bureau; The Conference Board. 2018e=DRP estimate.
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.
Total Personal Income Concentrated in States with Largest Populations
Total Personal Income Generally Increasing the Fastest in the West
Household Debt and Savings Rates at Reasonable Levels 2000 2001 2002 2003 2005 2006 2007 2008 2010 2011 2012 2013 2015 2016 2017 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2014 2015 2016 2017 14% 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.
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.
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.
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 $141.6 +5.3% U.S. Median Home Price -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% Source: National Association of REALTORS.
Home Sales Slowing due to Lack of Inventory, Rising Prices Number of Existing Homes Sold in the U.S. (millions) 8 7.08 6.52 6 4 5.02 4.12 4.34 4.18 4.26 4.66 5.09 4.94 5.25 5.45 5.51 5.50 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Source: https://www.statista.com/statistics/226144/us-existing-home-sales/
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 1,000 500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e * 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.
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)
C+INVESTMENT+G+ NX=GDP
Value of Private Domestic Investment (billions of 2012 chained dollars) 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 $3,500 $3,000 2017 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.
Millions of Jobs U.S. Employment Gains/Losses by Year 5 4 3 2 1 0-1 -2-3 -4-5 -6 Recession U.S. Source: U.S. Bureau of Labor Statistics. 2018e=DRP estimate.
U.S. Employment Growth by Supersector Total U.S. Employment = 148.2 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.
Employment Growth Varies Across the Country Alaska & North Dakota Employment Lower in 2018 than 2017 Source: U.S. Bureau of Labor Statistics.
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 20,000,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: U.S. Bureau of Economic Analysis.
Labor Force Continues to Expand with Continued Low Unemployment 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2014 2015 2016 2017 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018e 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.
Pockets of Higher Unemployment Exist Throughout Country U.S. Unemployment Rate = 3.9% (July 2018, seasonally adjusted) Source: U.S. Bureau of Labor Statistics.
Cycle Monitor Dr. Glenn Mueller, Black Creek Group
Most Office Markets In Expansion Phase 2Q 2018 Vacancy Rate: 9.2% Full Service Rent: $25.19 Completed: 43.8 MSF Under Construction: 155.8 MSF Source: CoStar Group Source: Black Creek Group, Cycle Monitor, Second Quarter 2018 Analysis.
Most Industrial Markets at Equilibrium 2Q 2018 Vacancy Rate: 4.9% NNN Rent Direct: $7.37 Completed: 54.6 MSF Under Construction: 238.7 MSF Source: CoStar Group Source: Black Creek Group, Cycle Monitor, Second Quarter 2018 Analysis.
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.
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
C+I+ GOVERNMENT+NX= GDP
Value of Government Expenditures (billions of 2012 chained dollars) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $3,500 $3,000 2017 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.
Increase in Annual Deficit due to Rising Mandatory Outlays and Interest Payments 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $400 $200 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 U.S. Federal Deficit ($billions) Source: Congressional Budget Office.
Interest Rate Comparisons 10 8 6 4 2 0 Recession 2-Yr Treasury 10-Yr Treasury 30-Yr Fixed Rate Mortgage Source: Federal Reserve Bank of St. Louis.
C+I+G+NET EXPORTS=GDP
Value of U.S. Imports and Exports (billions of 2012 chained dollars) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $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.
Trade Weighted U.S. Dollar Index (Mar 1973 = 100) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Major currencies index includes the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. 120 110 100 90 80 70 60 50 Source: St. Louis Federal Reserve.
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 GDP Growth by Country 20% 15% 10% U.S. 2017 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.
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