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U.S. & Western NY Economic Outlook

U.S. & Western NY Economic Outlook. Commercial Planning & Analysis Department May 12, 2010. Seasonally Adjusted at Annual Rate U.S. Real Gross Domestic Product. Trillions of Constant Q1:10 Dollars. Linked Qtr Annualized Percent Change 2009 Q1 -6.4%

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U.S. & Western NY Economic Outlook

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  1. U.S. & Western NY Economic Outlook Commercial Planning & Analysis Department May 12, 2010

  2. Seasonally Adjusted at Annual Rate U.S. Real Gross Domestic Product Trillions of Constant Q1:10 Dollars Linked Qtr Annualized Percent Change 2009 Q1 -6.4% Q2 -0.7% Q3 2.2% Q4 5.6% 2010 Q1 3.2% The Big Picture: The recession’s over, but output remains 1.2% below the 2008 peak $14.8 $14.6 Q1 Growth Drivers Stronger consumer spending +2.6 pts Change in private inventories +1.6 pts Stronger investment in equipment & software +0.8 pts Stronger exports (gross) +0.7 pts $14.3 Sources: U.S. Bureau of Economic Analysis 2006 2007 2008 2009 ‘10

  3. Inflation-Adjusted Year-Over-Year Percentage Change U.S. Personal Consumption Expenditure Growth Consumers Are Peeking Out of the Foxhole… Real spending in March grew at fastest rate since Aug. 2007 2.9% average since Jan 1990 RECESSION RECESSION RECESSION 2.4% Source: U.S. Bureau of Economic Analysis 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Mar

  4. Industrial Production (R) Capacity Utilization (L) Year-over-Year % Change Seasonally Adjusted U.S. Industrial Production - Manufacturing Y-o-Y Chg in Industrial Production Capacity Utilization Production …While Manufacturers Are Easing Off The Brakes As demand improves, factories are ramping up production Source: Federal Reserve 2007 2008 2009 ‘10

  5. Seasonally Adjusted U.S. Unemployment Rate But not enough to keep the jobless rate from remaining near a 26-year high… RECESSION RECESSION 9.9% RECESSION June ’92 7.8% 5.7% average since Jan 1990 June ’03 6.3% 4.4% Mar ‘07 Source: U.S. Bureau of Labor Statistics 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Apr

  6. How’s Western NY performing in this environment?

  7. Relative Change in Private Sector Employment Since January 2002 Western New York vs. United States Less Boom, Less Bust… Net Change From Employment Peak United States -7.1 points Western NY -3.6 points Mar ’08 104.5% United States Oct ’08 98.9% 97.4% Western Portion of Upstate NY (counties west of Utica-Rome metro area) 95.3% Source: U.S. Bureau of Labor Statistics Based on 12-month moving average employment 2002 2003 2004 2005 2006 2007 2008 2009 ‘10 Mar

  8. Seasonally Adjusted Unemployment Rate Western Portion of Upstate NY vs. U.S. 9.9% The regional jobless rate remains nearly two percentage points below the U.S. average United States 7.8% (Mar) Western Portion of Upstate NY Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor NYS data seasonally adjusted by M&T 2007 2008 2009 ‘10

  9. Year-Over-Year Percentage Change Private Sector Employment Growth Western Portion of Upstate NY vs. U.S. WNY job losses are easing and remain below the U.S. average Western Portion of Upstate NY -1.3% -2.0% United States Source: U.S. Bureau of Labor Statistics 2007 2008 2009 ‘10 Mar

  10. Year-Over-Year Percentage Change in Private Sector Employment U.S. States – First Quarter 2009 vs. 2010 Top 10 States Alaska North Dakota New Hampshire Vermont Western Upstate NY New York Downstate NY Iowa Louisiana Virginia Illinois Georgia Wisconsin Oklahoma Arizona Kansas California Colorado Nevada Wyoming Bottom 10 States 1 2 3 4 5 6 7 8 41 42 43 44 45 46 47 48 49 50 -3.8% -3.9% -4.1% -4.2% -4.2% -4.2% -4.3% -4.7% -5.3% -6.0% 0.7% -0.2% -1.0% -1.5% -1.7% -1.9% -1.9% -2.1% -2.2% -2.3% Source: U.S. Bureau of Labor Statistics

  11. Year-Over-Year Percentage Change in Private Sector Employment NYS Metro Areas – First Quarter 2009 vs. 2010 Utica-Rome Buffalo Syracuse Albany Poughkeepsie / Newburgh New York City Rochester United States Binghamton Source: U.S. Bureau of Labor Statistics

  12. Buffalo Area Trends

  13. Year-Over-Year Percentage Change Private Sector Employment Growth Buffalo Metro Area vs. United States Job losses are easing and remain below the U.S. average -1.1% Buffalo -2.0% United States Source: U.S. Bureau of Labor Statistics 2007 2008 2009 ‘10

  14. Seasonally Adjusted U.S. and Buffalo Area Unemployment Rate United States 9.9% Like most upstate NY metros, Buffalo’s jobless rate remains below the U.S. average—and seems to be diverging from the national trend 8.0% (Mar) Buffalo Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor Note: Buffalo data seasonally adjusted by M&T 2007 2008 2009 ‘10

  15. Year-Over-Year Percentage Change Existing Home Price Appreciation Buffalo-Niagara Falls Metro Area vs. United States United States Why is Buffalo Doing So Well? Local price appreciation has topped the U.S. norm since 2007—helping to insulate WNY from major swings in consumer spending 6th highest appreciation out of 299 Metro Areas measured in Q4 2009 Buffalo 1.8% Note: Excludes homes financed with non-conforming loans (subprime, I.O., jumbos, etc.); Includes refis -4.7% Source: Office of Federal Housing Enterprise Oversight 2003 2004 2005 2006 2007 2008 2009

  16. Single Family Home Building Permits Per 100,000 Residents Buffalo vs. 100 Largest U.S. Metro Areas 100 Largest U.S. Metro Areas Buffalo-NF Less Boom, Less Bust WNY home builders avoided speculative over building, preventing a housing bubble from forming * Based on 2008 population Source: U.S. Census Bureau

  17. Year-Over-Year Percentage Change Construction Employment Buffalo Metro Area vs. United States Net Result: Construction job losses are less of a drag on the Buffalo economy -0.6% Buffalo -11.3% United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor 2007 2008 2009 ‘10

  18. Year-Over-Year Percentage Change Retail Trade Employment Buffalo Metro Area vs. United States Another Positive As consumer spending stabilizes, retail hiring starts to rebound 3.6% Buffalo -1.2% United States Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor 2007 2008 2009 ‘10

  19. Year-Over-Year Percent Change in Automobile Traffic Into U.S. via Four Buffalo Area Bridges (Left Scale – RED) Exchange Value of Canadian Dollar Per U.S. Dollar (Right Scale – BLUE) Stronger Canadian Dollar Lends a Hand… Can. Dollar Exchange Rate In USD Change in Automobile Crossings Canadian Dollar is at Par with U.S. Sources: Federal Reserve, Niagara Falls and Peace Bridge Commissions 2009 2010

  20. Consumer Confidence Buffalo Metro Area vs. United States Index: 1996 Q1 = 100 A Long, Slow Climb Ahead Confidence is slowly improving, but remains well below pre-recession levels 73.9 United States Buffalo 60.2 Sources: Siena Research Institute, University of Michigan 2007 2008 2009 ‘10

  21. Rochester Area Trends

  22. Year-Over-Year Percentage Change Private Sector Employment Growth Rochester Metro Area vs. United States Job losses are easing and remain below the U.S. average Rochester -1.8% -2.0% United States Source: U.S. Bureau of Labor Statistics 2007 2008 2009 ‘10

  23. Share of Total Private Sector Employee Compensation* Health Care & Education Payroll Income Rochester Metro Area vs. United States A Nice Shock Absorber… Health care & education are a major source of stability for the Rochester economy 23.0% Rochester 1,800 net new jobs created over the past 12 months (+1.8%) 15.9% United States 2002 2003 2004 2005 2006 2007 2008 ‘09 Sources: U.S. Bureau of Labor Statistics * 4-Quarter running total

  24. Share of Total Private Sector Employee Compensation* Manufacturing Payroll Income Rochester Metro Area vs. United States …To Help Offset Factory Layoffs Industrial payrolls continue to shrink, but remain a major income source Rochester 6,100 net jobs lost over the past 12 months (-9.3%) 22.3% 13.6% United States 2002 2003 2004 2005 2006 2007 2008 ‘09 Sources: U.S. Bureau of Labor Statistics * 4-Quarter running total

  25. Year-Over-Year Absolute Change Rochester Area Job Gain/Loss – Q1 2010 Percentage Change 1.6% 2.1% -0.2% -2.0% -1.1% -4.8% -2.4% -3.2% -9.3% Health Care Services Private Education Financial Activities Construction Retail (Ex. Food Stores) Wholesale Trade Leisure & Hospitality Professional & Business Services Manufacturing Manufacturing layoffs account for 71% of 2010 job losses, even though they make up just 12% of total employment Source: U.S. Bureau of Labor Statistics

  26. Total Private Sector Payroll Income Rochester Metropolitan Area Manufacturing vs. Education & Health Care Billions $3.8 Manufacturing $3.7 Health Care & Education 2002 2003 2004 2005 2006 2007 2008 ‘09 * 4-Quarter running total Sources: U.S. Bureau of Labor Statistics

  27. Federal Reserve Bank of New York NYS Manufacturing Activity Index Index Numbers Above 0 = Expansion Increase Decrease NET 2009 Oct 51.1% 17.6% +33.4 Nov 41.3% 19.0% +22.3 Dec 24.5% 20.0% +4.5 2010 Jan 33.1% 17.2% +15.9 Feb 41.6% 16.7% +24.9 Mar 43.3% 20.4% +22.9 Apr 47.5% 15.6% +31.9 31.9 Positive Outlook NYS manufacturing activity (most of which is Upstate) is rising once again 2008 2009 2010

  28. Manufacturing Share of Gross Metropolitan Product - 2008 Upstate NY Metro Areas vs. United States ROCHESTER Buffalo Binghamton Syracuse U.S. Metro Area Average Industrial Impact Stronger factory output should provide a key boost to the Upstate NY economy during the second half of 2010

  29. Inflation Adjusted 12-Month Running Total County Sales Tax Collections in the Rochester Metropolitan Area Constant March 2010 Dollars (millions) The New Normal? With less consumer spending, real sales tax receipts have shifted downward by 8.5% since mid-2008 But are up 0.8% since November 2009 Monroe, Livingston, Ontario, Orleans & Wayne counties Note: data are cash sales tax collections (excluding EFTs) for county governments only—excluding cities and school districts Sources: NYS Department of Taxation & Finance, U.S. Bureau of Economic Analysis $525 2007 2008 2009 ‘10

  30. Year-Over-Year Percentage Change Consumer Confidence Rochester Metro Area vs. United States Positive Outlook Confidence is starting to improve, easing downward pressure on household spending 26.8% 14.5% Rochester United States Sources: Siena Research Institute, University of Michigan 2007 2008 2009 ‘10

  31. Syracuse Area Trends

  32. Year-Over-Year Percentage Change Private Sector Employment Growth Syracuse Metro Area vs. United States A Recurring Pattern Job losses have been less severe than the national norm -1.2% Syracuse -2.0% United States Source: U.S. Bureau of Labor Statistics 2007 2008 2009 ‘10

  33. Seasonally Adjusted U.S. and Syracuse Area Unemployment Rate United States 9.9% Consistent with other upstate metro areas, Syracuse’s jobless rate remains well below the U.S. average 8.0% (Mar) Syracuse Sources: U.S. Bureau of Labor Statistics, New York State Department of Labor Note: Syracuse data seasonally adjusted by M&T 2007 2008 2009 ‘10

  34. Year-Over-Year Absolute Change Syracuse Area Job Gain/Loss – Q1 2010 Percentage Change 4.0% 1.7% 2.2% 3.5% -1.9% -8.8% -5.9% -5.8% -6.1% Private Education Health Care Services Leisure & Hospitality Construction Retail Transportation Wholesale Trade Financial Activities Manufacturing Transportation & wholesale trade layoffs account for 37% of 2010 job losses, even though they make up just 7% of total employment Source: U.S. Bureau of Labor Statistics

  35. Percentage of Average Private Sector Jobs* Health Care & Private Education Employment Syracuse Metro Area vs. United States Similar to Rochester Evolving labor market insulates Syracuse economy 22.8% Syracuse 17.9% United States Source: U.S. Bureau of Labor Statistics * 12-month moving average 2007 2008 2009 ‘10

  36. Year-Over-Year Percentage Change Construction Employment Syracuse Metro Area vs. United States Another Positive… Building activity continues to support local economy 4.8% Syracuse United States -11.3% Source: U.S. Bureau of Labor Statistics 2007 2008 2009 ‘10

  37. Year-Over-Year Percentage Change Wholesale Trade & Transportation Job Growth Syracuse Metro Area vs. United States …But Also a Negative Local job losses remain well above the U.S. average Syracuse -2.7% United States -7.4% Source: U.S. Bureau of Labor Statistics 2007 2008 2009 ‘10

  38. Consumer Confidence Index Syracuse Metro Area vs. United States Slowly Getting Back On Our Feet… Consumer sentiment is improving — but will remain fragile until the jobless rate begins to shrink United States 82.2 73.9 63.6 Syracuse 54.8 Sources: Sienna Research Institute, University of Michigan 2007 2008 2009 ‘10

  39. Percentage of Average Private Sector Jobs* State and Local Government Employment Syracuse Metro Area vs. United States Potential Storm Cloud Will NYS budget woes hurt state & local employment levels? 21.1% Syracuse 18.3% United States Source: U.S. Bureau of Labor Statistics * 12-month moving average 2007 2008 2009 ‘10

  40. 2010-11 Economic Outlook ?

  41. Economic Cycle Research Institute U.S. Leading Economic Index Indicates a turning point in the economic cycle when changes in the direction of the index are persistent, pronounced, and pervasive over several months. Designed to turn down before a recession and turn up before an expansion. Index 1992 = 100 6-9 Month Outlook Further growth appears to be on the horizon… 134.7 Index Components Money supply (M2) Commodity prices Mortgage purchase applications Corporate bond quality spread NYSE Composite Index Ten-year Treasury yield Initial jobless claims Weather- related dip 2007 2008 2009 ‘10 Apr 30

  42. Institute For Supply Management U.S. Manufacturing Activity Index Index Numbers Greater Than 50 = Expansion 60.4 …led by a rebound in manufacturing, where activity expanded for the 9th consecutive month in April "Manufacturers continue to see extraordinary strength in new orders, as the New Orders Index has averaged 61.6 percent for the past 10 months.” “…signs for employment in the sector continue to improve as the Employment Index registered its fifth consecutive month of growth.” “…Overall, the recovery in manufacturing continues quite strong, and the signs are positive for continued growth." Norbert Ore—ISM Business Survey Committee chairman 2007 2008 2009 2010

  43. Inflation-Adjusted Percentage Change From Previous Quarter at Annualized Rate Fixed Investment in Equipment & Software by U.S. Businesses Business Spending Takes the Lead Capex is rebounding as firms move forward with necessary investments that were postponed over past several years Sources: U.S. Bureau of Economic Analysis M&T Bank forecast 2007 2008 2009 2010 FORECAST

  44. U.S. Household Debt Service Ratio As a Percent of Disposable Income Sobering Reality Consumers will continue to repair battered balance sheets by saving & paying down debt for at least another year, keeping a lid on economic growth Q1 2008 13.92% Average Since 1980 12.07% 12.60% Source: Federal Reserve 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 09 Q4

  45. Inflation-Adjusted Year-Over-Year Percentage Change U.S. Personal Income Ex. Transfer Payments Income Drag Persists Ex. government payments, real income remained below year-ago levels for the 26th consecutive month 2.3% average since Jan 1990 RECESSION RECESSION RECESSION -0.6% Source: U.S. Bureau of Economic Analysis 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Mar

  46. Months’ Supply of Available Homes U.S. Single Family Homes For Sale Existing Homes New Homes Months Supply At Current Sales Rate Jan:09 12.4 Housing Drag The housing market will face significant pressure for at least another year as inventory levels remain well above historic norms RECESSION RECESSION 8.0 6.7 Sources: U.S. Census Bureau, NAR 00 01 02 03 04 05 06 07 08 09 10 Mar

  47. Seasonally Adjusted U.S. Unemployment Rate Forecast Labor Drag The jobless rate will remain elevated for an extended period 10.0% 9.5% 8.9% FORECAST Sources: U.S. Bureau of Labor Statistics, M&T estimates 2008 2009 2010 2011

  48. Seasonally Adjusted at Annual Rate U.S. Real Gross Domestic Product Trillions of Constant Q1:10 Dollars Modest Recovery The economy should expand by 3.0% in 2010 and by 3.1% in 2011—positive, but below historic norms Linked Qtr Annualized Percent Change 2010 Q1 3.2% Q2 2.9% Q3 3.0% Q4 3.1% 2011 Q1 3.1% Q2 2.9% Q3 3.1% Q4 3.2% $15.4 $14.9 $14.8 FORECAST $14.3 Sources: U.S. Bureau of Economic Analysis, M&T estimates 2006 2007 2008 2009 2010 2011

  49. Federal Government Expenditures As a Percent of GDP 25.4% 2006 7.4% 2007 2.8% 2008 9.3% 2009 17.9% 2010 5.8% 2011 3.0% Year-Over-Year Spending Increase 25.1% Uncle Sam Lends a Hand Fiscal policy helps support 2010-11 growth— but what comes next? CBO FORECAST Source: Congressional Budget Office 98 99 00 01 02 03 04 05 06 0708 09 10 11 Surplus/ Deficit as % of GDP 0.8% 1.4% 2.5% 1.3% (1.5%) (3.4%) (3.5%) (2.6%) (1.9%) (1.2%) (3.2%) (9.9%) (10.6%) (8.3%)

  50. Year-Over-Year Percentage Change U.S. Pre-Tax Corporate Profit Forecast Over Next 12 Months A Critical Handoff Business profits will have to continue rising to offset the stimulus wind down 2009 2010

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