richard yamarone director of economic research argus research corp
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“What We’re Watching to Identify the Economic Recovery”. June 3, 2009. Richard Yamarone Director of Economic Research Argus Research Corp. Hoping for a “V”-Shaped Recovery. Leading Indicators Signal Some Degree of Recovery. The Most Convincing Argument of Recovery. - PowerPoint PPT PresentationTRANSCRIPT
Richard YamaroneDirector of Economic Research
Argus Research Corp.
“What We’re Watching to Identify the Economic Recovery”
June 3, 2009
Hoping for a “V”-Shaped Recovery
Real GDP (%)
-8
-6
-4
-2
0
2
4
6
8
10
'95 '97 '99 '01 '03 '05 '07 '09 F
Source: Bureau of Economic Analysis
Leading Indicators Signal Some Degree of Recovery
Leading Economic Indicators vs. Real GDP Growth (Y/Y%)
-4
-2
0
2
4
6
8
10
'85 '95 '05
-4
-2
0
2
4
6
8
10GDP
LEI
-3.0%
-2.5%
Source: Bureau of Economic Analysis, The Conference Board, Argus Research Corp.
The Most Convincing Argument of Recovery
ECRI Weekly Leading Index
-30
-25
-20
-15
-10
-5
0
5
10
15
'99 '01 '03 '05 '07 '09
Source: Bloomberg, ECRI
Fed Indices Point to More Prosperous Times
Chicago Fed National Activity Index
-4.00
-3.50
-3.00
-2.50
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
'90 '93 '96 '99 '02 '05 '08
Source: Federal Reserve Bank of Chicago
Three Month Moving Average
Anecdotal Reports Starting to Improve
U.S. Average Daily Package Volume UPSvs. Real GDP
-5
-3
-1
1
3
5
7
2000 2002 2004 2006 2008
-3
-2
-1
0
1
2
3
4
5
6
UPS Volume
Real GDP
Real GDPUPS Volume
Source: United Parcel Service, Bureau of Economic Analysis, Argus Research
Fiscal Policy Arriving at the Spigots
Direct Outlays, Stimulus Package ($Blns)
-50
0
50
100
150
200
250
2009 '10 '11 '12 '13 '14 '15 '16 '17 '18 2019
Source: CBO
Business Investment has Collapsed
Capital Spending (%)
-40
-30
-20
-10
0
10
20
30
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08
Non-Residential Investment
Source: Bureau of Economic Research
Little Reason for Hope in New Orders Data
New OrdersNonDefense Capital Goods Ex-Aircraft (Y/Y%)
-40
-32
-24
-16
-8
0
8
16
24
'94 '96 '98 '00 '02 '04 '06 '08
Source: Department of Commerce
Key Index Implying Strong Recovery
ISM New Orders - Inventories vs. Real GDP
-15
-10
-5
0
5
10
15
20
25
1983 1988 1993 1998 2003 2008
-3
0
3
6
9
GDP
NO-INV
NO-IGDP Y /Y%
Source: BEA, ISM, Argus Research
Little Need to Build With Glut of Commercial Property
Structures Spending (%)
-45
-30
-15
0
15
30
'94 '96 '98 '00 '02 '04 '06 '08
Source: Bureau of Economic Analysis
Signs of Stabilization
New & Existing Home Sales
300
450
600
750
900
1050
1200
1350
'96 '99 '02 '05 '08
3550
4300
5050
5800
6550
7300
New
Existing
New Existing
Source: US Dept. of Commerce, National Association of Realtors
Home Prices Returning to Pre-Bubble Levels
S&P/Case Shiller Home Price Indices
75
100
125
150
175
200
225
250
275
300
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09
AZ-Phoenix
CA-Los Angeles
CA-San Diego
CA-San Francisco
CO-Denver
DC-Washington
FL-Miami
FL-Tampa
GA-Atlanta
IL-Chicago
MA-Boston
MI-Detroit
MN-Minneapolis
NC-Charlotte
NV-Las Vegas
NY-New York
OH-Cleveland
OR-Portland
TX-Dallas
WA-Seattle
Source: S&P
Encouraging Signs in the Housing/Construction Market
Architecture Firms' Billing Index
30
35
40
45
50
55
60
65
1996 1998 2000 2002 2004 2006 2008
Source: American Institute of Architects
“Stimulus” May Help Ailing Construction Sector
Construction Spending (Y/Y%)
-40
-30
-20
-10
0
10
20
30
2003 2005 2007 2009
Non-Residential
Residential
Source: Department of Commerce
Trade, the Unsexy Savior
Contribution to GDPResidential Spending & Trade
-0.23
-1.11-1.4
-1.18-0.91
-0.6
-1.06-1.33
-1.12
-0.52 -0.6-0.8
-1.39
0.09
0.59
-0.12
1.33
-1.2
1.66
2.03
0.940.77
2.93
1.05
-0.15
2.18
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
'06 QI QII QIII QIV '07 QI QII QIII QIV '08 QI QII QIII QIV '09 QI
Residential
Trade
Source: BEA, Argus Research
Some Recovery in Container Traffic
Outbound Container Statistics (TEU)
50,000
70,000
90,000
110,000
130,000
150,000
170,000
'95 '97 '99 '01 '03 '05 '07 '09
Port of Long Beach
Source: Port of Long Beach
Some Signs of Peak in Unemployment
'Jobs Hard-to-Get' &Unemployment Rate
3
4
5
6
7
8
9
10
'90 '92 '94 '96 '98 00 '02 '04 '06 '08
0
10
20
30
40
50
U Rate Jobs Index
Jobs Index
Unemployment Rate
Source: Conference Board, Bureau of Labor Statistics
Unemployment Benefit Claims Point to Economic Trough
Weekly Initial Claims
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
700,000
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09
Source: US Department of Labor
Ever-Resilient Consumer Tossed in Towel
Real Consumer Spending (%)
-5
0
5
10
1992 1995 1998 2001 2004 2007
Source: Bureau of Economic Aanalysis
‘Fab Five’ – Dining Out
Spending: Meals at Other Eating Places (Y/Y%)
-6
-4
-2
0
2
4
6
8
'98 '01 '04 '07
Source: Bureau Economic Analysis, NBER
‘Fab Five’ – Jewelry & Watches
Spending: Jewelry & Watches Y/Y%
-16
-12
-8
-4
0
4
8
12
16
'98 '01 '04 '07
Source: Bureau Economic Analysis, NBER
‘Fab Five’ – Cosmetics & Perfumes
Spending: Cosmetics & Perfumes (Y/Y%)
-9
-6
-3
0
3
6
'98 '01 '04 '07
Source: Bureau Economic Analysis, NBER
‘Fab Five’ – Women’s Dresses
Spending: Women's Clothing (Y/Y%)
-8
-6
-4
-2
0
2
4
6
8
10
12
'98 '01 '04 '07
Source: Bureau Economic Analysis, NBER
‘Fab Five’ – Casino GamblingSpending: Casino Gambling Y/Y%
-16
-12
-8
-4
0
4
8
12
16
20
24
'98 '01 '04 '07
Source: Bureau Economic Analysis, NBER
‘Fab Five’ Recovery…
Post Recession, Fab-Five
95
100
105
110
115
120
125
130
135
140
145
Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Dining Out
Perfumes
Women's
Jewelry
Casino
December 2001=100
Bad Signs for Summer Spending
Real Spending: Hotels & Motels (Y/Y%)
-20
-16
-12
-8
-4
0
4
8
12
16
'98 '01 '04 '07
Source: Bureau Economic Analysis, Argus Research, NBER
America Still Loves Those Trucks
Total Vehicle Assemblies (Mlns)
3.72 3.34 2.95
1.33 1.66 1.87 1.84
4.123.97
3.72
2.52
3.11 3.05 3.2
0
1
2
3
4
5
6
7
8
9
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09
Trucks
Autos
Source: Federal Reserve System
Prices Aren’t ‘Collapsing’
The Economist Commodity Price Index
110
125
140
155
170
185
200
215
230
245
260
275
2/14/2001 2/13/2002 2/12/2003 2/11/2004 2/9/2005
All Items
Industrials
Food
2005=100
Source: The Economist
Market Inflation Expectations Rising
5-Year Treasury Note - Five Year TIPS Spread
-2.50
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2003 2004 2005 2006 2007 2008 2009
Source: Federal Reserve Bank of St. Louis, Argus Research
Consumer Inflation Expectations on the Rise
Reuters/U. Michigan Inflation Expectations (%)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'03 '04 '05 '06 '07 '08 '09
Source: Bloomberg
Broad Inflation Measures Still Elevated
GDP Deflators (%)
-6
-4
-2
0
2
4
6
2004 2005 2006 2007 2008 2009
PCE Deflator
GDP Deflator
Source: Bureau of Economic Analysis
No ‘Deflation’ in this Respected Measure
Dallas Fed Trimmed-Mean PCE Inflation (Y/Y%)
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
3.1
'95 '97 '99 '01 '03 '05 '07 '09
Source: Federal Reserve Bank of Dallas
Inflation Pressures Appear to be ‘Well-Anchored’… For Now
Core Personal Consumption Expenditure Deflator (Y/Y%)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08
Federal Reserve 'Comfort Zone'
Source: Bureau of Economic Analysis, Argus Research
Monetary Policy Getting Easier Every Month
Real Fed Funds RateCore Personal Consumption Deflator (%)
-2.0
0.0
2.0
4.0
6.0
'87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09
Internal Fed Gauge Implies Fed to Remain on ‘Hold’
Argus Leading Fed Funds Index
0
1
2
3
4
5
6
7
8
9
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08
30
40
50
60
70
80
90
100
110
120
130
FED FUNDS
ALFFI
FF % Index
37.16
Risks to “V”-Shaped Recovery…
Commodity (Food), Energy, Healthcare Inflation
(price pass alongs announced during the quarterly earning season)
Stimulus Fails to Generate Jobs
Jobs Climate Deteriorates Further
Auto Industry Collapse
Consumers Decide to Save