ECONOMIC UPDATE. Alison Felix Senior Economist

Transcription

1 REGIONAL AND LOCAL ECONOMIC UPDATE Alison Felix Senior Economist Federal Reserve Bank of Kansas City 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 U.S. Economic Overview Incoming data suggest that the U.S. economy continues to recover at a modest pace. Manufacturing activity is expanding. The energy and agriculture sectors are booming. Consumer spending is well above year-ago levels. H h US f h ll However, the U.S. economy faces many challenges over the next few years. Unemployment rates are likely to remain stubbornly high. Residential construction activity remains weak, constrained in part by excess housing supply, falling prices and high foreclosure rates.

3 A moderate recovery is expected to continue over the next few years Real Gross Domestic Product Percent change fromprevious period, annualized FOMC Forecast Range (Jan 11) Source: Bureau of Economic Analysis; FOMC

4 Consumers are spending more as confidence levels l gradually increase. Retail Sales and Consumer Confidence 15 Percent change from a year ago Index 1 Consumer Confidence (right axis) 1 Retail Sales (left axis) Mar-6 Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Source: Census Bureau and Consumer Confidence Board

5 Inflation remains subdued but is starting to increase slightly. 5 Percent change from year ago Inflation Percent 5 Overall PCE Inflation Core PCE Inflation Feb-1 Feb-3 Feb-5 Feb-7 Feb-9 Feb-11 Source: Bureau of Economic Analysis

6 Inflation expectations have also ticked up recently Percent Inflation Expectations U of Mich Inflation Expectations -1 year forward 5 Yr, 5 Yr Forward Breakeven Inflation Rate (TIPS) U of Mich Inflation Expectations -5 years forward Percent Mar-6 Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Source: University of Michigan and Federal Reserve Board of Governors

7 The Tenth District of the Federal Reserve

8 Employment fell sharply during the recession. 15 Index Total Nonfarm Employment Seasonally adjusted Index US KS MO KC Feb-6 Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 Source: Bureau of Labor Statistics

9 Unemployment rates remain elevated. 11 Percent Unemployment Rate Seasonally adjusted Percent 11 9 U.S. KS KC MO Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Source: Bureau of Labor Statistics

10 There are large regional differences in unemployment rates.

11 Employment continued to decline in most industries in Kansas City over the past year Percent Employment Growth by Industry Feb-11 over Feb-1 Percent US KS MO KC Mining Prof. & Busi. Educ. & Health Trans. & Util. Manuf. Leis. & Hosp. Trade Constr. Fin. Svcs. State & Loc. Govt. Info -1 Source: Bureau of Labor Statistics

12 Hiring expectations increased for the second quarter. Hiring Expectations 1 Net percent of firms planning to add workers Percent US Q3 1 Q 1 Q1 11 Q 11 KC Source: Manpower Inc.

13 Manufacturers expect to hire more workers over the next 6 months. Index Expected Employment Indexes - Manufacturing Seasonally adjusted; six months ahead Index 3 Number of employees Average employee workweek Mar-6 Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 - Sources: FRBKC Manufacturing Survey

14 Manufacturing activity continues to expand. 65 Index Manufacturing Activity Seasonally adjusted; month-over-month Index 65 6 US 1J Mar-6 Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Sources: ISM, FRBKC Manufacturing Survey Note: 1J index is computed on ISM basis (5 = zero change)

15 Manufacturers expect further gains over the next six months. Tenth District Manufacturing Expectations Seasonally adjusted; six months ahead Index Index Dec-1 Jan-11 3 Feb-11 Mar Production Volume of new orders New orders for exports Capital expenditures Employment -1 Source: FRBKC Manufacturing Survey

16 Oil prices have increased sharply. py 1 $/Barrel Energy Prices $/MMBTU Oil Spot Prices (left axis) Oil Futures 3/7/11 (left axis) Natural Gas Spot Prices (right axis) Nat Gas Futures 3/7/11 (right axis) Mar-6 Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Mar-1

17 The energy sector is expanding, especially for oil producers. Count of Active Drilling Rigs # Rigs # Rigs US-Oil (Left Axis) US-Gas (Left Axis) 1J-Oil (Right Axis) 1J-Gas (Right Axis) Mar-8 Mar-9 Mar-1 Mar-11 Source: Baker-Hughes

18 Lower supplies and increased demand have led to higher h crop prices. 18 $/Bushel Crop Prices $/Bushel Beans 1 Wheat Corn Mar- Mar-5 Feb-6 Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Source: Commodity Research Bureau

19 As expected, home sales plummeted after the expiration of the tax credit. Exis ting Home Sales Seasonally adjusted 11 Index: 5:Q=1 Index US MO 1 KS KC :Q 6:Q 7:Q 8:Q 9:Q 1:Q Source: NAR

20 Residential construction activity remains weak. Value of Residential Construction Contracts 11 Index: Feb-6=1 Seasonally adjusted Index MO US KS Feb-6 Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 Source: FW Dodge

21 Home prices continued to decline across most of the U.S. in 1.

22 Home price appreciation has varied over the past 5 years.

23 Foreclosure rates in the Midwest are lower than in other parts of the nation.

24 Commercial construction activity is weaker than pre-recession recession levels. 175 Value of Commercial Construction Contracts Seasonally adjusted, 3-mo. mov. av. Index: Feb-6=1 Index MO US KS Feb-6 Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 Source: F.W. Dodge Inc.

25 Office and industrial vacancy rates have leveled l off in Kansas City. Percent Kansas City Commercial Vacancy cy Rates Percent Office 8 6 Industrial 6 Retail MultiFam 5:Q 6:Q 7:Q 8:Q 9:Q 1:Q Source: Torto-Wheaton Research

26 Conclusions The U.S. and Kansas City economies are expected to continue to recover gradually over the next few years. Weak residential construction activity and high unemployment may prevent a more robust recovery. Manufacturing, energy and agriculture sectors are expected to continue to provide a boost to the economy.

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