Download The U.S. Economic and Financial Market Outlook

U.S. and Michigan Economic Outlook
Passages Through a Sea of Uncertainty
Robert A. Dye
Chief Economist, Comerica Bank
January, 2013
Mare Incognitum…The Sea of Uncertainty
Economic Policy Uncertainty Index
U.S. and European
Fiscal Issues
Lehman
and TARP
250
Debt ceiling dispute
Treaty of
Accession &
2nd Gulf War
9/11
200
Bear Stearns
150
100
50
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
2
EPUI Explains Persistent Weak Business Confidence
Economic Policy Uncertainty Index
and the NFIB Survey
250
110
105
200
100
150
95
90
100
85
50
Components of NFIB Survey
Employment plans
Current job openings
Capital outlay plans
Inventory plans
Current inventory
Expectations about economy
Expectations about sales
Expected credit conditions
Good time to expand
Earnings
80
'00
'02
'04
'06
'08
'10
Economic Policy Uncertainty index (L)
'12
NFIB Business Optimism, (R)
3
The Fiscal Cliff, Happy New Year!
• Obama era payroll tax cut has expired for everyone
• Increased income, capital gains, dividend taxes for the wealthy 1%
• Will add up to about $160 billion in additional revenue in 2013
• RDPI set to fall 3.5-4.0 percent annualized 2013Q1
• Debt ceiling debate still to come
• $110 budget sequester still unresolved
• Long-term entitlement spending still unresolved
4
Recent U.S. Data Is Mixed
• 2012Q3 real GDP 3.1%, Q4 weaker
• Dec. payroll employment +155,000
• Unemployment rate stable at 7.8%
• House sales
• Home prices
• Home construction
Home Sales Trending Up
5,500
5,000
4,500
4,000
3,500
3,000
• Dec. auto sales 15.4 million unit rate
700
600
500
400
300
New, ths (R)
200
2011
2012
Existing, ths (L)
2008
2009
2010
• Dec. ISM MF Survey 50.7 percent
5
2012Q4 Helped by Household Sector, Hurt by
Uncertainty
• Consumer confidence improving
Auto Sales and Consumer Confidence
• Vehicle sales, Sandy
• Housing sector strengthening
• Other credit fueled purchases
• Labor markets
• Asia
• U.S. policy uncertainty
18
Auto Sales, millions SAAR (L)
17
16
15
120
110
100
90
14
13
80
70
12
11
60
50
10
9
8
2006
40
30
20
Confidence Index (R)
2007
2008
2009
2010
2011
2012
• Europe continues to melt
6
Consumer Deleveraging...And Releveraging
Non-revolving Consumer Credit and
Financial Obligations Ratio
16
19
Non-revolving cons. credit, pchya (L)
12
18
8
4
17
0
16
-4
Financial Obligations Ratio, (R)
-8
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
15
'12
7
Job Creation Is Key to Sustaining the Economy
Monthly Job Creation, ths
Unemployment Rate, percent
300
U.S. Payroll Job Growth, ths (L)
10.5
200
10.0
100
9.5
0
9.0
-100
8.5
-200
-300
11.0
8.0
U.S. Unemployment Rate (R)
7.5
J F M A M J J A S O N D J F M A M J J A S O N D
'11
'12
8
Forecast for 2013, Fiscal Tightening Trumps
Monetary Easing
U.S. Real GDP Growth, annualized rate
History
5
3
1
(1)
(3)
(5)
(7)
(9)
2008
2009
2010
2011
2012
Forecast
2013
9
Interest Rates Face Upward Pressure As Flight to
Quality and Financial Repression Eventually Unwind
Yield, percent
6.0
5.0
4.0
10-Year Treasury
3.0
2.0
1.0
Fed Funds
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
10
Forecast Risks
Downside Risks
Upside Risks
•
Consumer spending
•
QE3 gains traction
•
Job growth
•
Equity markets rally
•
Biz investment
•
Jobs!
•
Federal Spending
•
Construction
•
Eurozone and Asia
•
Households unleash pent-up demand
•
More “transitory” factors/oil prices
•
Low interest rates/investment boom
•
Housing market languishes
•
Energy/manufacturing renaissance
•
Healthcare costs
•
Technology
11
Most Michigan Labor Markets Cooled 2012H2
Regional Labor Market Indicators
4
Payroll Employment, pchya
2
0
-2
-4
-6
-8
-10
2008
2009
U.S.
2010
Warren Metro Div
2011
Lan
2012
Kal
GR
Robert A. Dye
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