Economic Outlook. for Connecticut Developers Council. Alissa DeJonge Vice President of Research Connecticut Economic Resource Center, Inc (CERC)

Transcription

1 Economic Outlook for Connecticut Developers Council Alissa DeJonge Vice President of Research Connecticut Economic Resource Center, Inc (CERC) March 5, 2015.

2 Presentation Overview } Global Conditions } US Trends } Connecticut Indicators

3 Global Economic Conditions

4 Global Conditions - Europe } Economic Conditions in European Union } Continued high unemployment } Deflation } Bailout negotiations between Greece and European Union } Reached agreement on bailout extension } Greece will adhere to previously agreed upon austerity measures in exchange for relaxation in 2015 fiscal targets Source: The Economist, Bloomberg Businessweek

5 Global Conditions Emerging Markets } Emerging market growth has slowed especially in Brazil, Russia and China } India has experienced an increase in growth due to more business friendly policies and reduced oil prices 12% 10% 8% 6% 4% 2% 0% Emerging Market GDP Growth China India Brazil Russia Source: The World Bank

6 Global Outlook } Global GDP growth in is projected to be 3.5% and 3.7%, respectively. } Europe economic weakness will continue as high unemployment rates continue to hamper demand } Lower probability of Greece leaving the Eurozone because of recent cooperation } Emerging market growth continues to slow because of geopolitical issues in Russia, tax increases and lower commodity prices in Brazil, and a slumping housing market in China. Source: The International Monetary Fund

7 US Economic Conditions

8 US Conditions Gross Domestic Product } GDP advanced 2.6% in 2014 } Increases in business equipment, residential investment, personal consumption 6 Percent Change in GDP Components 6 GDP COMPONNENTS Consumption Investment Exports less imports Government spending Gross domestic product I II III IV I II III IV I II III IV GDP Source: International Monetary Fund, US Bureau of Economic Analysis

9 US Conditions - Trade Balance } US Dollar has increased in value due to stronger economic activity } Has impacted trade balance: imports increasing, exports decreasing slightly -350 Trade Balance and US Dollar 84 Trade Balance ($Mil) US Dollar -600 I II III IV I II III IV US Trade Balance US Trade Weigted Dollar Source: Federal Reserve Bank of St Louis, US Bureau of Economic Analysis

10 US Conditions Job Growth Annual Average Job Growth 259, , , , , ,000 94,917 88,833 (298,083) (424,000) In 2014, job growth accelerated significantly. Job growth has been influenced by falling energy prices and business investments. Jobs added were in traditionally low-wage sectors such as temporary help; and leisure and hospitality Source: US Bureau of Labor Statistics

11 US Conditions - Wage Growth 3.9% Wage growth has been relatively flat in recent years Growth in Median Quarterly Earnings 2.0% 3.1% 3.6% 2.4% However, 2014 wage growth almost reached the Federal Reserve s target inflation rate of 2% 1.1% 1.2% 1.6% 1.0% 1.9% Source: US Bureau of Labor Statistics

12 US Conditions Consumer Confidence 120 Consumer Confidence 100 Index Year: January February March April May June July August September October November December January February March April May June July August September October November December January February* Source: Surveys of Consumers: University of Michigan; The Manufacturing ISM Report On Business PMI

13 US Conditions Consumer Spending } } } } After adjusting for inflation, consumer spending grew by 0.3% in January Although spending increased, it was weaker than expected. Economists expected a larger increase based on the decrease in gasoline prices. The average American driver will save $750 on gas this year, according to government estimates. Source: Yahoo Finance, CNN Money

14 US Conditions Consumer Activities Household Debt as % Disposable Income Household Debt As Percent of Disposable Income Personal Savings Rate Source: Federal Reserve Bank of St. Louis, US Bureau of Economic Analysis

15 US Conditions - Housing } Housing prices started to plateau at the end of CASE-SHILLER INDEX } Demand for housing has weakened recently due to weather and more stringent lending guidelines. INDEX YEAR } The Obama Administration has implemented policies to stimulate demand such as relaxing lending standards Source: Surveys of Consumers: University of Michigan; T

16 US Conditions - Household Formation MILLIONS US Household Formation } The unemployment rate for individuals 25 to 34 years decreased from 7.7% (2012) to 5.7% (2014). } The number of renters grew by 2 million in } Increase in household formation may indicate more demand for housing going forward. Source: Bloomberg Business Week, US Census Bureau

17 US Conditions Mfg Business Confidence 60 Business Confidence 58 Index Year: January February March April May June July August September October November December January February March April May June July August September October November December January Source: The Manufacturing ISM Report On Business PMI

18 US Conditions - Energy Prices } Energy prices (natural gas, oil) declined significantly in latter half of 2014 $2.00 $1.80 US Motor Gasoline Prices Cost of Motor Oil (Dollars) $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $ January 2012 February 2012 March 2012 April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2013 January 2013 February 2013 March 2013 April 2013 May 2013 June 2013 July 2013 August 2013 September 2013 October 2013 November 2013 December 2014 January 2014 February 2014 March 2014 April 2014 May 2014 June 2014 July 2014 August 2014 September 2014 October 2014 November 2014 December Source: Bloomberg, Energy Information Agency

19 US Conditions - Stock Market The S&P 500 reached a high of 2,110 on February 17 th driven by positive economic indicators such as job growth and robust corporate earnings Source: Yahoo Finance

20 US Economic Outlook GDP growth in 2015 is expected to be above 3% in 2015 and 2016 The Federal Reserve has indicated that it will not raise interest rates in the short-term because inflation has not reached 2%, but many expect the Fed to raise rates by the end of the year (affecting 2016 GDP). Consumer spending is expected to increase due to job gains and energy price declines, but may taper when the Fed increases rates. Weak wage growth and strong low-wage job gains indicate that homes values/sales may not be as strong as desired. Business activity should continue to be strong due to job growth and strong corporate earnings, however some manufacturing sectors experience continued weakness. Source: Forbes, the IMF

21 Connecticut Conditions

22 Connecticut Conditions - State Budget Source: CT Mirror, Courant.com, Wall Street Journal } Governor Malloy announced his two year $40 billion budget plan for FY } Increase in corporate taxes and removal of the business entity tax. } Several tax cuts previously promised were cut, including sales tax exemption for apparel under $50. } Increases in early childhood education and transportation spending ($100 billion for transportation). } Estimated $325 million spending gap will be reconciled by issuing bonds. } Mental-health-care providers, hospitals and higher education among those to see deepest cuts.

23 Connecticut Conditions - Labor Market 12% Unemployment Rate 10% Unemployment Rate 8% 6% 4% 2% 0% Connecticut United States Source: US Bureau of Labor Statistics

24 Connecticut Conditions - Industry 113 Industry Employment Index Year: Leisure and Hospitality Government Construction Manufacturing Trade, Transportation, and Utilities Financial Activities Professional and Business Services Source: US Bureau of Labor Statistics

25 Connecticut Conditions - Housing } Housing permits in Connecticut increased 11% from 2013 to Increase driven by demand for 5+ unit housing. } Average sale price of single family homes decreased 4% from Q to Q4 2014; average price of condos increased 3%. } The number of home sales decreased 4% between Q and Q Number of Permits 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Housing Permits unit 5+ units 2-units 3-4 units Source: Berkshire Hathaway, DECD

26 Connecticut Economic Outlook } The Connecticut budget proposal indicates decreased government spending and business tax increases, which could hurt business investment and consumer spending. } Employment is improving in Connecticut with gains in Business and Professional Services and Leisure and Hospitality. Construction employment should improve with employment gains in other industries. } A stronger dollar and continued economic troubles in Europe could hurt demand for Connecticut exports. } Housing permits increased slightly indicating some gains in the housing market in Demand for multi-unit housing and condominiums should continue to trend upwards.

27 Thank you! Alissa DeJonge Vice President of Research Connecticut Economic Resource Center, Inc (860)