Single-family home sales and construction are not expected to regain 2005 peaks

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1 Single-family home sales and construction are not expected to regain 25 peaks Millions of units Housing starts (right axis) 4. Home sales (left axis) Millions of units Source: Moody s Analytics.

2 Core capital goods orders and shipments remain weak, but might be turning Nondefense capital goods excluding aircraft US$ billions 75 7 New orders Shipments Source: Federal Reserve Bank of St. Louis.

3 Repeated QE has led to unprecedented amount of Fed assets Total assets of Federal Reserve banks US$ trillions 5 Mar. 29: QE1 expanded Nov. 21: QE2 announced Sep. 211: Operation Twist Sep. 212 QE3 announced Dec. 213 Tapering begins Dec. 215 Fed rate raised 4 Nov. 28: QE1 announced /3/27 1/3/28 1/3/29 1/3/21 1/3/211 1/3/212 1/3/213 1/3/214 1/3/215 1/3/216 1/3/217 Source: Bloomberg.

4 Non-petroleum imports outpacing exports as dollar appreciates Real U.S. international trade Percent change year-over-year Imports Exports Source: Moody s Analytics.

5 Labor productivity and total factor productivity growth have been exceptionally weak in recent years Percent change in productivity 5 4 Private nonfarm labor productivity (5-year moving average) Total factor productivity Source: Moody s Analytics.

6 Real consumer spending fluctuating around 3% growth Personal consumption expenditures Percent change (year-over-year) Source: Federal Reserve Bank of St. Louis.

7 Contribution of personal consumption to U.S. real GDP growth Percentage points 4 3 Real GDP change resulting from personal consumption change Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis. Change in real GDP resulting from other factors

8 Durable goods lead growth in real consumer spending, but services gaining Percent change 8 Durable goods (left) Nondurable goods (middle) Services (right) Source: Federal Reserve Bank of St. Louis.

9 Real household net worth has reached new high Household assets and liabilities US$ trillions 1 Assets Net worth 2 Liabilities Source: Federal Reserve Bank of St. Louis.

10 Household debt is rising at a moderate pace Percent change in outstanding loans 16 Mortgages (left) Consumer credit (right) Source: Federal Reserve Bank of St. Louis.

11 Housing starts finally begin to recover United States Thousands of units 2, 1,8 1,6 1,4 Single-family units 1,2 1, Multi-family units Source: Federal Reserve Bank of St. Louis.

12 A recovery in household formation will support further gains in housing starts Millions Housing starts Household formation Forecast Source: IHS.

13 Labor market gaining momentum Nonfarm employment, United States Difference from previous month, thousands 6 Absolute change (left) Percent change (right) Percent change, year-over-year Source: Moody s Analytics.

14 Services generating largest job gains Change in employment during the 12 months ended March 217 (in thousands) Health care and social assistance Professional and business services Leisure and hospitality Retail trade Construction Financial activities Local government Other services Educational services Wholesale trade Transportation and warehousing Information Federal government Utilities State government Manufacturing Mining and logging Total change = 2.2 million Source: Bureau of Labor Statistics

15 Labor-force participation and employment rates will not return to pre-recession levels as baby boomers age Percent of population 16 and over Labor-force participation rate Employment-population ratio Source: Federal Reserve Bank of St. Louis.

16 S&P 5 and NASDAQ surge since election present Percentage gain NASDAQ Composite Index S&P 5 Index November 216 election Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Source: Bloomberg.

17 Contribution of private fixed investment to U.S. real GDP growth Percentage points 4 Change in real GDP resulting from other factors Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis. Real GDP change resulting from private fixed investment change

18 ISM s indexes show manufacturing bouncing back Index (over 5 indicates expansion) 65 Nonmanufacturing index Manufacturing index Source: Moody s Analytics. Note: ISM stands for Institute for Supply Management.

19 Investment in mines and wells has plummeted Real private fixed investment in structures US$ billions Mines and wells Utilities 25 Manufacturing Source: Federal Reserve Bank of St. Louis.

20 Oil rig count falls but U.S. production fairly stable Millions of barrels a day Rotary oil rig count (right axis) Crude oil production (left axis) Count 1,8 1,6 1,4 1,2 1, Sources: Moody s Analytics, U.S. Energy Information Administration (EIA).

21 U.S. crude oil and natural gas prices US$ per barrel Crude oil, WTI (left axis) US$ per million BTU Natural gas, Henry Hub (right axis) Source: Federal Reserve Bank of St. Louis. Note: WTI stands for West Texas Intermediate crude oil.

22 High-yield corporate spreads narrowing Corporate bond spreads over U.S. Treasuries Percent Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Source: Bloomberg. Note: High-yield = Barclays US Corporate High Yield Average OAS.

23 Consumer price inflation will pick up as commodity prices recover Private nonfarm sector inflation Annual percent change in inflation rates 6 5 All-urban CPI Core CPI (excluding food and energy) Source: Moody s Analytics.

24 Oil prices and drilling activity have collapsed Weekly oil rig count and West Texas Intermediate (WTI) crude oil price Count 2, 1,8 Crude oil price, WTI (right axis) 1,6 1,4 1,2 1, 8 6 Rotary oil rigs (left axis) 4 US$ per barrel Sources: Federal Reserve Bank of St. Louis, Moody s Analytics.

25 The U.S. current account will remain in deficit Percent Forecast US$ millions Balance as percent of GDP (left axis) Current-account balance (right axis) Source: IHS.

26 Contribution of net foreign trade to U.S. real GDP growth Percentage points 4 Change in real GDP resulting from other factors Sources: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis. Real GDP change resulting from net foreign trade change

27 Each 1% increase in exports boosts U.S. economy by Percent.35.3 Mexico China GDP.8.3 Industrial production Source: Milken Institute.

28 Each 1% increase in income boosts U.S. economy by Percent.35 Mexico China GDP.2.7 Industrial production Source: Milken Institute.

29 Destinations of U.S. exports of goods (February 217) Japan, 4.3% Germany, 3.4% China, 8.4% Mexico, 15.9% All other, 5.3% Canada, 17.7% Source: U.S. Census Bureau.

30 Soft and hard data on U.S. economic performance diverge Year-to-year (%) Jan 25 Jan 21 Jan 215 Index Retail sales (left axis) Consumer confidence (The Conference Board) (right axis) Capital goods orders (left axis) Business confidence (NFIB) (right axis) Source: Moody s Analytics.

31 Corporate profits after tax as share of gross domestic product Percent Jan-47 Jan-57 Jan-67 Jan-77 Jan-87 Jan-97 Jan-7 Source: Federal Reserve Bank of St. Louis.

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