U.S. and Regional Economic Outlook

Transcription

1 U.S. and Regional Economic Outlook Chad Wilkerson Vice President, Economist, and Oklahoma City Branch Executive Federal Reserve Bank of Kansas City

2 Overview of the Federal Reserve System The Fed consists of three main entities: Board of Governors: 7 members appointed by U.S. President Federal Reserve Banks: 12 total; semi-independent by design Federal Open Market Committee: 19 members; 12 voting As with most central banks, the Fed s primary responsibilities fall within four general areas: Lender of last resort provide liquidity in times of crisis Monetary policy promote full employment and low inflation Bank regulation ensure safety and soundness of banks Financial services bank for banks, bank for federal govt.

3 Federal Reserve Districts and Office Locations

4 The U.S. Economy

5 Real GDP growth picked up somewhat in Q3, but still remains moderate U.S. Real Gross Domestic Product 6 Percent change from the previous period, SAAR Q3 27 Q3 28 Q3 29 Q3 21 Q3 211 Q3 Source: U.S. Bureau of Economic Analysis, FOMC

6 Business investment was strong, exports grew further, and consumers spent more Growth in Components of Real GDP 16 Percent change from the previous period, SAAR Q2 211 Q Total GDP Consumer spending Residential investment Business investment Exports Government spending Source: U.S. Bureau of Economic Analysis

7 Monthly indicators through November suggest continued moderate growth U.S. Private Payroll Employment and Business Indexes 6 Change from previous month, thousands Index Private Employment (left axis) -8 ISM Manufacturing Index (right axis) 3 ISM Non-Manufacturing Index (right axis) Nov-6 Nov-7 Nov-8 Nov-9 Nov-1 Nov-11 Source: Institute for Supply Management, Bureau of Labor Statistics

8 Financial stress in Europe remains the biggest risk to U.S. and world growth 3-month EURIBOR & LIBOR Spreads (to OIS) 4. Percentage points LIBOR EURIBOR.5. Jan-7 Aug-7 Mar-8 Oct-8 May-9 Dec-9 Jul-1 Feb-11 Sep-11. Source: Bloomberg

9 At its November meeting, the FOMC expected fairly solid U.S. GDP recovery 8 6 Percent change, year-over-year Real Gross Domestic Product Nov. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Economic Analysis, FOMC

10 But for unemployment to only come down slowly the next few years Percent Unemployment Rate Seasonally Adjusted Nov. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Labor Statistics, FOMC

11 And for inflation pressures to ease slightly after rising with oil and food prices in 211 PCE Inflation Index Percent change, year-over-year Nov. FOMC Forecast Ranges in Yellow Long Term Source: U.S. Bureau of Economic Analysis, FOMC

12 Regional and Industry Outlook

13 There is considerable variation in economic growth across the nation and region Employment Growth, Year-over-Year (percent) October U.S.= 1.1 District = 1.2 Source: U.S. Bureau of Labor Statistics

14 States with high concentrations of energy activity tend to be doing the best right now Location of U.S. Drilling Rigs October 211 Oil Gas Thermal Source: U.S. Bureau of Labor Statistics

15 Unemployment rates throughout our region remain lower than in the nation Unemployment Rate (percent) October U.S.= 9. District = 7.2 Source: U.S. Bureau of Labor Statistics

16 However, labor markets may not be overly tight due to labor force dropouts Unemployment Rate by State Seasonally Adjusted 16 Percent 15.1 Sep LFPR* US DIST MO CO KS NM OK WY NE *LFPR= Labor Force Participation Rate Source: Bureau of Labor Statistics

17 And while some District states are nearing pre-recession job levels, others are not Change in Employment Since January 28 Seasonally Adjusted 1. Percent U.S. 1J MO NM KS CO WY OK NE Source: U.S. Bureau of Labor Statistics

18 Residential construction activity in both the nation and region remains sluggish Value of Residential Construction Contracts Seasonally Adjusted 12 Index: Oct-6= Tenth District U.S Oct-6 Oct-7 Oct-8 Oct-9 Oct-1 Oct-11 Source: F,W.Dodge, Inc.

19 But home prices in most of our region, including Oklahoma, have held up much better Five-Year Change in Home Prices Purchase-Only, 211 Q3 (percent) U.S.= Source: U.S. Bureau of Labor Statistics

20 Fewer real estate problems also means banks in the region remain in better condition Percent of Banks Experiencing a Loss June 3, up to 5% 5% to 1% 1% to 2% 2% to 4% 4% + 28 * Percentage of banks with negative net income (YTD) Source: Reports of Condition and Income

21 Manufacturing growth remains moderate in both the nation and our region Manufacturing Composite Indexes 65 Index Index 65 6 ISM KC Fed Nov-6 Nov-7 Nov-8 Nov-9 Nov-1 Nov-11 Note Tenth District calculated on an ISM basis; Above 5 indicates expansion Source: KCFRB Manufacturing Survey

22 And factory expectations for this area are fairly positive heading forward Tenth District Manufacturing Expectations Six-Months Ahead 6 Index Index Production Capital Spending Employment Nov-6 Nov-7 Nov-8 Nov-9 Nov-1 Nov-11 Source: KCFRB Manufacturing Survey

23 Surging farmland prices likely pose a risk in some parts of our region Tenth District Non-Irrigated Cropland Values Percent Change, Year-over-year 4 Percent 4 35 Q1 211 Q Q District NE KS MO Mtn States (CO, NM, WY) OK Source: FRBKC Agricultural Credit Survey

24 Summary The U.S. economy is growing moderately but is facing headwinds from Europe Fed forecasts call for modestly improving unemployment and falling inflation in 212 Economic activity in the Tenth Federal Reserve District is somewhat stronger The outlook for the region remains relatively good, though land prices appear to be a risk