Keith W. Maxwell of Spark Energy, joins McCombs Finance Professor Jay Hartzell, Craig Cordola, CEO of Memorial Hermann Hospital -Texas Medical Center in Houston, and Greg Peters, CEO of Zillant, to take a look ahead at not just the national economy as a whole, but also at the state of Texas.
The U.S. is now the world's largest producer of hydrocarbons, because technology has enabled us to produce “tight” oil, or shale oil, Maxwell said.
Economic Forecast 2014 Energy Focus: W. Keith Maxwell, CEO Spark Energy and Marlin Midstream, Oct. 17, 2013
1. October 17, 2013
Federal Reserve BankHouston Branch
2014 Economic Forecast
Keith Maxwell
CEO
Sparks Energy
2.
3. Economic Outlook 2014
Jay C. Hartzell
Chair, Department of Finance, McCombs School of Business
The University of Texas at Austin
4. Economic Forecasts
Research Department, Federal Reserve Bank of
Philadelphia
“Survey of Professional Forecasters”
First quarter (August 16, 2013)
Doing this since 1968
42 “Professional Forecasters”
Provide advice used by large commercial institutions
Members of National Association for Business
Economics (NABE)
Use a variety of techniques and assumptions to arrive
at forecasts
5. Real Gross Domestic Product
Definition
Historic average annual rate of growth
~ 3.0%
Median forecasts (annual rate of growth)
2013
2014
2015
2016
2.2%
2.3%
2.7%
2.9%
Risk of negative quarter (probability)
2013: Q3
2013: Q4
2014: Q1
2014: Q2
2014: Q3
10.5%
11.2%
11.7%
11.5%
11.8%
7. Foundations of Low Growth
Consumer spending and households
Stagnant incomes
High or under employment
Deleveraging
Uncertainty
Business investment
In aggregate, slim profit prospects
Contraction in household and government sectors
Uncertainty, particularly in government policy
Government spending
AAAAGGGGHHH! (debt-to-GDP ratio)
Net Export
Slowing global growth
8. Inflation (Consumer Price Index)
Definition
Historical average (annual rate)
~ 4.0%
Median forecasts (annual rate)
Headline CPI
Core CPI
2013
1.4%
1.8%
2014
2.0%
2.0%
2015
2.3%
2.1%
Long-term forecasts (annual rate)
Headline CPI
2012-2016
2.0%
2012-2021
2.0%
Comments of Fed on controlling inflation
Managing liquidity (e.g., bank and non-bank reserves)
Commitment to inflation
9. View from 30,000 Feet (2013-2016)
Slow growth
Improving private sector balance sheets
Deteriorating (dramatically) public sector balance
sheets
High unemployment
High under-employment
Lower workforce participation
Low interest rates
Low-ish inflation
More wealth re-distribution than creation
Energy
Health care
Education
12. US Economic Policy Uncertainty Index
Econom ic Policy Uncertainty Index
Monthly US Econom ic Policy Uncertainty Index
Zoom
1m
3m
6m YTD 1y
All
200
175
150
125
100
75
Sep '12
Nov '12
1990
Jan '13
Mar '13
2000
May '13
Jul '13
2010
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