1. Economic Outlook
January 2013
Economic Policy Division

2. Real GDP Outlook
Percent Change, Annual Rate
20
15
10
5
0
-5
-10
1970 1975 1980 1985 1990 1995 2000 2005 2010

3. U.S. GDP Actual and Potential
Quarterly, Q1 1970 to Q4 2011
Real GDP Trillion 2005 Dollars Log Scale
$14.0-
Forecast
$11.5-
$9.4-
$7.7-
Actual
$6.3-
Potential
$5.2-
$4.2-
1970 1975 1980 1985 1990 1995 2000 2005 2010
Potential GDP estimated by Congressional Budget Office

4. Comparing Recessions
GDP GDP GDP Average monthly
GDP Growth in Growth in Growth in payroll employment Months from end
Loss the the the growth in 3 years of recession until
(Peak to Duration of following following following 3 following trough we reached prior
Trough Trough) Recession year 2 years years (thous.) employment peak
May 1954 (II) -2.5 (%) 10 (months) 7.9 (%) 5.0 (%) 4.0 116 13
April 1958 (II) -3.1 8 9.6 5.7 4.2 72 12
February 1961 (I) -0.5 10 7.5 5.6 5.8 117 10
November 1970 (IV) -0.2 11 4.5 5.7 5.2 103 6
March 1975 (I) -3.2 16 6.2 4.7 4.5 245 9
November 1982 (IV) -2.6 16 7.7 6.7 5.8 268 12
March 1991(I) -1.4 8 2.6 3.0 3.2 128 23
November 2001 (IV) +0.7 8 1.9 2.9 2.9 36 39
June 2009 (II) -4.7 18 2.5 2.2 2.2 74 N/A

5. Personal Consumption Outlook
Percent Change, Annual Rate
9
6
3
0
-3
Real Personal Consumption
-6
Expenditures
-9
1980 1985 1990 1995 2000 2005 2010
Trillion $
Percent Change
3 70
60
1.5
50 Household Wealth
0 40
30
-1.5
Real Disposable Income Per Capita
20
-3 10
1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010

6. Household Balance Sheet
Trillion $ Household Assets Trillion $
60 20
50 Nonfinancial
Assets
Household Liabilities
15
40 Financial
Assets
30 10
20
5
10
0 0
1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010
Percent of Disposable Personal Income
15
14
Consumer Debt Service
13
12
11
10
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

7. Housing Market Trends
Thous. of Units, SAAR Thous. of Units, SAAR
Home Sales
2500 1400 7500
1200 6500
2000
1000
1500 5500
800
1000 Housing Starts 600
New Home Sales
(left axis)
4500
500 400 Existing Home 3500
Sales (right axis)
0 200 2500
1999 2001 2003 2005 2007 2009 2011 1999 2001 2003 2005 2007 2009 2011
Sales Price, Thous. $ Median Home Prices
280 220
Housing Affordability
200
240
180
Index
200 160
160 140
Existing Homes 120
120
New Homes 100
80 80
1999 2001 2003 2005 2007 2009 2011 1998 2000 2002 2004 2006 2008 2010 2012

8. Housing Market Trends
Thous. of Units, SAAR
700
Housing Inventory
Millions
New Homes (left axis)
120
4500
Existing Homes (right axis)
115 500
3500
110
Households 300
2500
105
100 100 1500
1998 2000 2002 2004 2006 2008 2010 1999 2001 2003 2005 2007 2009 2011
Mortgage Delinquency Percent
and Foreclosure Rates
30 35
Foreclosures: All
25 30
Foreclosures: Subprime
20 Delinquencies: Prime 25
Delinquencies: Subprime 20
15
15
10 Home Mortgages with
Negative Equity
10
5
5
0
0
1998 2000 2002 2004 2006 2008 2010 2012

9. Investment
Percent Change, Annual Rate
40
30
20
10
0
-10
Real Private Investment in
Equipment & Software
-20
-30
-40
1980 1985 1990 1995 2000 2005 2010
Percent Change, Annual Rate Billion Chained 2000$, Annual Rate
45
150
35 120
25 90
15 60
5 30
0
-5
-30
-15 -60 Real Change in
-25
Real Private -90
Private Inventories
-35 -120
-45
Investment - Structures -150
1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010

10. Sector Indicators
SA, 2000=100 6 month moving average; thous. tons
125 1,400
1,200
100
1,000
75
800
50 ATA Truck Tonnage Index Boxboard Production
600
25 400
200
0
0
2006 2007 2008 2009 2010 2011 2012
2006 2007 2008 2009 2010 2011 2012
thous, 6-month moving average $ Billions Monthly Leasing and
600 12
Finance Index
10
500 8
6
400 Total Rail Carloadings 4
2
300 0
2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012

11. U.S. Trade
SAAR, Bil. Chn. 2000$
0
-100
-200
-300
-400
-500
-600 Real Net Exports of Goods
-700 and Services
-800
2006 2007 2008 2009 2010 2011 2012 2013
Exchange Rate (Major Currencies/US$)
115
105
95
85
75 U.S. Nominal Trade Weighted
Exchange Rate
65
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

12. Labor Market
Million
Million
140
150
Total Nonfarm Jobs Household Employment
130 140
130
120
120
110
110
100 100
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
SA, Thousands, 4-week Moving Average Percent
700 18
16 Unemployment Rate
600 December: 7.8 percent
Initial Unemployment 14
500 Claims 12
10
400 8
6
300
4
2 Unemployment Rate U-6
200
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

13. Labor Market
Thousands Thousands
10,000
Part-time for Economic Reasons
3000
2500
Marginally 8,000
Attached
2000 6,000
1500
4,000
1000
Discouraged Workers
500 2,000
0 0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 1980 1985 1990 1995 2000 2005 2010
SA, percent Median Weeks Unemployed, SA
30
68
25
Duration of Unemployment
66 20
Civilian Participation 15
64 Rate 10
5
62 0
1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010

14. Interest Rates & Spreads
Percent
8.0
7.0
10-Year Treasury Note Yield
6.0
5.0
4.0
3.0
2.0
3-Month Treasury Note Yield
1.0
0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
4
Percent 3.5 Risk Spread
TED Spread 3.0 Moody's Seasoned Baa Corporate
Bond Yield Minus Moody's
3
3-Month LIBOR Minus 3- 2.5
Seasoned Aaa Corporate Bond
Month Treasury
2 2.0 Yield
1.5
1
1.0
0 0.5
2003 2004 2005 2006 2007 2008 2009 2010 2011 1997 1998 2000 2002 2004 2007 2009 2011

15. Fed Policy
Billions $
3,000
Bank Assets and Liabilities
2,500
2,000
1,500
1,000
500
0
Jan Apr. July Oct. Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct
2008 2009 2010 2011 2012
Excess Required Federal Reserve Assets Money Supply (M1)

16. Domestic Bank Lending
Billions $ Billions $
900 C&I Loans at Commercial Banks 600
800
500
Home Equity Loans
700
600 400
500
300 Large
400
300 200 Small
Large
200
100
100 Small
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012
Billions $
2,000 Consumer Credit Outstanding Percent
Delinquency Rates at Commercial Banks
12
1,800
C&I Loans
1,600 10
1,400 Credit Cards
8 Residential Real Estate
1,200
1,000 6 Commercial Real Estate
800
600 Revolving 4
400 2
Nonrevolving
200
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012

17. Europe
Percent Change, Annual Rate
10.0
8.0 Real GDP
UK France
6.0
4.0 Germany Eurozone
2.0
0.0
-2.0
-4.0
2009 2010 2011
Source: Oxford Economics

18. Europe
Percent
12
Unemployment Rates
10
8
6
4
UK France Germany Eurozone
2
0
2009 2010 2010 2011 2011 2012
Source: Oxford Economics

19. Emerging Markets
Percent Change, Year to Year
14.0 Real GDP
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0 Mexico China India
-8.0
2009 2010 2010 2011 2011 2012
Percent
9 Unemployment Rates
8
7
6
5
4
3
2 Mexico China India
1
0
2009 2010 2010 2011 2011 2012
Source: Oxford Economics

20. The Fiscal Cliff
• Expiring 2001/2003 Tax Cuts – Impacts marginal tax rates, dividends, capital gains, the estate tax, PEP/Pease, the
marriage penalty, and the child tax credit. ($108 billion – CBO)
• Health Care Tax Increases – A provision of ObamaCare slaps a 3.8% surtax on all forms of investment
income, including capital gains and dividends income, resulting in a total tax rate of 23.8% of capital gains and a total
top rate of 43.8% on dividends income. ($836 billion/10 years – CBO & JCT)
• The End of AMT Patches – Congress generally “patches” the Alternative Minimum Tax (AMT) every year to help it
keep pace with inflation. As a result, just over four million tax returns currently pay the AMT. If a new patch is not
enacted retroactively for 2012, that number will increase to above 30 million for that year and would exceed 40 million
by the end of the decade. ($103 billion – CBO)
• The End of Jobs Measures – Both the two percent payroll tax holiday and extended unemployment benefit will
disappear at year’s end. ($89 billion – JCT)
• The End of Doc Fixes –At the end of the year, the current doc fix will end, leading to a nearly 30 percent immediate
reduction in Medicare physician payment. ($10 billion – CBO)
• The Expiration of Various “Tax Extenders” – various normal “extenders,” such as the research and experimentation
tax credit and the state and local sales tax deduction, expired at the end of 2011. Others, such as the production tax
credit, will expire at the end of 2012. Some of these extenders are likely to be reinstated retroactively at the end of this
year, but will disappear under current law. ($84 billion - CBO)
• Activation of the Sequestration – Owing to the failure of the Super Committee to find suitable spending cuts, the
Congress adopted a sequestration process that would cut $1.2 trillion over 10 years from government spending. The cuts
would begin on January 15, 2013. ($97 billion)
• Debt Ceiling – Given the current level of government spending and allowing the Treasury some leeway in financing
expenditures, it is likely that the government debt issuance will once again bump up against the debt limit between
November 2012 and February 2013.

21. CBO’s Baseline Deficit
(August 2012)
Billions $
Budget Deficit
500
0
-500
-1,000
-1,500
-2,000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Percent of GDP Deficit to GDP
5
0
-5
-10
-15
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

22. Alternative Deficit Forecasts
Billions $
400 Budget Deficit Forecast
200
0
-200
-400
-600
-800 CBO Baseline
-1,000
-1,200 CBO Alternative Fiscal Scenario
-1,400
President's Budget
-1,600
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Percent of GDP
4 Forecast
2
Deficit to GDP
0
-2
-4
-6 CBO Baseline
-8 CBO Alternative Fiscal Scenario
-10 President's Budget
-12
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

23. Government Baseline Debt
(CBO’s Baseline – August 2012)
Billions $
20,000 Debt
15,000
10,000
5,000
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Percent of GDP
100
Debt to GDP
80
60
40
20
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

24. Alternative Debt Forecasts
Billions $
25,000 CBO Baseline Forecast
20,000
Debt CBO Alternative Fiscal
15,000
Scenario
President's Budget
10,000
5,000
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Percent Forecast
100
90
80
70 Debt to GDP
60
50 CBO's Baseline
40 Projection
30 Alternative Fiscal
20 Scenario
10 President's budget
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

25. Government Revenues and Outlays
( percent of GDP)
30
Forecast
25
20
15
Revenues (%GDP) Outlays (%GDP)
10
5
0
1980 1985 1990 1995 2000 2005 2010 2015 2020
Source: CBO Baseline (August 2012)