economic outlook 2013 – 2014 steel manufacturers association annual members conference mayflower...
TRANSCRIPT
Economic Outlook 2013 – 2014
Steel Manufacturers AssociationAnnual Members Conference
Mayflower HotelApril 30, 2013
Washington, DC
Peter MoriciUniversity of [email protected]
Twitter @pmorici1
How “Great” a Recession
1854 - 2012: 33 RecessionsAverage Length: 16 Months Long Depression: 1873-79 (65 mos.) Great Depression: 1929-33 (43 mos.); 1937 – 38 (18 mos.)Volcker Recession (Reagan): 1980 (6 mos.); 1981-82 (16
mos.)Great Recession (Obama): 2007–09 (18 Months)
Peak Unemployment1876, 14% – Long Depression1933, 24.9% – Great DepressionNovember, 1982, 10.8% – Volcker Recession (Reagan)October, 2009 10% - Great Recession (Obama)
Reasons for OptimismU.S. Innovation Continues at a Strong Pace
New and Improved Products
Strongest Manufacturing Productivity Growth Among Industrialized Countries
Logistics
Shale Gas/Oil RevolutionHeavy Transportation
Intercity and Urban Transport
Manufacturing Revival
Repricing of U.S. Labor
Superior Higher Education SystemMorrill Act of 1862 – Colleges of Science and Engineering
Scientific Management – America’s Business Colleges
Potential Growth
Potential Trend GDP Growth: 3% Per YearAverage Productivity Growth: 2% Per Year
Average Labor Force Growth: 1% Per Year
After Deep Recession Growth of 4 – 6% PossiblePotential Productivity Growth: 2 – 4%
Potential Employment Growth: 2 – 4%
Growth Above 3 % Is Needed to Reduce Unemployment
Unemployment Has Been Falling Because Adults Are Leaving the Labor Force
Lessons of HistoryStronger Growth is Possible
Reagan Recovery: 1982 - 1990Unemployment Rate
November 1982: 10.8June 1986: 7.2%
GDP Growth1982:Q3 – 1986:Q2: 5.0%
Obama Recovery: 2009 – Unemployment
October 2009: 10.0%March 2013: 7.6%
GDP Growth2009:Q2 – 2013:Q1: 2.1%
Obstacles to GrowthChina Slowing?
Europe: Euro; Bank and Sovereign Debt
Chinese/German/Japanese Mercantilism
US: Trade Deficit: Oil, China
U.S. Regulatory Overreach
Tax SystemHigh Individual and Corporate Rates Raise the Price
of Capital
Misplaced Efforts to Obviate Income Inequality
Runaway Health Care
Social Security and Federal/State Pensions
Chinese Growth Model Running Out of Steam?
Modernization and Inexpensive Labor Has Limits
Growing Trade Surpluses with U.S. Has Limits
Undervalued Yuan
Subsidies/High Tariffs/Other Forms of Protection
Trade Deficits Slow Growth in U.S.
Competition from Pakistan, Vietnam, Others
Overseas Resource and Energy Investments
Europe: Festering Problems in Eurozone and Debt
Disparate Productivity Growth—North vs. South
Balkanized Labor Markets
Absence of Fiscal Union
Limited ECB Powers/MandateAbsence of Unified Banking Regulation and Bank
Resolution Tools/Authority
Absence of Sovereign Lender of Last Resort
Result: Sovereign, Bank and Private Debt
Global Variables
2012 2013 2014Global 1.5% 1.5 2.0
US 2.2 2.0 2.2Eurozone -0.5 -0.5 0.0China 7.7 7.8 8.0India 5.0 5.7 6.5Mexico 3.9 3.2 3.6Brazil 0.9 2.7 3.4Russia 3.4 3.1 3.5Japan 2.0 0.4 2.4
Oil (WTI) $94 96 103Oil (Brent) 113 108 115
National Economic Forecast
Q412 Q113 Q213 Q313 Q413 2012 2013 2014
GDP: Annual 0.4 2.5 1.8 2.3 2.1 2.2 2.0 2.3
GDP: Q4/Q4 1.7 2.2 2.4
CPI: Year/Year
1.9 1.7 2.2 2.4 2.6 2.1 2.2 2.8
Core CPI: Year/Year
1.9 2.0 1.9 2.0 2.1 2.1 2.0 2.1
Unemploy-ment
7.8 7.7 7.7 7.8 7.8 8.1 7.7 7.8
Federal Funds
0.125 0.125 0.125 0.125 0.125 0.125 0.125 0.125
U.S. Autos and Housing
Vehicle Sales Housing Starts
2012 14.4 M 780K
2013 15.4 1000K
2014 16.0 1200K
Retail Sales
Nominal Real
2012 5.0 2.9
2013 5.1 2.9
2014 5.6 2.8
U.S. Policy FixesFix Trade With China – Currency ReformDevelop Domestic Oil & GasFederal Deficit – Entitlement Reform
Health Care – Fewer Subsidies, Genuine ReformSocial Security – Raise Retirement Age
BankingRollback Dodd FrankRestructure Banks – Glass Steagall
Broader Regulatory ReformPersonal/Corporate Income Tax Reform – VATSecondary Education Reform – Costs/Orientation to Labor
Market (More Vocational Training)Post Secondary Reform – Cost Issues
Fixing the Trade Deficit
China’s Yuan, Japan’s Yen
General Currency Reform – Euro?
Recalibrate Trade Agreements and World Trade Organization
Education/Infrastructure/R&D
Corporate/Personal Income – Value Added Tax Swap
Energy Policy
Energy Policy
Crude Oil Supply
Domestic Production 9.5 MBD
Net Imports 6.6
Total 14.1
Gasoline Consumption 8.4
Diesel for Transportation 2.7
Health Care Policy
Price Not Provider Is the Issue
U.S. and Germany Both Have Generous Government Payment Systems
U.S. Cost Per Capita - $9000; Germany - $6000
Germany Better Regulates Prices for Drugs, Insurance Co, Admin Costs, Hospitals, etc.
U.S. Malpractice System
Lessons of Great Recession
Global Economy Is Fundamentally Altered (Destabilized) by New Technologies, Global Finance, Government Efforts to Insulate Citizens
Strong Firms Continue Growing by Winning Market Share During Recessions and Periods of Slow Growth
Customer Focus is Critical to Success
Cost Control
Cutting Edge Technologies
Transparency: Accomplishments & Shortcomings
Profits Are Earned by Exploiting Windows in the Marketplace: Mini-Monopolies
Issues for Businesses/InvestorsModerate/Slow GDP Growth—Recession RiskStructural Changes in the Market Place
Continuing Challenges for U.S. ManufacturingAutos – Fundamentally Altered Core ProductTougher Environmental/Mileage StandardsEmphasis on Infrastructure, Skill-Specific Education
Strengthening CompetitivenessCustomer Focus/Customer RelationsAltering Mix of Products and Markets – More Value-
Added ProductsInnovation and New ProductsCosts and Employment Policies