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Economics
Economic Update
Trade Finance Workshop
Los Angeles, California
September 13, 2013
Bob Skinkle
International and Banking Condition
Highlights

US economy expected to continue growing at modest
pace, slowly reducing unemployment

California was hit harder by the recession, but recovery
is gaining steam


Growth has been concentrated in several metro areas but
is expected to broaden in 2014

Housing remains key to the outlook
Global growth and California’s trade patterns continue to
shift towards Asia
2
U.S. economic growth expected to hit post-recession
high next year
Quarterly average unemployment rate - %
Real GDP, % change annual rate
10
4
Moody’s Analytics
9
2
8
7
0
Consensus
6
-2
5
Recession
07
08
09
-4
10
11
12
13F 14F
Recession
06
07
09
4
10
11
Sources: BEA, BLS, Blue Chip Indicators (August 2013) and Moody’s Analytics baseline forecast August 2013
12 13F 14F
3
California’s employment situation has been weaker
than the national average
Unemployment rate
%
% of population employed
14
%
65
CA
12
US
10
US
63
CA
61
8
59
6
57
4
Recessions
Recessions
2
00
02
04
06
Source: Bureau of Labor Statistics
08
10
12
55
00
02
04
06
08
10
12
4
California metro employment is still below pre-crisis
levels for many metro areas
%
105
San Jose
San Francisco
100
San Diego
Los Angeles
95
Riverside
90
Forecast
Sacramento
85
07Q4
08Q4
09Q4
10Q4
Source: Moody’s Analytics, baseline forecast August 2013
11Q4
12Q4
13Q4
14Q4
5
California home construction rebounding from low
levels
New home permits
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2006
2007
2008
2009
Single family
Source: Moody’s Analytics, including 2013 and 2014 forecasts
2010
2011
2012
2013f
2014f
Multifamily
6
House prices remain well below peak in many states
Single-family home price index, prior peak to current percent change
DC
U.S. = -20.4%
Positive to -5%
-5% to -15%
-15% to -25%
-25% or more
Source: CoreLogic, data through May 2013 including distressed sales
7
Rising long-term interest rates could slow housing
%
(FCM10 - FFED)
10-Year Treasury Note Yield at Constant Maturity (% p.a.)
Federal Funds [effective] Rate (% p.a.)
%
10
8
10
10-Year Treasury
Rate, %
8
Recessions
6
6
4
Fed Funds
(effective) Rate, %
4
Spread ppt
2
2
0
0
-2
-2
90
95
Source: Haver Analytics
Source: Federal Reserve Board, through August 2013
00
05
10
88
Highlights

US economy expected to continue growing at modest
pace, slowly reducing unemployment

California was hit harder by the recession, but recovery
is gaining steam


Growth has been concentrated in several metro areas but
is expected to broaden in 2014

Housing remains key to the outlook
Global growth and California’s trade patterns continue to
shift towards Asia
9
The US economy is the only major economy to exceed
pre-crisis level
Real GDP: Q1 2008 = 100
110
108
106
104
102
100
98
96
94
92
90
Q1 2008
Source: IMF, Haver
U.S.
Japan
U.K.
Euro Area
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
10
Developing Asia is expected to continue to lead global
GDP growth
Real GDP: 2008 = 100
240
220
200
180
World
Developing Asia
China
IMF Forecast
Euro Area
160
140
120
100
80
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: IMF World Economic Outlook, May 2013
11
As trade patterns shift, international trade remains a
major component of the California economy
California Customs District Volume - $ Billions
70
18
2000
16
60
2012
14
50
12
40
10
30
8
6
20
4
10
0
2006
California Top Export Markets – Percent of Total
2
2007
2008
2009
Exports
2010
2011
Imports
Source: Haver, US Dept of Commerce
2012
2013
0
Greater
China
Mexico
Canada
Japan
12
US trade weighted dollar has appreciated but remains
below its long run average
1973 = 100
120
115
110
105
100
Appreciation
95
90
85
Depreciation
Long run average
80
75
70
1995
1997
1999
2001
2003
2005
2007
2009
Source: Federal Reserve, real trade weighted US dollar exchange rate – major currencies
2011
2013
13
Highlights

US economy expected to continue growing at modest
pace, slowly reducing unemployment

California was hit harder by the recession, but recovery
is gaining steam


Growth has been concentrated in several metro areas but
is expected to broaden in 2014

Housing remains key to the outlook
Global growth and California’s trade patterns continue to
shift towards Asia
14