economic outlook: beyond the recession esica spring conference the tides inn – irvington, va may...
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Economic Outlook:Beyond the RecessionESICA Spring Conference
The Tides Inn – Irvington, VAMay 6, 2010
Ann Battle Macheras
Federal Reserve Bank of Richmond
Overview• National Economic Trends
• GDP• Employment• Business Activity
Construction Indicators• Construction Put in Place• Commercial Vacancy Rates• Property Prices
Financial Markets• Lending for Commercial Real Estate
• What to Expect?
National Economic Trends
US Gross Domestic ProductPercent Change, Seasonally Adjusted Annual Rate
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% C
hang
e, S
AAR
1Q: 2010US: 3.2%
Source: BEA/Haver Analytics
Real Gross Domestic Product
10000.0
10500.0
11000.0
11500.0
12000.0
12500.0
13000.0
13500.0
14000.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2005
US Dol
lars
(Billio
ns)
1Q:13,254.7
Source: BEA/Haver Analytics
Real Gross Domestic Product 2010
Q1 Q2 Q3 Q4 Q1
CHANGE FROM PREVIOUS QUARTER AT COMPOUND ANNUAL RATE [Percent]:
Gross Domestic Product -6.4 -0.7 2.2 5.6 3.2
Personal Consumption Expenditures 0.6 -0.9 2.8 1.6 3.6
Nonresidential Fixed Investment -39.2 -9.6 -5.9 5.3 4.1Structures -43.6 -17.3 -18.4 -18.0 -14.0Equipment & Software -36.4 -4.9 1.5 19.0 13.4
Residential Fixed Investment -38.2 -23.3 18.9 3.8 -10.9
Exports of Goods & Services -29.9 -4.1 17.8 22.8 5.8Imports of Goods & Services -36.4 -14.7 21.3 15.8 8.9
Final Sales to Domestic Purchasers -6.4 -0.9 2.3 1.4 2.2
LEVEL IN QUARTER AT SEASONALLY ADJUSTED ANNUAL RATE [Billions of Chained (2005) Dollars]:
Change in Private Inventories -113.9 -160.2 -139.2 -19.7 31.1
Net Exports of Goods & Services -386.5 -330.4 -357.4 -348.0 -367.0
-1.8
2009
Government Consumption Expenditures & Gross Investment
-2.6 6.7 2.6 -1.3
Source: Bureau of Economic Analysis/Haver Analytics
Non-Residential Fixed Investment
Source: BEA/Haver Analytics
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% C
hang
e fro
m p
revi
ous Q
uarter
at a
n Ann
ual R
ate
1Q4.31%
Real Non-Residential Fixed InvestmentEquipment and Software
Source: BEA/Haver Analytics
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% C
hang
e fro
m p
revi
ous Q
uarter
at a
n Ann
ual R
ate
1Q13.4%
Non-Residential Fixed Investment in Structures
Source: BEA/Haver Analytics
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% C
hang
e fro
m p
revi
ous Q
uarter
at a
n Ann
ual R
ate
1Q-14.0%
Real Non-Residential Fixed Investment in Structures
Source: BEA/Haver Analytics
300.0
320.0
340.0
360.0
380.0
400.0
420.0
440.0
460.0
480.0
500.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2005
US Dol
lars
(Billio
ns)
1Q:348.3
Nonfarm Payroll EmploymentAverage Monthly Change
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ave
rage
Mon
thly
Cha
nge,
Tho
us.
Monthly ChangeJan: 14Feb: -14
Mar: 162
Source: Bureau of Labor Statistics/Haver Analytics
Industry Growth in the United StatesPercent Change in Employment from a Year Ago
-0.3
-1.3
-0.7
1.8
-1.2
-3.2
-4.7
-1.8
-5.2
-10.5
-1.7
1.2
-0.8
-0.6
2.0
0.5
-2.9
-4.9
-1.8
-6.2
-10.9
-1.1
-12.0 -9.0 -6.0 -3.0 0.0 3.0
Government
Other
Leisure & Hospitality
Education & Health Services
Professional & Business Services
Financial Activities
Information
Trade, Transportation & Utilities
Manufacturing
Natural Resources & Construction
Total
Percent Change
March 2010
Fifth District
U.S.
Unemployment Rate
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Perc
ent
March:9.7%
Source: Bureau of Labor Statistics/Haver Analytics
Retail Sales
Source: BEA/Haver Analytics
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Perc
ent C
hang
e fro
m ye
ar a
go
% Change:Jan: 4.1%Feb: 3.9%Mar: 7.6%
Personal Income and Expenditures
Source: BEA/Haver Analytics
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
YoY
% C
hg
Real Personal Consumption Expenditures
Real Personal Income
March 2010RPCE: 2.4%RPI: 1.0%
ISM Manufacturing and Non-Manufacturing Surveys
20
25
30
35
40
45
50
55
60
65
30
35
40
45
50
55
60
65
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
ISM Manufacturing ISM Non-Manufacturing
Source: Institute of Supply Managers
Richmond Manufacturing Composite Index:MD, DC, VA, WV, NC, SC
20
25
30
35
40
45
50
55
60
65
-60
-50
-40
-30
-20
-10
0
10
20
30
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Richmond Manufacturing Survey
Richmond Manufacturing Survey
Source: Federal Reserve Board/Haver Analytics
Manufacturing Activity – Regional Surveys
Philadelphia New York
Source: Federal Reserve Bank of Philadelphia and Federal Reserve Bank of New York
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
2005 2006 2007 2008 2009 2010 2011
Empire State Manufacturing Survey
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
2005 2006 2007 2008 2009 2010 2011
Business Outlook Survey
Industrial ProductionIndex: 2002=100
90
92
94
96
98
100
102
104
106
108
110
112
114
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Federal Reserve Board/Haver Analytics
Capacity UtilizationIndex: 2002=100
64
66
68
70
72
74
76
78
80
82
84
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Federal Reserve Board/Haver Analytics
Core Capital Goods
45
50
55
60
65
70
2004 2005 2006 2007 2008 2009 2010 2011
Curre
nt $
, Billi
ons New Orders
Shipments
Source: US Census Bureau/Haver Analytics
Construction Indicators
U.S. Construction Put in PlaceTotal and Private Construction
500
575
650
725
800
875
950
1025
1100
1175
1250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Billio
ns o
f US
$ (S
AAR)
Total Construction PIPPrivate Construction PIP
Source: US Census Bureau/Haver Analytics
U.S. Construction Put in PlaceOffice and Commercial Construction
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Billio
ns o
f US
$ (S
AAR)
Office Construction PIPCommercial Construction PIP
Source: US Census Bureau/Haver Analytics
U.S. Construction Put in PlacePower and Manufacturing Construction
10
20
30
40
50
60
70
80
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Billio
ns o
f US
$ (S
AAR)
Power Construction PIPManufacturing Construction PIP
Source: US Census Bureau/Haver Analytics
Regional Construction Put in PlaceTotal Private Construction
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006 2007 2008
Billio
ns o
f US
$
New England
Mid-Atlantic
South Atlantic
Source: US Census Bureau/Haver Analytics
Regional Construction Put in PlaceOffice Construction
Source: US Census Bureau/Haver Analytics
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006 2007 2008
Billio
ns o
f US
$
New England
Mid-Atlantic
South Atlantic
Regional Construction Put in PlaceCommercial Construction
Source: US Census Bureau/Haver Analytics
0
2
4
6
8
10
12
14
16
18
20
2000 2001 2002 2003 2004 2005 2006 2007 2008
Billio
ns o
f US
$
New England
Mid-Atlantic
South Atlantic
Regional Construction Put in PlaceManufacturing Construction
Source: US Census Bureau/Haver Analytics
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008
Billio
ns o
f US
$
New England
Mid-Atlantic
South Atlantic
U.S. Commercial Real Estate
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Perc
ent
U.S. Office Vacancy Rate
U.S. Industrial Availability Rate
Source: CB Richard Ellis/Haver Analytics
Regional Commercial Real EstateOffice Vacancy Rates
Source: CB Richard Ellis/Haver Analytics
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Perc
ent
BaltimoreBostonPhiladelphiaWashington, D.C.
Regional Commercial Real EstateIndustrial Availability Rates
Source: CB Richard Ellis/Haver Analytics
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Perc
ent
BaltimoreBostonPhiladelphiaWashington, D.C.
Employment’s Relationship to Residential and Commercial Property Prices
Source: Moody’s/REAL, BLS, Haver Analytics
Moody’s/REAL Commercial Property Price Index: Dec. 2000=100
124
126
128
130
132
134
136
138
140
80
100
120
140
160
180
200
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Milli
ons of
Jobs
Inde
x
Commercial Property Price Index U.S. Payroll Employment
Financial Markets
Fed Funds Rate
0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Target RangeTarget RateEffective Rate
Lending for Commercial Real EstateNet Percentage Tightening Standards
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Lending for Commercial Real EstateNet Percentage Reporting Stronger Demand
-80.0
-60.0
-40.0
-20.0
0.0
20.0
40.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Possible Future Scenarios?
Gross Domestic Product – What to Expect?
96
98
100
102
104
106
108
110
112
114
96
98
100
102
104
106
108
110
112
114
t-8 t-7 t-6 t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8Months Before/After NBER Business Cycle Trough (Recessions end at t)
Post-War Average
1981:Q3 -1982:Q4
1990:Q3 -1991:Q1
2001:Q1 -2001:Q4
2007:Q4 -2009:Q2
Index, Trough=100
Note: For the most recent recession, t= 2Q:2009Source: BEA/Haver Analytics
Nonfarm Payroll Employment – What to Expect?
94
96
98
100
102
104
106
108
94
96
98
100
102
104
106
108
t-24 t-20 t-16 t-12 t-8 t-4 t t+4 t+8 t+12 t+16 t+20 t+24Months Before/After NBER Business Cycle Trough (Recessions end at t)
Post-War Average
1981:Q3 -1982:Q4
1990:Q3 -1991:Q1
2001:Q1 -2001:Q4
2007:Q4 -2009:Q2
Index, Trough=100
Note: For the most recent recession, t= June 2009Source: BLS/Haver Analytics
Private Nonresidential Construction – What to Expect?
76
80
84
88
92
96
100
104
108
112
116
76
80
84
88
92
96
100
104
108
112
116
t-24 t-20 t-16 t-12 t-8 t-4 t t+4 t+8 t+12 t+16 t+20 t+24Months Before/After NBER Business Cycle Trough (recession end at t)
Post-War Average
1981:Q3 -1982:Q4
1990:Q3 -1991:Q1
2001:Q1 -2001:Q4
2007:Q4 -2009:Q2
Index, Trough=100
Note: For the most recent recession, t= June 2009Source: Census Bureau/Haver Analytics
Looking Ahead for 2010:
• Positive developments:• Job losses tapering off and gains setting in• Consumer spending strengthening• Business investment and increased activity• Global markets reinforcing the recovery
• Risks to the recovery
• Stubborn unemployment
• Housing slow to rebound
• Commercial real estate – continued drag
• State and local revenue shortfalls – another drag
Links for Data:
• Construction Put In Place: http://www.census.gov/const/www/c30index.html(the links on the lefthand side take you to additional pages with more
detail for each category)
• Senior Loan Officer Survey – Measures of Supply and Demand for Commercial Real Estate Loans: http://www.federalreserve.gov/boarddocs/SnLoanSurvey/default.htm
• National Indicators, such as GDP, Personal Consumption, etc. – Charts available in pdf files, with sources listed belowhttp://www.richmondfed.org/research/national_economy/national_economic_indicators/index.cfm
Ann’s email: ann.macheras@rich.frb.org
The views and opinions expressed herein are those of the author. They do not represent an official position of the Federal Reserve Bank of Richmond or the Federal Reserve System.
Questions?… and thank you!
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