Economic Update - MichiganMay 17, 2016 Federal Reserve Bank of Chicago 19 Stock Market S&P 500 and...

Paul TraubSenior Business Economist

Federal Reserve Bank of ChicagoMay 17, 2016

Economic UpdateConsensus Revenue Estimating Conference

May 17, 2016 1Federal Reserve Bank of Chicago

Main Economic IndicatorsAnnual Comparison – 2009, 2015 and 2016 March YTD

Source: U.S. Bureau of Economic Analysis, Census Bureau and Bureau of Labor Statistics

2009 2015 2016

GDP – Annual Growth Rate -2.8% 2.4% 1.9% 1

PCE Core Inflation Yr. / Yr. 1.2% 1.3% 1.7%

Unemployment Rate – Annual Avg. 9.3% 5.3% 4.9%

Participation Rate 65.4% 62.6% 62.9%

Nonfarm Job Growth (Monthly Avg.) -298,100 228,700 203,000

Initial Unemployment Claims 573,730 278,140 268,767

1. Year‐over‐year change ‐ Q1 ‘16 / Q1 ‘15


Contribution to Percent Change, Q4, 2015 - Q/Q at SAAR

U.S. Real GDP

1.3

‐0.6

‐0.3

0.2

‐1.0

‐0.5

0.0

0.5

1.0

1.5

GDP Consumption PrivateInvestment

Net Exports Government

Percent

Source: U.S. Bureau of Economic Analysis

Note: Private domestic investment includes: nonresidential ‐0.76, residential +0.49, and ‐0.33inventory change .

Net Exports includes: Exports ‐0.31 and Imports ‐0.02.Government Consumption and Investment includes: Federal ‐0.11 and State and Local 0.31.

0.5 – 1st Est.


1.7

3.63.0

2.41.92.0

8.0

6.6

3.8

‐1.6

0.7

4.3 4.2

0.6 1.02.1

2.72.1

2.8 2.7

‐4.0

‐2.0

0.0

2.0

4.0

6.0

8.0

10.0

Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16

Total Durable Goods Nondurable Goods Services

Percent


Real Personal Consumption ExpendituresBillions of Chained $2009, Percent Change - Q/Q at SAAR


6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

SAAR Annual Average

Aug ’0914.6

Apr ‘1617.3

17.2 YTD

Feb ’099.0

S.A.A.R – Millions of Units

Millions

U.S. Light Vehicle Sales

Cash for Clunkers

Source: Ward’s Automotive and BEA


Private Fixed Investment

8.6

5.0

‐0.7 ‐1.0‐3.5

3.35.1

3.7

0.4

‐1.6

1.64.1

2.6

‐2.1

‐5.8

10.1 9.48.2

10.1

14.9

‐10.0

‐5.0

0.0

5.0

10.0

15.0

20.0

Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16

Total Fixed Investment Nonresidential Residential

Percent


Billions of Chained $2009, Percent Change - Q/Q at SAAR


New Orders and Industrial ProductionIndex – 2012 = 100

85.0

90.0

95.0

100.0

105.0

110.0

115.0

2012 2013 2014 2015 2016

New Orders Industrial Production

Note: New Orders Nondefense Capital Goods Excluding Aircraft.

Mar ‘16103.4

98.8

Percent


In Thousands of Units (SAAR) and Annual Average

(000)’s

Source: U.S. Census Bureau

U.S. Housing Starts

Note: The United States averaged 1.5 million housing starts per year 1990 to 2004.

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Annual Average SAAR

Mar ‘161,089

Billions Chained $2009, Index – Q4 2007 = 100

80

90

100

110

120

130

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Total Federal State & Local

Index

Q1 ‘16101.597.995.7


Government Consumption & Investment



Billions of Chained $2009, Percent Change - Q/Q at SAAR

‐0.1

2.6

1.8

0.1

1.21.1

0.00.3

2.3

‐1.6

1.2

‐0.5

2.8

1.5 1.5

‐0.8

4.3

2.8

‐1.2

2.9

‐2.0

‐1.0

0.0

1.0

2.0

3.0

4.0

5.0

Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16

Total Federal Federal Nondefense State & Local

Percent


Government Consumption & Investment


Stronger U.S. DollarSelect Currencies Jan 3, 2014 to May 6, 2016, Index – 2014 = 100

9095

100105110115120125130135

J M M J S N J M M J S N J M M

Source: Board of Governors – Federal Reserve System

115.8

Index Canadian Dollar to U.S. Dollar

Stronger U.S. Dollar

Weaker U.S. Dollar

90

95

100

105

110

115

120

125

130


115.8

Index Euro to U.S. Dollar


Weaker U.S. Dollar

90

95

100

105

110

115

120

125

130


101.1

Index Japanese Yen to U.S. Dollar


Weaker U.S. Dollar

90

95

100

105

110


105.3

Index Chinese Yuan to U.S. Dollar


Weaker U.S. Dollar

Billions Chained $2009, Index – 2005 = 100

‐$1,000

‐$800

‐$600

‐$400

‐$200

$0

$200

$400

$600

$800

$1,000

0

20

40

60

80

100

120

140

160

180

200

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Net Exports Exports Imports

Index

Q1 ‘16151.7

123.1

‐$566.6


Real Imports and Exports



China PMIManufacturing & Nonmanufacturing ‐ SA, +50 Signifies Expansion

35.0

40.0

45.0

50.0

55.0

60.0

65.0

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Manufacturing Nonmanufacturing

Index

Source: China Federation of Logistics & Purchasing and Haver Analytics

Apr ’1653.5

50.1


3.1

1.71.2 1.2

1.8 1.9 1.9 2.0 2.0

7.4

6.3

5.34.9

4.64.0 4.1

4.6 4.85.4

4.2

3.5 3.3 3.43.1 3.2

3.5 3.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2010 2011 2012 2013 2014 2015 2016 2017 2018Advanced Economies Emerging and Developing Economies World

Global OutlookIMF Forecast for Growth (Jan ‘16 Update), % Chg. Yr./Yr.

Percent

Source: IMF ‐World Economic Outlook


U.S. Real GDP Blue Chip ForecastAnnual Percent Change – Chained $2009

2.5

2.1 2.12.0

1.8

2.52.4 2.4

2.3 2.3

1.0

1.5

2.0

2.5

3.0

Jan '16 Feb '16 Mar '16 Apr '16 May '16

2016 2017

Source: April 2015 Blue Chip Economic Indicators

Percent

U.S. Consumer

May 17, 2016 Federal Reserve Bank of Chicago 15

‐6.0

‐4.0

‐2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Savings Rate Real DPI

Percent

Percent Change Year/Year and Percent of Personal Income

Mar ’165.4%

3.1%



Dec ‘1210.5%

6.8%

Real Disposable Personal Income & Savings Rate

10.0

13.0

16.0

19.0

22.0

25.0

28.0

'60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16

Total Credit Total Less Government Held Student Loans

Total Consumer Credit

17Federal Reserve Bank of Chicago

Percent

May 17, 2016

Revolving and Non‐revolving Credit as % of DPI

Mar ‘1626.2%

19.0%

Source: Federal Reserve Bank ‐ Board of Governors

0.5

1.0

1.5

2.0

2.5

3.0

3.5

'60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16

Personal Interest Payments

18Federal Reserve Bank of Chicago

Percent

May 17, 2016

As a Percent of Disposable Personal Income

Mar ’162.0%



Stock MarketS&P 500 and Dow Jones Indices, Index Jan, 2014 = 100

90.0

95.0

100.0

105.0

110.0

115.0

120.0

'14 F M A M J J A S O N D '15 F M A M J J A S O N D '16 F M A M

S&P 500 Dow Jones

Index

Source: St Louis Fed and S&P Dow Jones

Week EndingMay 6, 2016

112.92,060.7

109.017,738.9

Consumer Sentiment

20Federal Reserve Bank of ChicagoMay 17, 2016

University of Michigan

Index

20

40

60

80

100

120

140

'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Jan ’15 98.1

January ‘00112.0

Source: Thomson Reuters / University of Michigan

Apr ’16 89.0

Buying Conditions for Vehicles

21Federal Reserve Bank of ChicagoMay 17, 2016

University of Michigan

Index

80

90

100

110

120

130

140

150

160

'08 '10 '12 '14 '16

Apr ’16 143.0

Source: Thomson Reuters / University of Michigan


Monetary PolicyEmployment & Inflation

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

'09 '10 '11 '12 '13 '14 '15 '16

Actual Target


Unemployment Rate & PCE InflationPercent Unemployed, PCE % Change Yr./Yr.

Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve

1.2 1.31.5

1.9

1.5 1.51.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

'09 '10 '11 '12 '13 '14 '15 '16

Annual Actual Target

Unemployment Inflation – Core PCE

2.0%

Mar ‘161.6%

Apr ‘165.0%

Percent Percent

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

'00 '02 '04 '06 '08 '10 '12 '14 '16


Underutilization of LaborU6 Unemployment Rate ‐ SA

Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve

Apr ‘169.7%

Percent

Includes total unemployed plus marginally attached workers plus employed part‐time for economic reasons.


0

50

100

150

200

250

300

350

400

2012 2013 2014 2015 2016

Monthly Actual Annual Average

U.S. Nonfarm PayrollsMonthly and Annual Average Job Change – In Thousands

Thousands

Source: U.S. Department of Labor: Bureau of Labor Statistics

2012179.1

2013192.6

2014251.3 2015

228.7

Apr ‘16192.3160


Average Hourly Earnings & Hours WorkedTotal Private, All Employees – % Change Y/Y and Hours, SA

33.4

33.6

33.8

34.0

34.2

34.4

34.6

34.8

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Earnings (Left) Hours (Right)

Apr ’1634.5

2.5%

Percent

Source: Author’s calculations using U.S. Department of Labor: Bureau of Labor Statistics data.

Jun ’0734.53.6%

Hours


Inflation ExpectationsPCE Core Inflation – Yr./Yr. & Q4/Q4

Source: Bureau of Economic Analysis and FRB Philadelphia Q1 ‘16 Survey

Survey of Professional Forecasters – Q1 ‘16 ForecastPercent

1.5

1.3

1.71.8

1.92.0

1.5

1.71.8 1.8

1.9

0.0

0.4

0.8

1.2

1.6

2.0

2014 2015 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 2016 2017 2018

Actual Expectations


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2016 2017 2018 Longer‐run

Mar '16 Projections Market Expectations Dec '15 Projections

Appropriate pace of policy firmingMidpoint of target range or target level of the Fed Funds Rate

Percent

Source: Board of Governors – Federal Reserve System, December 2015


Yield Curve10 Year – 1 Year Treasuries

Apr ’16125 bps

Percent

Source: Board of Governors – Federal Reserve System

‐4.0

‐3.0

‐2.0

‐1.0

0.0

1.0

2.0

3.0

4.0

'54 '58 '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '10 '14

Michigan Economy



Main Economic IndicatorsAnnual Comparison – 2009, 2015 and 2016 March YTD

Source: U.S. Bureau of Economic Analysis, Census Bureau and Bureau of Labor Statistics

2009 2015 2016

GDP – Annual Growth Rate -8.2% 2.5% Est. N/A

CPI Core Inflation Yr. / Yr. 1 1.0% 1.7% 2.2%

Unemployment Rate – Annual Avg. 13.8% 5.4% 4.8%

Participation Rate 63.1% 60.3% 61.2%

Nonfarm Job Growth (Monthly Avg.) -18,400 5,900 10,700

Initial Unemployment Claims 28,000 8,720 9,250

1. CPI for Detroit/Ann Arbor/Flint CSA includes Macomb, Oakland, Wayne, Lapeer, Livingston, St. Clair,Monroe and Washtenaw counties.


Chicago Fed Survey of Business Conditions

‐40.0

‐20.0

0.0

20.0

40.0

60.0

80.0

2013 2014 2015 2016

Current Outlook

Activity Index: Overall

Apr ’1624.1

‐4.1

Index


‐40.0

‐20.0

0.0

20.0

40.0

60.0

80.0

2013 2014 2015 2016

Manufacturing

Activity Index: by Sector

Chicago Fed Survey of Business Conditions

‐40

‐20

0

20

40

60

80

2013 2014 2015 2016

NonmanufacturingIndex Index

Apr ‘16‐19

Apr ‘1623


Current Economic ConditionsApril Beige Book Summary, Seventh District - Chicago

• Contacts expressed a renewed optimism as growth in economic activity pick up to a moderate pace in late February and March.

• Growth in consumer spending maintained a steady yet modest pace. Retailers again expressed disappointment that lower gasoline prices and improvements in the labor market were not providing more of a boost to consumer spending.

• Growth in business spending rose to a moderate pace in late February and March.• Retailers and manufacturers indicated comfortable inventory levels though the

mild winter left some retailers with excess stock of winter related items.• Hiring picked up to a moderate pace, as did the number of contacts indicating

they planned to increase workforces in the future.• Strong demand continued for skilled workers, particularly for professional and

technical occupations, sales, and skilled manufacturing and building trades.

• Construction and real estate activity increased slightly over the reporting period. Residential construction increased for new single-family markets and in urban areas.


Current Economic Conditions (Continued)April Beige Book Summary, Seventh District - Chicago

• Manufacturing production rose at a modest rate in most industries and activity remained strong in in the automotive and aerospace industries. Soft demand for agricultural and mining machinery continued to hurt the heavy machine industry. However, manufacturers primarily serving the oil and gas industry reported adjusting their product offerings toward other industries.

• Overall, financial conditions improved some over the reporting period. Equity markets regained much of their losses and volatility subsided. Business loan demand improved marginally and loan pricing remains competitive. Commercial real estate loan demand remains strong. Credit card utilization increased though balances remained steady. Residential real estate demand declined some while auto loan volumes continued to grow.

• In the agricultural sector, spring arrived early allowing field work to begin. Corn, soybean, and wheat prices moved up, and rents and fertilizer prices moved down. Cattle prices edged higher, while hog and dairy prices were somewhat lower. Dairy prices dropped and some operations that had not made forward contracts at higher prices now face losses.


Midwest Economic IndexMichigan’s Contribution to the MEI

‐0.05

0.00

0.05

0.10

0.15

0.20

0.25

'15 F M A M J J A S O N D '16 F M

Manufacturing Construction Services Consumer Index Annual Average

Mar ‘160.19

20150.10

20160.16

Source: Federal Reserve Bank of Chicago

Index


Relative Midwest Economic IndexMichigan’s Contribution to the Relative MEI

‐0.10

‐0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

'15 F M A M J J A S O N D '16 F M

Manufacturing Construction Services Consumer Index Annual Average

Mar ‘160.30

20150.12

20160.28

Source: Federal Reserve Bank of Chicago

Index


ISM Purchasing Managers Index

40.0

45.0

50.0

55.0

60.0

65.0

70.0

Jan‐15 Apr‐15 Jul‐15 Oct‐15 Jan‐16 A

40.0

45.0

50.0

55.0

60.0

65.0

70.0


40.0

45.0

50.0

55.0

60.0

65.0

70.0


40.0

45.0

50.0

55.0

60.0

65.0

70.0


U.S. CompositeIndex

Source: Institute for Supply Management , Haver Analytics and FRED

SE Michigan Composite

U.S. Manufacturing SE Michigan Manufacturing

Composite and Manufacturing, SA - Greater than 50 = Expansion

Apr ‘1655.1

Apr ’1660.0

Mar. ’1663.0

Apr ’1650.8


In Thousands of Units

(000)’s

Source: U.S. Census Bureau

Michigan Housing Starts

46.8

30.6

19.2

10.97.0

9.0 8.811.7

14.6 15.819.1

21.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 MarAvg YTD


Michigan Nonfarm PayrollsMonthly Average Job Change In Thousands

Thousands

Source: U.S. Department of Labor: Bureau of Labor Statistics

‐4.9‐8.8

‐24.3

‐0.6

7.4 6.8 6.3 6.0 5.1

10.7

‐30.0

‐25.0

‐20.0

‐15.0

‐10.0

‐5.0

0.0

5.0

10.0

15.0

'07 '08 '09 '10 '11 '112 '13 '14 '15 '16 MarYTD


Unemployment & Participation RatesPercent of Labor Force - SA

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Michigan U.S.

Source: U.S. Department of Labor: Bureau of Labor Statistics and Haver Analytics

Mar ‘165.0%

4.8%

Percent

59.0

60.0

61.0

62.0

63.0

64.0

65.0

66.0

67.0

'05 '07 '09 '11 '13 '15

Michigan U.S.

Percent

Mar ‘1663.0%

61.5%

Unemployment Rates Participation Rates

0.3

1.3

1.7

0.4 0.4

2.2

2.8

2.0

1.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

'08 '09 '10 '11 '12 '13 '14 '15 '16MarYTD


Average Hourly Earnings & Hours WorkedMichigan Nonfarm ‐ Total Private, % Chg. Y/Y & Hours, SA

Percent

Source: Author’s calculations using U.S. Department of Labor: Bureau of Labor Statistics data.

Total Private ‐ Average Weekly HoursHoursTotal Private ‐ Average Hourly Earnings

34.2

33.3

33.7

34.134.2

34.4

33.9

32.632.833.033.233.433.633.834.034.234.434.6

'08 '09 '10 '11 '12 '13 '14 '15 '16MarYTD

‘08 to ‘15 CAGR, 1.4%


Michigan Real Personal IncomeIn Billions of $2009 and % Change Year/Year

‐8.0

‐6.0

‐4.0

‐2.0

0.0

2.0

4.0

6.0

8.0

$300.0

$310.0

$320.0

$330.0

$340.0

$350.0

$360.0

$370.0

$380.0

$390.0

$400.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

% Chg. Y/Y (right) Real Personal Income (left)

$Billions PercentQ4 ‘15$390.3

4.1%

Source: Bureau of Economic Analysis and Haver Analytics


Michigan Employment & Auto SalesThousands of Employees and Sales – 1990 to 2015

3,750

4,000

4,250

4,500

10,000 12,000 14,000 16,000 18,000

Employmen

t

Sales

Source: Bureau of Labor Statistics and Ward’s Automotive

2009 2010

2011

2012

2013

2014

2015

20052006

2007

2008

4,390 – 17,445

4,270 – 17,835

3,870 – 10,600


Michigan Automotive IndustryProduction, Employment, and Vehicles/Employee - Index 2007 = 100

25.0

50.0

75.0

100.0

125.0

150.0

175.0

'07 '08 '09 '10 '11 '12 '13 '14 '15

Production Employment Veh/Emp

Index

Source: Author’s calculations using data from Bureau of Labor and Ward’s Automotive.

2015137.9

104.6

75.9


Average Financing at Finance Companies New Car Loan Parameters – Index 2008 = 100, NSA

70.0

80.0

90.0

100.0

110.0

120.0

'08 '09 '10 '11 '12 '13 '14 '15

Maturity Rate Financed Payment

Percent

Source: Author’s calculations using Federal Reserve Board of Governors data

Q4 2015Index Actual

113.9

106.6105.4

85.5

$27,986

65.4 Mos.$489.95

5.03%


16,94816,504

16,089

13,195

10,401

11,554

12,735

14,440

15,532

16,434

17,385 17,300 17,200

8,000

10,000

12,000

14,000

16,000

18,000

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Thousands of Units – Calendar Year

U.S. Light Vehicle Sales

Thousands

Source: Ward’s Automotive and BEA and Blue Chip Consensus Forecast.

Thank You!

Economic Update - MichiganMay 17, 2016 Federal Reserve Bank of Chicago 19 Stock Market S&P 500 and...

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Transcript of Economic Update - MichiganMay 17, 2016 Federal Reserve Bank of Chicago 19 Stock Market S&P 500 and...