e-forecasting.com's review of the US and global economic environment, using our real-time indicators, leading indicators and long term forecast projections to give a comprehensive review of conditions.
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US and Global Economic Review & Forecast 2010
1. Client-tailored solutions for what’s next
Economic Review and
Forecast
Summary presentation of
e-forecasting.com’s outlook for US
and global economic conditions
Friday, October 15th
, 2010
2. Client-tailored solutions for what’s next 01/30/15
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Presentation Agenda
Overview of recession/rebound
Snapshot of current economic
climate: stagnation?
Future outlook
Q&A
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Stagnation Nation?
European style high unemployment
Where is US economic dynamism?
Good, Bad & Ugly Policies?
Major Risks
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Policy-Makers, Advisers & the
Economy
The British Keynesian Recipes
• Business is the problem, Government is the
solution
The American “School” (Monetarism)
– Government is the problem, private sector is
inherently stable
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Policy-Makers, Advisers & the
Economy
Effectiveness of Policies
Peoples reaction & behavior
Permanent Policies vs. Transitory
(Las Vegas style) policies
Income or Wealth (assets) drives
behavior
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Current Risks
Ineffectiveness of low interest rates
Deficits, Debts and Fear – The Greek
experience
Running out of “others money”
Free fall of the Dollar, panic, high
interest rates, a “real” depression
Inflate the economy, fooling workers
and fixing the budget
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Real-Time Look @ Economy NOW
What is happening RIGHT now with
the economy
– US monthly GDP, current macro
components, policies, etc
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Real Time Monthly GDP
• e-forecasting estimates US
monthly GDP increased 0.8%
in September to $13,243B,
after going up 2.4% in August
• Annual growth rate in the third
quarter is estimated to be 1%
• Six-month growth rate, which
signals confirmation of turning
points, went up 1.8% in
September, after going up
2.1% in August
$12,900
$13,000
$13,100
$13,200
$13,300
J F M Q1 A M J Q2 J A S Q3
Monthly GDP Up in September
BEA, Quarterly e-forecasting, Monthly
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Growth in Monthly GDP
Looking @ growth
rate, can see depth
of previous
recession, upswing,
and now stalling of
economy
When negative,
recession; when
positive, expansion
14
-8.0
-4.0
0.0
4.0
8.0
12.0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
%
Growth in U.S. MonthlyGDP
NBER-Defined U.S. Recessions
Six-Month Growth Rate Smoothed, Annualized
Long-Term Growth Rate: 3.3%
15. Client-tailored solutions for what’s next
Historical View
Taking the current
recession in
context over a
long history, we
can see how deep
the recession was
as well as the
length (solid fill)
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Billions
Monthly GDP & the Business Cycle
NBER-Defined U.S. Recessions
Real GDP, at Seasonally Adjusted Annual Rates (SAAR)
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Q3 will be slower than Q2
Looking @ table, we see Q3 has slower growth which will
be the new trend
Chained $2005 annual % change annual % change annual % change MA3
SAAR*, Billions from quarter ago from month ago from 3 months ago**
2009 September $12,860.8 1.6% $12,907.1 ▲ 4.6% 1.6%
2009 October $12,944.0 ▲ 3.5% 3.1%
2009 November $13,040.0 ▲ 9.3% 4.7%
2009 December $13,019.0 5.0% $13,073.0 ▲ 3.1% 5.0%
2010 January $13,138.6 ▲ 6.2% 5.7%
2010 February $13,125.7 ▼ -1.2% 4.7%
2010 March $13,139.0 3.7% $13,152.9 ▲ 2.5% 3.7%
2010 April $13,178.1 ▲ 2.3% 2.1%
2010 May $13,219.0 ▲ 3.8% 2.2%
2010 June $13,194.9 1.7% $13,187.7 ▼ -2.8% 1.7%
2010 July $13,207.6 ▲ 1.8% 1.6%
2010 August $13,233.8 ▲ 2.4% 0.8%
2010 September $13,228.2 1.0% $13,243.0 ▲ 0.8% 1.0%
*SAAR: Seasonally Adjusted Annual Rate.
Year
Quarterly GDP
Table 1: U.S. Monthly GDP, Latest Estimates
**MA3: 3-month moving average monthly GDP. End-month of quarter growth rate is the same as the annual quarterly growth rate.
Monthly GDP
Chained $2005
SAAR*, Billions
Month
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What’s Ahead?
Focus on manufacturing, inflation,
other major factors
Global overview
Exports/imports outlook
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Short-Term Outlook: US Lead
Six month growth
rate was negative
for first time since
May 09 in last
report
-20
-10
0
10
20
59 63 67 71 75 79 83 87 91 95 99 03 07
Expansionand Recession Signalsfrom
Growth in eLEI
Six-Month GrowthRate Smoothed, Annualized, in eLEI
U.S. Long-Term Growth Rate: 3.3%
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Short-Term Outlook: US
Looking at growth
in the US economy,
we see a small
peak then growth
to stabilize
between 2% and
3% through 2013-8
-6
-4
-2
0
2
4
6
8
Annual % change from three months ago1
Forecast of Growth in Monthly GDP
Actual Forecast
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US Manufacturing
Manufacturing
recovery will slow
then continue, yet
not reach peak of
06
80
85
90
95
100
105
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Index, 2007=100
Manufacturing Production
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US Consumer Prices
Look for inflation
due to major
increases in money
supply
160
170
180
190
200
210
220
230
240
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Index, 1982-84=100 , SA
Consumer Price Index (CPI)
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US Durable Goods
Consumer
expenditures on
durable goods will
continue to recover
nearing $1,300
trillion at 2005
constant prices$700
$800
$900
$1,000
$1,100
$1,200
$1,300
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
In Billions, SAAR
Consumer Expenditures on Durables
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Trade Outlook
Exports have
recovered and will
near peak levels
Real imports will
continue rebound
and reach new
peak near $1,500
billion
$500
$600
$700
$800
$900
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
In Billions, SAAR
Real Exports of Manufactures
$800
$1,000
$1,200
$1,400
$1,600
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
In Billions, SAAR
Real Imports of Manufactures
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Trade Balance Outlook
Trade balance of manufactures as percent
of GDP will increase through forecast
horizon
-8
-6
-4
-2
0
2
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Forecast
Percent
Percent of Trade Balance of
Manufactures to GDP
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Monetary Policy on the Horizon
Look for the Fed
Funds rate held
long at extreme
lows, will now start
to go up; can’t last
forever at near-
zero!
-2
0
2
4
6
8
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Percent
Monetary Policy: Federal Funds Rate
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Global Future Outlook
Looking @ major economic blocs and
their leading indicators helps give an
idea of turning points, which areas
suffered more than others and which
will come out of recession faster and
stronger…
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World vs. US
The US moves with the world economy,
usually the timing of recessions and peaks
are the same
Dynamics of the Global Business Cycle
USA Leading Index Moves Up or Down Ahead of the Rest of the World
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World, excluding USA United States
Consecutive negative values (below x-axis) predict recessions
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BRIC Attack
BRIC HAD been continually outperforming the
world and USED TO move out of recession much
faster
BRIC is now slowing down at same time and pace
as the rest of the world
Early Warning Signals for Booms and Busts in BRIC Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World BRIC Area
Consecutive negative values (below x-axis) predict recessions
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Latin America’s Bumpy Ride
Latin America’s economy fluctuates much
greater than rest of world, is now starting
to improve before the rest of the world
Early Warning Signals for Booms and Busts in Latin America
-40
-30
-20
-10
0
10
20
30
40
50
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World Latin America
Consecutive negative values (below x-axis) predict recessions
-30
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators:Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in LatinAmerica
World Latin America
Consecutive negative values (below x-axis) predict recessions
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Euro Area
Early Warning Signals for Booms and Busts in Euro Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World Euro Area
Consecutive negative values (below x-axis) predict recessions
Euro area usually
mirrors global
economy, this time
around slowing
down faster than
rest of world
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators:Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Euro Area
World Euro Area
Consecutive negative values (below x-axis) predictrecessions
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Non-Euro Area
Non-Euro area is
faring much better
than Euro area,
still slowing down
but at higher
overall levels
Early Warning Signals for Booms and Busts in Non-Euro Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World Non-Euro Area
Consecutive negative values (below x-axis) predict recessions
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators:Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Non-EuroArea
World Non-Euro Area
Consecutivenegative values (belowx-axis) predictrecessions
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Africa & Middle East
Africa and Middle East moving along with
world economy and slowing at the same
rates
Early Warning Signals for Booms and Busts in Africa & Middle
East
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World Africa & Middle East
Consecutive negative values (below x-axis)
predict recessions
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators:Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals forBooms and Busts inAfrica & Middle East
World Africa & Middle East
Consecutive negative values (below x-axis) predict recessions
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Asia Pacific
Asia Pacific showed a lot of strength
coming out of recession but is also victim
to the recent and upcoming slowdown
Early Warning Signals for Booms and Busts in Asia & Pacific Area
-24
-18
-12
-6
0
6
12
18
24
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World Asia & Pacific Area
Consecutive negative values (below x-axis) predict recessions
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Asia & Pacific Area
World Asia & Pacific Area
Consecutivenegative values (belowx-axis) predictrecessions
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Emerging Asia will carry global
economy
2009 2010 2011 2012 2009 2010 2011 2012
-0.97 0.27 0.36 0.44 -129.7 7.1 10.2 11.3
-0.68 0.17 0.20 0.24 -90.9 4.5 5.8 6.3
-0.29 0.10 0.15 0.19 -38.7 2.6 4.3 5.0
-0.43 0.21 0.22 0.21 -57.2 5.6 6.3 5.6
-0.79 0.48 0.36 0.49 -104.8 12.6 10.1 12.7
-0.58 0.33 0.22 0.34 -77.4 8.6 6.2 8.9
-0.01 0.35 0.25 0.24 -1.6 9.0 7.1 6.2
-0.32 0.35 0.26 0.26 -42.9 9.2 7.3 6.9
1.54 1.96 1.87 1.99 205.5 51.2 53.4 51.8
1.50 1.60 1.57 1.67 199.9 41.7 44.8 43.4
0.05 0.14 0.14 0.16 6.1 3.6 3.9 4.1
-0.7 3.8 3.5 3.8 100.0 100.0 100.0 100.0
ASIA & PACIFIC INDUSTRIAL
EMERGING ASIA
China & India
MIDDLE EAST & AFRICA
WORLD GROWTH
1
1
Sum of Regional Contributions Source: www.e-forecasting.com
Euro Area (euro16)
Non-Euro Members (11)
OTHER EUROPE
NORTH AMERICA
United States
SOUTH AMERICA
TABLE 2
CONTRIBUTION OF REGIONS TO GLOBAL GROWTH
REGION
Percentage Points Contribution Relative Contribution, Percent
EUROPEAN UNION (EU27)
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Wrap Up
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