4. Contributions to GDP Growth by Component Q3 2008 – Q4 2009 Source: Bureau of Economic Analysis
5. Historic and Projected Real GDP Growth around the World 2007 – 2011* The world-wide recession is over with emerging market economies led by China, India and Brazil leading the overseas recovery. For the first time in post WWII history, the U.S. and Europe are not the locomotives of worldwide economic growth. However both the U.S. and Europe are recovering led by government stimulus programs. Barring a “double dip “ recession on the expiration of government stimulus later in 2010, the estimates below of worldwide economic growth in 2011 are likely to be exceeded, particularly in developing countries. *2008/09 data are actual Source: International Monetary Fund
6. S&P Reported Operating Earnings for Listed CompaniesQ1 2000-Q4 2009* Source: Standard & Poors
8. Capacity Utilization by Status of ProductionJanuary, 2008 – December, 2009 Source: Federal Reserve Bank
9. Manufacturers Orders & ShipmentsExcluding TransportationJanuary, 2008 – December, 2009 Source: Census Bureau
10. Net Change in U.S. Jobs (Total Non-farm)January, 2006 – January, 2010 Source: Bureau of Labor Statistics
11. National Nonfarm Employment by Industry Sector GroupsDecember, 2007 – January, 2010 The loss of jobs is pervasive throughout the entire economy and has not spared previously immune professional , executive and managerial positions. This has been as much, if not more, a white collar, middle class recession. Source: Bureau of Labor Statistics
12. Initial Unemployment Claims January, 2009 – January, 2010 Reflecting the rise in unemployment, new job losses rose dramatically in the first quarter of 2009. The trend of new job losses has been declining since then but reversed to the upside in January. The absolute level of new job loss remains high. Source: Department of Labor
14. Number of Unemployed on Federal Extended Benefit ProgramsMay, 2008 – January, 2010 Source: Department of Labor
15. Retail Sales Less Food and Fuel September, 2007 – December, 2009 Consumer CreditQ3 2006 – November, 2009 Consumer spending stabilized in the second quarter and improved in the third. Since the third quarter of 2008 consumer spending had been declining and the consumer has been paying down outstanding debt. These trends have been negative for the economy in the short term but the reduction of consumer debt and an increase in consumer savings are positive for the economy and the improved creditworthiness of the consumer longer term. Source: (Left) Census Bureau, (Right) Federal Reserve Bank
16. National Saving Rateas Percentage of Personal Disposable IncomeQ1 2005 – Q4 2009 Source: Bureau of Economic Analysis
17. New Home Sales Units Sold v. Length on Market April, 2006 - December, 2009 Existing Home Sales v. Length on MarketApril, 2006 - December, 2009 Housing sales have improved since March, 2009 and inventories have declined, particularly in new home construction. The improvement in housing reflects the government’s buyer tax credit, the cutback in new home construction, much reduced home prices and lower mortgage interest rates. Source: (Left) National Association of Realtors, (Right) Census Bureau
20. Commercial Mortgage Backed Securities (CMBS): Delinquency Rates for All Private-labels* Q2 2006 – Q3 2009 Source: Mortgage Banker’s Association *CMBS issued by private entities (i.e. other than Fannie Mae, Ginnie Mae, or Freddie Mac). The percentage of loans that are 30-days delinquent. The delinquency includes foreclosed estates.
21. Real Estate & Consumer Loan Delinquency Rates: All Banks and Financial Institutions Q2 2007 –Q3 2009 Source: Federal Reserve Bank
22. While inflation has declined precipitously in the recession led by the collapse in energy and commodity prices. After bottoming in July, 2009, prices are moving up, driven by the reversal in energy prices. In addition, basic services, healthcare and education prices remain stubbornly high. Source: Bureau of Labor Statistics
23. Crude Oil Spot Prices in U.S. DollarsFebruary, 2005 – February, 2010 Source: Energy Information Administration
24. Nominal Broad Dollar Index* August, 2000 – February, 2010 * Broad Dollar Index: a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners. Source: Federal Reserve Board
26. Money Supply (M2): January, 2007 – December, 2009 Source: Federal Reserve Bank
27. U.S. Federal Budget Deficit, 1995-2012* *2010-2012 data are projections Source: Congressional Budget Office
28. Federal Reserve Balance Sheet: Reserve Bank CreditJune, 2008 – February, 2010 Source: Federal Reserve Bank
29. Federal Fund Rates, January, 2008 - February, 2010 3-month LIBOR rates lent in $US January, 2008 - February, 2010 The Fed and European Central Bank have cut interest rates to the banking systems here and abroad thus driving down the cost of bank funds to facilitate bank lending. The Fed has indicated it will continue to keep interest rates low for the time being but it will have to raise interest rates when the economy strengthens. Source: (Left) Federal Reserve Bank, (Right) British Banker’s Association
30. Where are the opportunities? Healthcare Education Worker Retraining Agriculture Energy Conservation Environmental Solutions Electric Power Transportation – Increase Mass Transit Exports Water Conservation – New Supplies and Recycling U.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC) Real Estate – Recycle and Rehab Existing Commercial and Residential Property
31. Overview of Where the $787 Billion is Going: Break-down of the Stimulus Dollars by Sectors Source: Recovery.gov
32. Conclusions The deep and protracted recession that began in the fourth quarter of 2007 ended in the third quarter of 2009 and recovery accelerated in the fourth quarter thanks to federal stimulus, increased factory orders and reduced inventory liquidation. The continuation of government stimulus is expected to lead to further GDP growth in the first half of 2010 but at lower growth rates from the outsized gain in Q’4, ‘09. Second half 2010 economic growth will depend on contributions from the private sector and job creation. Emerging industrialized economies, led by accelerated growth in China, are outpacing the U.S. in economic recovery and are poised to grow faster than the U.S. in 2010.
33. Conclusions continued Despite government stimulus the U.S. economy still faces near term economic pressures which include: high cost and reduced availability of credit improving but continued low level of corporate profits continuing high levels of unemployment continued weak levels of corporate capital and consumer spending severe reductions in state and local government spending and eroded municipal financial strength continued credit pressures in residential housing and consumer lending extending to commercial real estate markets and corporate lending
34. Conclusions continued After an expected cyclical recovery in 2010-2012, we believe longer term socio-economic issues facing this country will result in slower future economic growth for the United States featuring reduced growth in consumer spending, high levels of national debt and increased entitlement spending. In addition, the availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future, further curtailing the growth in private sector spending longer term.
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