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ECONOMIC OUTLOOK: Good…Bad…or Ugly?

ECONOMIC OUTLOOK: Good…Bad…or Ugly?. GFOAz Conference August 6, 2009. Lee McPheters W. P. Carey School of Business Arizona State University. The Good…. Global Outlook Free Fall Finished Green Shoots. The Bad…. The Consumer Housing Markets Labor Market. The Ugly….

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ECONOMIC OUTLOOK: Good…Bad…or Ugly?

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  1. ECONOMIC OUTLOOK: Good…Bad…or Ugly? GFOAz Conference August 6, 2009 Lee McPheters W. P. Carey School of Business Arizona State University

  2. The Good… • Global Outlook • Free Fall Finished • Green Shoots

  3. The Bad… • The Consumer • Housing Markets • Labor Market

  4. The Ugly… • Idle Capacity • Unemployment • Credit Conditions Several universities considering new mascot to boost football fortunes.

  5. Global Contraction in 2009 • Global credit bubble pops • Real estate values fall • Capital inflows contract • Commodity prices decline • Global trade decreases • First GDP drop since 1930s

  6. U. S. Share of World GDP 2007 1990 1980 European Union 22.4% 25.5% 25.4% East Asia 3.1% 8.2% 3.5% China 1.6% 6.0% 1.7% United States 26.5% 25.4% 25.4% Source: World Bank

  7. U. S. Share of World GDP

  8. Global PMI Bottoming Out?

  9. Is the Economic Free Fall Finished?

  10. When Will The U.S. Economy Improve? • it’s better now (23%) • later this year (14%) • in a year (25%) • longer (39%)

  11. Survey of Leading Economists Blue Chip Consensus _ _ _ 50 Top Economists • 93% believe recession • will end by Q4 2009 • 87% believe unemployment • will peak by Q2 2010 • 80% believe Bernanke will • be reappointed in 2010 Blue Chip Consensus, July 2009

  12. Recovery in sight: Greenspan

  13. Autos, Retail, Home Sales Bottom Out

  14. U.S. Economy Contracting At Slower Pace: Expect Modest Gains In The Months Ahead 3.6% -1.0% Recession begins Source: U. S. Bureau of Economic Analysis, revised July 31, 2009

  15. GDP Recovery in 2nd Half? Percent Change in Real GDP at Annual Rate 2008 2009 Blue Chip Consensus

  16. Vehicle Sales Were Up In July

  17. Vehicle Miles Traveled Are Increasing

  18. Monthly Retail Sales Bottoming Out

  19. Accounts for 70% of GDP Business spending, exports weak Problem: borrowing/lending down Problem: confidence is down Problem: saving rate is up Why Consumer is Key

  20. Consumers Stopped Buying & Borrowing – Started to Save Percent Growth In Consumer Spending at Annual Rate 2009 2007 2008

  21. Restaurant Performance Index Down Since 2007

  22. 1% rise in saving cuts spending by $100 bil. Saving Rate Went Up in 2009 4.2%

  23. US Housing Worst Since 1940s Single Family Q3 ‘07 Single Family 2008 Permits - 30% Resales - 31% Prices (Phx) - 4.1% Permits - 42% Resales - 13% Resale Price -10% Source: National Assoc Realtors; US Census Source: US Census, National Assoc. Realtors

  24. Federal Policy Increased Home Ownership After 1995 Home Ownership

  25. USA Resale Home Prices Have Bottomed Out (Cumulative Price Change Relative to Peak)

  26. Phoenix Housing Affordable Again Percent Families That Can Afford Median Priced Home National Association of Home Builders

  27. 8.8 Mos. Supply Unsold New Homes 12 mos. peak

  28. Job Losses Continue in 2009 US Bureau of Labor Statistics, thousands of jobs

  29. U. S. Has Fewer Jobs Now than 9 Years Ago Dec 2007: 138.1 mil Feb 2001: 132.5 mil June 2009: 131.8mil Aug 2003: 129.8 mil Source: U. S. Bureau of Labor Statistics, seasonally adjusted data

  30. Arizona Next to Last in Rate of Job Creation (Percent Change June 2009 vs June 2008) 24 4 1 47 40 5 12 48 26 33 43 49 States Lost Jobs 49 20 13 Alaska #2 U. S. Bureau of Labor Statistics

  31. Worst Big Metro Economies Job Loss - June 2009 vs June 2008 – Labor Force > 1 Million W. P. Carey School of Business & U. S. Bureau Labor Statistics

  32. Capacity Utilization Below Past Lows June Capacity Utilization 68%

  33. Worst Modern Unemployment? Not Yet. Unemployment Rate 9/5% Year/Year Employment Change Year/Year Employment Change

  34. Arizona Below US Rate Source: US Bureau of Labor Statistics and AZ Dept of Commerce

  35. Unemployment Rates US Bureau of Labor Statistics, June 2009

  36. Unemployment Rates US Bureau of Labor Statistics, June 2009

  37. Bank Borrowings from Fed As “Lender of Last Resort” $8 Bil 1984

  38. Bank Borrowings from Fed As “Lender of Last Resort” $700 Bil 2008 $8 Bil 1984

  39. Banks Hold Large Excess Reserves 2007 2008 2009

  40. Bank Lending Down Since November 2008 2009

  41. U. S & Arizona Economic Outlook

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