trmg - 10.19.09 it’s getting brighter, really, it’s getting brighter tales from the recovery of...

TRMG - 10.19.09

It’s Getting Brighter, Really, It’s Getting BrighterTales from the Recovery of 2009

Dr. Chris KuehlManaging Director

Armada Corporate Intelligence

Chief EconomistNational Association of Credit Managers

TRMG - 10.19.09

TRMG - 10.19.09

The Recession of 2008-2009 has Ended (sort of)

• Investor confidence has returned – hit 10,000 again for the first time in a year

• CMI has been rising since February and is almost at 50

• PMI data has started to trend upward and is finally over 50

• Housing has started to climb back to respectability – new homes are up and so are existing home sales

• Durable goods orders climbed on the back of automotive and aviation (but it may be short lived)

• Consumer activity showing some signs of life (but there is a long way to go). Retail numbers look better than before

TRMG - 10.19.09

There is Still Much to Worry About

• Unemployment rates are at 9.8% - just shy of the double digit level that had been predicted

• Commercial property is the next big issue for banks – could be a multi-billion dollar problem

• Commodities demand has started to increase and that is starting to put pressure on inflation

• Government efforts are a mixed bag at best. The stimulus package has been limited, “cash for clunkers” was too little and perhaps too late, the health care reform effort could be very expensive.

TRMG - 10.19.09

Jobless Data

• Overall rate of unemployment up to 9.8% - is that really significant?

• Joblessness as lagging economic indicator

• Divergence between job sectors – college educated and skilled workers at 4.7% while high school grads are at 17% and growing

• Huge regional disparities – Michigan at 15% and North Dakota at 4.3%, Iowa at 6.8%

• Sector differences – job shortages in health care and energy while bottom drops out of construction and automotive

TRMG - 10.19.09

TRMG - 10.19.09

How Bad Was This Last Recession?

• Comparable to recessions in the last three decades – not necessarily the worst but some unique issues

• Fundamentally a bank led crisis and one that will not end without a bank recovery

• Worst quarters were in 2008 Q4 and 2009 Q1 – more hope for Q3 and Q4 of 2009

• Factors that play into global recovery – consumer attitude, banks, foreign trade, stimulus plans and the threat of inflation

TRMG - 10.19.09

TRMG - 10.19.09

Six Things to Keep People Awake at Night

• Interest rate policy – when do they go back up?

• The return of the oil and commodities bubbles.

• The recession ending while providing something else to worry about – inflation.

• Struggles to pay major deficit may provoke new tax efforts.

• Consumer attitudes are improving but performance isn’t

• States are in real trouble

TRMG - 10.19.09

Forecasts

• Interest rates will remain very low until 2010 but when they jump – they will jump fast

• Oil prices will remain low through the early part of 2010 but will start to spike consistently by early spring – up to between $90 and $120 per barrel

TRMG - 10.19.09

Forecasts

• Inflation will start with commodity demand but will not be provoked by labor demand until 2011

• Consumer demand will not manifest this year and will be weak until mid 2010

• Trade will provide biggest boost to US economy in the next 12 to 18 months

TRMG - 10.19.09

Four Trends Coming Out of the Recession

• The rise of “giganomics”. More people functioning as collection of skills available to hire – multiple employers and multiple opportunities

• Expanded role of government – will cure be worse than the disease when it comes to financial community – deficits will loom as next big problem

• The “new frugality”. Will it last? What will people really be frugal with?

• US no longer the economic center of the universe – Asia rising but so is Europe and Latin America

TRMG - 10.19.09

TRMG - 10.19.09

Contact Information – [email protected]

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