National & Colorado. Economic Update. Alison Felix Economist & Branch Executive Federal Reserve Bank of Kansas City Denver Branch

Transcription

1 National & Colorado Economic Update Alison Felix Economist & Branch Executive Federal Reserve Bank of Kansas City Denver Branch The views expressed are those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2 Despite a slight decline in the fourth quarter, the U.S. economy continues to expand at a moderate pace. REAL GROSS DOMESTICPRODUCT (GDP) Annualized Percent Change from Previous Period 6% 5% 4% 3% 2% 1% 0% -1% 2.4% 0.1% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% -0.1% 3.0% 2.3% High Low 3.5% 3.7% 3.0% 3.0% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q FOMC Central Tendency Projections 6% 5% 4% 3% 2% 1% 0% -1% Source: Bureau of Economic Analysis & Federal Open Market Committee (FOMC) December 2012 Projections/Haver Analytics 2

3 Consumer spending was the primary driver of economic growth in CONTRIBUTIONS TO REAL GDP Percent Change at Seasonally Adjusted Annualized Rates 6% 4% 2% 0% -2% -4% -6% -8% -10% Real GDP -0.1% Personal Consumption Expenditures Gross Private Domestic Investment Govt. Consumption & Investment Net Exports Q4-07 Q2-08 Q4-08 Q2-09 Q4-09 Q2-10 Q4-10 Q2-11 Q4-11 Q2-12 Q4-12 6% 4% 2% 0% -2% -4% -6% -8% -10% Source: Bureau of Economic Analysis/Haver Analytics 3

4 Unemployment rates remain elevated and are expected to gradually decline in coming years. UNEMPLOYMENT RATES Seasonally Adjusted 10% 9% 8% 9.6% 8.9% 8.9% United States 7.9% 10% 9% 8% 7% 6% 7.6% Colorado 7% 6% 5% 4.6% 5% 4% 3% 3.8% 4% 3% 2% Dec. '12 Jan. ' FOMC Central Tendency Projections 2% Source: Bureau of Labor Statistics & Federal Open Market Committee (FOMC) December 2012 projections/haver Analytics 4

5 Inflation remains below the FOMC s 2 percent target. PERSONALCONSUMPTIONEXPENDITURE PRICEINDEX (PCEPI) Percent Change Year-over-Year, Seasonally Adjusted 6% 4% Headline Inflation 6% 4% 2% 2% 0% Core Inflation 0% -2% -2% Dec. 02 Dec. 04 Dec. 06 Dec. 08 Dec. 10 Dec. 12 Source: Bureau of Economic Analysis/Haver Analytics 5

6 the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. - FOMC January Statement EFFECTIVE FEDERAL FUNDS RATE 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Source: Board of Governors of the Federal Reserve System 6

7 the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. - FOMC January Statement FEDERAL RESERVE BALANCESHEET Trillions $3 Foreign Short-Term Lending Currency Swaps $2 $1 $0 -$1 Assets Traditional Portfolio Currency in Circulation Liabilities Federal Agency & Mortgage-Backed Securities Reserves Trillions $3 -$2 -$2 Other -$3 -$3 Jan. '07 Jan. '08 Jan. '09 Jan. '10 Jan. '11 Jan. '12 Jan. '13 $2 $1 $0 -$1 Source: Board of Governors of the Federal Reserve System 7

8 FEDERAL RESERVE BANK DISTRICTS Boston Minneapolis New York San Francisco Kansas City Chicago St. Louis Cleveland Richmond Philadelphia Board of Governors Dallas Atlanta Source: Federal Reserve Bank of Kansas City 8

9 Job gains continue, with Colorado outpacing the nation in growth. NONFARM EMPLOYMENT Index 100 = December 2002, Seasonally Adjusted Percent Change Past 10 Years Past Year Peak to Current United States 3.5% 1.5% -2.3% Colorado Colorado United States Dec '02 Dec '04 Dec '06 Dec '08 Dec '10 Dec '12 Source: Bureau of Labor Statistics/Haver Analytics 9

10 Most states have experienced positive job growth over the past year. DECEMBER 2012 PAYROLL EMPLOYMENT Seasonally Adjusted 2.3% Percent Change Year-over-Year Over 3% 2 to 3 1 to 2 0 to 1-1 to 0-2 to -1 Below -2 United States 1.5% Source: Bureau of Labor Statistics/Haver Analytics 10

11 Colorado continues to enjoy broad-based growth across industries. DECEMBER 2012 PAYROLL EMPLOYMENT Seasonally Adjusted Percent Change Year-over-Year Share of Jobs Construction Private Educational Services Natural Resources & Mining Manufacturing Other Services Health Care & Social Assistance Professional & Business Services Leisure & Hospitality Financial Activities Retail Trade Wholesale Trade Local Government State Government Federal Government Transportation & Utilities Information Colorado 5.2% United States -0.2% -2.4% -3.4% 6.0% 5.9% 3.6% 3.3% 3.3% 2.8% 2.7% 2.6% 2.6% 2.3% 2.3% 1.2% 0.9% 1.5% 1.2% 5.8% 4.2% 10.7% 15.3% 12.2% 6.3% 10.6% 4.1% 10.6% 4.3% 2.4% 3.0% 2.9% Source: Bureau of Labor Statistics/Haver Analytics 11

12 Despite increases over the past year, construction employment is still 28 percent below pre-recession levels. DECEMBER 2012 PAYROLL EMPLOYMENT Seasonally Adjusted Change from Peak (Dec. 2007) Health Care & Social Assistance State Government Private Educational Services Natural Resources & Mining Federal Government Leisure & Hospitality Other Services Local Government Professional & Business Services Retail Trade Wholesale Trade Financial Activities Manufacturing Transportation & Utilities Information Construction -28.3% Colorado United States -4.0% -5.4% -6.7% -9.5% -11.5% -11.9% 15.1% 14.7% 14.0% 10.0% 5.4% 2.9% 2.9% 1.6% 0.7% Share of Jobs 10.7% 4.3% 1.5% 1.2% 2.4% 12.2% 4.2% 10.6% 15.3% 10.6% 4.1% 6.3% 5.8% 3.0% 2.9% 5.2% Source: Bureau of Labor Statistics/Haver Analytics 12

13 Residential construction activity has picked up considerably VALUE OF RESIDENTIAL CONSTRUCTION 56.2% Percent Change Year-to-Date Over 50% 30 to to to 20 0 to to to -10 United States 29.4% Source: McGraw Hill/F.W. Dodge 13

14 However, construction activity remains at low levels relative to historical highs. RESIDENTIAL PERMITS Peak to Index 100 = December 2002, Seasonally Adjusted Percent Change 2012 Current United States 33.5% -62.0% 140 Colorado Colorado United States 20 0 Dec. 02 Dec. 04 Dec. 06 Dec. 08 Dec. 10 Dec. 12 Source: Census Bureau/Haver Analytics Note: Monthly permit data is unrevised and may not sum to year-end totals. 14

15 Construction activity is strongest in Denver County RESIDENTIAL PERMITS BY COUNTY Adams Arapahoe Boulder Denver Douglas El Paso Grand Jefferson Larimer Mesa Pueblo Weld Other Counties 0 2,000 4,000 6,000 8,000 Single Family Multi-Family 10-Year Peak Source: Census Bureau/Haver Analytics 15

16 Residential permitting activity is about half of what it was at peak levels RESIDENTIAL PERMITS BY COUNTY Adams Arapahoe Boulder Denver Douglas El Paso Grand Jefferson Larimer Mesa Pueblo Weld Other Counties 0 2,000 4,000 6,000 8,000 Single Family Multi-Family 10-Year Peak Source: Census Bureau/Haver Analytics 16

17 Home prices are rising in most states... FHFA PURCHASE-ONLY HOME PRICE INDEX (2012Q3) Seasonally Adjusted 6.6% Percent Change Year-over-Year Over 10% 7.5 to 10 5 to to 5 0 to to 0 United States 4.0% Source: Federal Housing & Finance Agency (FHFA)/Haver Analytics 17

18 yet prices remain below peak values at the national level. FHFA PURCHASE-ONLY HOME PRICES (2007Q1 2012Q3) Seasonally Adjusted -0.6% Percent Change Peak to Current Over 20% 10 to 20 0 to to 0-20 to to -20 United States -16.6% Source: Federal Housing & Finance Agency (FHFA)/Haver Analytics 18

19 Improvements in infrastructure and non-residential construction activity have varied across the country VALUE OF NON-RESIDENTIAL & NON-BUILDING CONSTRUCTION 11.1% Percent Change Year-to-Date 25+% 10 to 25 0 to to 0-25 to to -25 United States -4.1% Source: McGraw Hill/F.W. Dodge 19

20 Manufacturing activity has slowed over the past 4 months in the Tenth District. MANUFACTURING ACTIVITY Diffusion Index, Seasonally Adjusted, Month-over-Month 65 Expanding ISM 50.2 December 2012 Kansas City District 49.0 January Contracting 30 Jan. 03 Jan. 05 Jan. 07 Jan. 09 Jan. 11 Jan. 13 Source: Institute for Supply Management (ISM) & Federal Reserve Bank of Kansas City/Haver Analytics 20

21 Manufacturers in the Tenth District still expect higher levels of activity over the next six months. TENTH DISTRICT MANUFACTURING EXPECTATIONS Diffusion Index, Seasonally Adjusted, Six Months Ahead Q2-12 Q3-12 Q4-12 January Production Volume of New Orders Number of Employees Capital Expenditures New Orders for Exports Source: Federal Reserve Bank of Kansas City/Haver Analytics 21

22 Oil drilling has increased sharply over the past two years, while natural gas drilling has declined. ACTIVE DRILLING RIG COUNTS 2,000 United States Colorado 200 1,600 Natural Gas Crude Oil 160 1, '08 '09 '10 '11 '12 '08 '09 '10 '11 '12 0 Source: Baker Hughes 22

23 Even with the recently passed legislation in response to the fiscal cliff, risks from fiscal policy remain. Sequestration (March 1) Potential Federal government shutdown (March 27) Debt ceiling (May 19) 23

24 The U.S. has debt levels (as a percent of GDP) that are similar to many European countries NET DEFICIT** Percent of GDP 2013 NET FINANCIAL LIABILITIES* Percent of GDP 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 0% Germany -2% Australia Belgium Italy -4% France Portugul -6% United Kingdom Greece -8% Ireland Spain United States Japan -10% -12% *Government assets less liabilities. **Government receipts less disbursements. Source: Organization for Economic Cooperation (December 2012 Outlook) 24

25 Much of the recent debate surrounding fiscal policy has related to the benefits and disadvantages of trying to reduce the U.S. debt. U.S. DEBT TO GDP RATIO 120% 100% 80% Baseline Projection 60% 40% 20% 0% Source: Congressional Budget Office (February 2013 projections) 25

26 Medicare and net interest are projected to be the fastest growing expenses for the Federal government. FEDERAL SPENDING & REVENUE As a Percent of GDP 30% 25% 20% Revenue 15% 10% 5% Net Interest Major Health Programs Social Security 0% Fiscal Year Source: Congressional Budget Office (February 2013 projections) 26

27 National & Colorado Economic Update Alison Felix This presentation will be available at: