US Macro Overview November 15, 2017

After declining in August, real consumer spending showed a strong rebound in September. − Motor vehicle sales picked up notably in September and

October after declining through much of the year.

Business equipment spending has been strong this year, with capital spending indicators pointing to solid growth in the near-term.

Housing indicators still point to continued gradual improvement in this sector. − Multi-family starts remained appreciably below their recent

peaks, but tight market conditions continued to promote a gradual rise in single-family starts.

Payroll growth recovered in October from the effects of Hurricanes Harvey and Irma. The unemployment rate, the employment-to-population ratio, and the labor force participation rate all declined. − Growth of labor compensation remained subdued.

Monthly readings on PCE inflation indicated that core inflation continues to run somewhat below the FOMC’s longer-run objective.

In the past month, U.S. equity indexes continued to rise and are at record highs. The nominal long-term Treasury yield was roughly unchanged and the U.S. dollar rose slightly. − Oil prices moved up recently due to tensions in the Middle East

and a solid outlook for global growth.

-10

-8

-6

-4

-2

0

2

4

6

8

10

-10

-8

-6

-4

-2

0

2

4

6

8

10

2000 2002 2004 2006 2008 2010 2012 2014 2016

Output growth maintains its pace in Q3 % Change – Annual Rate

Source: Bureau of Economic Analysis via Haver Analytics

% Change – Annual Rate

450

500

550

600

650

700

-4

-2

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012 2014 2016

Wealth helping to support consumer spending 4 Quarter % Change % of Disposable Income

Source: Bureau of Economic Analysis, Federal Reserve Board, via Haver Analytics Note: Shading shows NBER recessions.

Real Personal Consumption

(Left Axis)

Household Net Worth

(Right Axis)

Real Disposable

Income (Left Axis)

0

10

20

30

40

50

60

70

80

90

100

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Financial Wealth Housing Wealth

Stock prices and home values lift household net worth Trillions of Dollars

Source: Federal Reserve Board, Bureau of Economic Analysis via Haver Analytics

Note: Shading shows NBER recessions.

Hurricanes distorted payroll changes in September Thousands

Source: Bureau of Labor Statistics via Haver Analytics

-160 -140 -120 -100 -80 -60 -40 -20 0 20 40

Average Monthly Change for the Year Prior Aug - Sep 2017 Change

Manufacturing

Information

Education & Health Services

Professional & Business Services

Other Services

Financial Activities

Wholesale & Retail Trade, Transportation, Warehousing, Utilities

Leisure & Hospitality

Mining & Logging

Construction

58

60

62

64

66

2

4

6

8

10

12

2006 2008 2010 2012 2014 2016

Labor market conditions continue to improve Percent Percent

Source: Bureau of Labor Statistics via Haver Analytics

Note: Shading shows NBER recessions.

Unemployment Rate (Left Axis)

Labor Force Participation Rate

(Right Axis)

Employment to Population Ratio

(Right Axis)

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014 2016

12 Month % Change 12 Month % Change

Source: Bureau of Economic Analysis via Haver Analytics Note: Shading shows NBER recessions.

Total PCE

Core PCE

FOMC Objective

Inflation still running below the FOMC’s objective

Recent rebound in motor vehicle sales Millions (SAAR) Millions (SAAR)

Source: Autodata via Haver Analytics Note: Shading shows NBER recessions.

024681012141618202224

0

5

10

15

20

25

2000 2002 2004 2006 2008 2010 2012 2014 2016

200

210

220

230

240

250

260

270

280

290

300

7/3 7/17 7/31 8/14 8/28 9/11 9/25 10/9 10/23 11/6

Price of Retail Gasoline

Hurricane impact on gasoline prices less than expected Cents Per Gallon

Source: Energy Information Administration via Haver Analytics

Hurricane Harvey: Aug 25

Sept. 1 Forecast: Sept: $3.00 Oct: $3.40

Sept. 14 Forecast: Sept: $2.90 Oct: $3.12

30

40

50

60

70

2000 2002 2004 2006 2008 2010 2012 2014 2016

ISM Non-Manufacturing Index

Index

Source: Institute for Supply Management, Federal Reserve Board via Haver Analytics Note: Shading shows NBER recessions.

ISM Manufacturing Index

Solid growth expected for manufacturing & service sectors

46474849505152535455565758596061

46474849505152535455565758596061

2013 2014 2015 2016 2017

Signs pointing to strong and synchronized global growth Index Level Index Level

Source: IHS Markit and Institute for Supply Management via Haver Analytics

EU

US

China