COMMENTS ON THE ECONOMIC, BUSINESS AND POLITICAL CLIMATE

Transcription

1 COMMENTS ON THE ECONOMIC, BUSINESS AND POLITICAL CLIMATE Roger Tutterow, Ph.D. Coles College of Business Kennesaw State University Montana s Credit Unions Power Up Conference May 18, 2018 Great Falls, MT

2 Expansion Getting Tired? (Source: National Bureau Economic Research Peak Trough Contraction Expansion February 1945(I) October 1945 (IV) 8 80 November 1948(IV) October 1949 (IV) July 1953(II) May 1954 (II) August 1957(III) April 1958 (II) 8 39 April 1960(II) February 1961 (I) December 1969(IV) November 1970 (IV) November 1973(IV) March 1975 (I) January 1980(I) July 1980 (III) 6 58 July 1981(III) November 1982 (IV) July 1990(III) March 1991(I) 8 92 March 2001(I) November 2001 (IV) December 2007 (IV) June 2009 (II) 18 73??? 106 Average, all cycles: (11 cycles) Contributions To GDP Growth (Source: Bureau of Economic Analysis) GDP = Consumption Gross Net Exports Government Investment 2016: Q3 2.8% 1.92% % 0.09% 2016: Q4 1.8% 1.99% 1.34% -1.61% 0.03% 2017: Q1 1.2% 1.32% % -0.11% 2017: Q2 3.1% 2.28% 0.64% 0.21% -0.03% 2017: Q3 3.2% 1.49% 1.19% 0.36% 0.12% 2017: Q4 2.9% 2.75% 0.78% -1.16% 0.51% 2018: Q1 2.3% 0.73% 1.19% Gross Investment = Nonresidential Residential Inventory 2016: Q % -0.18% 0.16% 2016: Q4 1.34% 0.02% 0.26% 1.06% 2017: Q % 0.41% -1.46% 2017: Q2 0.64% 0.82% % 2017: Q3 1.19% 0.58% -0.21% 0.79% 2017: Q4 0.78% 0.84% 0.46% -0.53% 2018: Q1 1.19% 0.76% % Page 1

3 65 ISM s PMI (Source: Institute of Supply Management) Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Jul-16 Apr-17 Jan Foreign Exchange: Trading Partners (Source: Board of Governors of the Federal Reserve System) Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 Page 2

4 Consumer Sentiment (source: University of Michigan, Survey Research Center) Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Comments from Curtin (source: Richard Curtin, Director of Survey of Consumers, February 2017) the gain represents the result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth overall gain in the Expectations Index was due to self-identified Independents, who were much closer to the optimism of the Republicans than the pessimism of the Democrats the February Expectations Index was 55.5 among Democrats, among Republicans, and 89.2 among Independents Page 3

5 Retail Sales (source: U.S. Bureau of the Census, annual rate of growth) 12% 9% 6% 3% -3% -6% -9% RS Total RS ex-auto -12% Jan-96 Dec-96 Nov-97 Oct-98 Sep-99 Aug-00 Jul-01 Jun-02 May-03 Apr-04 Mar-05 Feb-06 Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Apr-15 Mar-16 Feb Auto & Light Truck Sales H&I Effect (Source: Department of Commerce, in millions) Auto Light Truck Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Page 4

6 Auto Inventory (Source: Department of Commerce) Inv/Sales Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Leading Economic Indicators (source: Conference Board, % change in last 6 months) 9% 6% 3% -3% -6% -9% -12% -15% Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Page 5

7 600 Change in Payroll Employment (Source: Bureau of Labor Statistics) Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16 Jul-17 State Employment (Net Change) (source: Bureau of Labor Statistics) 21% 18% 15% 12% 9% 6% 3% -3% -6% Utah Texas North Dakota Colorado District of Col Washington Idaho California Oregon Florida Massachusetts New York South Carolina Tennessee Georgia North Carolina South Dakota Nevada Minnesota Montana Nebraska Hawaii Virginia Arizona New Hampshire Indiana Maryland Michigan Delaware Oklahoma Kentucky Iowa Wisconsin Pennsylvania Missouri Arkansas Ohio Alaska Louisiana New Jersey Rhode Island Vermont Illinois Kansas Maine Mississippi Alabama New Mexico Connecticut West Virginia Wyoming Page 6

8 Employment by Cities 15% 1 Loss Recovery 5% -5% -1 MONTANA Billings Great Falls Missoula Employment by Cities 8% 7% 6% Net L12M 5% 4% 3% 2% 1% -1% MONTANA Billings Great Falls Missoula Page 7

9 1 8% 6% US Employment Shift by Sector (Source: Bureau of Labor Statistics) L12M L5Yr 4% 2% -2% -4% -6% Total Mining Const Manuf T T & Util Info Fin Prof & Biz Ser Educ & HC Leis & Hosp Other Serv Govt Prices: Still talk of Deflation/Inflation? (source: Bureau of Labor Statistics) CPI rose by 0.2% in April after having been down by 0.1% and up by 0.2% in March and February. Core CPI rose 0.1% in March after rising by 0.2% and 0.2% in two previous months. Overall CPI up 2.5% over last 12 months. Core up 2.1% over same period. Energy component was up by 1.4% last month and up by 7.9% over the last 12 months Page 8

10 Crude Oil: West Texas Intermediate (Source: US Energy Information Administration) Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 18% 16% 14% 12% 1 8% 6% 4% 2% -2% Construction Cost w/o Energy (Source: BLS PPI & ABC) Inputs to Construction Inputs to Nonres Construct Plumb Fixtures and Fittings Fabric Struct Metal Products M/M Y/Y Iron and Steel Steel Mills Products Nonferrous Wire and Cable Softwood Lumber Concrete Products Prepared Asphalt Page 9

11 Federal Funds Rate Short Rates Finally Start Moving (Source: Board of Governors of Federal Reserve System) 25% 2 15% 1 5% Jan-80 Sep-81 May-83 Jan-85 Sep-86 May-88 Jan-90 Sep-91 May-93 Jan-95 Sep-96 May-98 Jan-00 Sep-01 May-03 Jan-05 Sep-06 May-08 Jan-10 Sep-11 May-13 Jan-15 Sep-16 Market s FFR Outlook (Source: CME Group) bps bps bps bps bps bps /13/2018 8/1/2018 9/26/ /8/ /19/2018 1/30/2019 Page 10

12 14% 12% 1 8% 6% PIIGS Revisited (Source: European Central Bank) Mar-15 Jun-15 Nov-15 Feb-16 May-16 Oct-16 Jun-17 Sep-17 Jan-18 4% 2% Portugal Ireland Italy Greece Spain Large Scale Asset Purchases (source: Federal Reserve System) QE1 (March 2009) $1.25 T in MBS $200B in Agencies $300M in Treasuries QE2 (November 2010) $600B in Treasuries Operation Twist Swapped $667B in longs for shorts QE3 (September 2012) $85B/month agency MBS & Treasuries Taper begins December 2012 Page 11

13 Fed: Securities Held Outright /7/04 7/7/04 1/7/05 7/7/05 1/7/06 7/7/06 1/7/07 7/7/07 1/7/08 7/7/08 1/7/09 7/7/09 1/7/10 7/7/10 1/7/11 7/7/11 1/7/12 7/7/12 1/7/13 7/7/13 1/7/14 7/7/14 1/7/15 7/7/15 1/7/16 7/7/16 1/7/17 7/7/17 Loan Spread over COF Widening? Large & Med Small Apr-90 Jul-91 Oct-92 Jan-94 Apr-95 Jul-96 Oct-97 Jan-99 Apr-00 Jul-01 Oct-02 Jan-04 Apr-05 Jul-06 Oct-07 Jan-09 Apr-10 Jul-11 Oct-12 Jan-14 Apr-15 Jul-16 Oct-17 Page 12

14 Debt Balance and Mix (source: Federal Reserve Bank of New York Credit Panel/Equifax) MBA Mortgage Activity: Purchase & Refinance (Source: Mortgage Bankers Association) Purch Refi Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Page 13

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16 CRE Loan Standards: Net Tightening (Source: Federal Reserve System, Senior Officers Lending Survey) ADC Non-Res Multifam Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 Page 15

17 90+ Days Delinquent by Loan Type (source: Federal Reserve Bank of New York Credit Panel/Equifax) Charge Off Rates at Commercial Banks (source: Board of Governors of the Federal Reserve System) 3.5% % 2. Biz CRE 1.5% % % Jan-91 Mar-92 May-93 Jul-94 Sep-95 Nov-96 Jan-98 Mar-99 May-00 Jul-01 Sep-02 Nov-03 Jan-05 Mar-06 May-07 Jul-08 Sep-09 Nov-10 Jan-12 Mar-13 May-14 Jul-15 Sep-16 Page 16

18 Credit Unions: Credit Quality Delinquency Ratio Net Charge-Off Ratio Q-07 3Q-07 1Q-08 3Q-08 1Q-09 3Q-09 1Q-10 3Q-10 1Q-11 3Q-11 1Q-12 3Q-12 1Q-13 3Q-13 1Q-14 3Q-14 1Q-15 3Q-15 1Q-16 3Q-16 1Q-17 3Q-17 Credit Unions: Net Worth Ratio Q-07 3Q-07 1Q-08 3Q-08 1Q-09 3Q-09 1Q-10 3Q-10 1Q-11 3Q-11 1Q-12 3Q-12 1Q-13 3Q-13 1Q-14 3Q-14 1Q-15 3Q-15 1Q-16 3Q-16 1Q-17 3Q-17 Page 17

19 NCUA Data: 4Q 2017 NCUA Data: 4Q 2017 Page 18

20 NCUA Data: 4Q 2017 NCUA Data: 4Q 2017 Page 19

21 Construction Spending: By Sector (Source: U.S. Bureau of Census) -3-4 Residential Non-Residential -5 Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep Non-Residential Construction (Source: U.S. Bureau of Census) Lodging Office Commercial Health care Educational Religious Public safety Amuse & Rec Transportation Communication Power Highway and street Sewage & waste disp Water supply Conserv and develop Manufacturing Page 20

22 US Housing Permits: SF and Total (source: U.S. Bureau of Census) Total SF Jan-98 Oct-98 Jul-99 Apr-00 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul US Housing Permits: Multi-family (Source: U.S. Bureau of Census) Jan-02 Aug-02 Mar-03 Oct-03 May-04 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 Apr-14 Nov-14 Jun-15 Jan-16 Aug-16 Mar-17 Oct-17 Page 21

23 MT Housing Permits: SF and Total (source: U.S. Bureau of Census) Total SF Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 MT Housing Permits: Multi-family (Source: U.S. Bureau of Census) Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Page 22

24 The Demographics: Boom & Bust (Source: CDC, US Bureau of Census) 210 Home Prices & CPI (Source: S&P Case-Shiller & Bureau of Labor Statistics) CPI Case-Shiller 50 Jan-00 Aug-00 Mar-01 Oct-01 May-02 Dec-02 Jul-03 Feb-04 Sep-04 Apr-05 Nov-05 Jun-06 Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12 Jun-13 Jan-14 Aug-14 Mar-15 Oct-15 May-16 Dec-16 Page 23

25 House Prices: Net District of Col Colorado North Dakota Texas South Dakota Nebraska Tennessee Oklahoma Kentucky Iowa Oregon Kansas Louisiana Washington Montana Indiana Utah Alaska South Carolina North Carolina West Virginia Georgia Wyoming Missouri Idaho Hawaii Arkansas Ohio Massachusetts Wisconsin Pennsylvania Minnesota Maine Vermont New York Alabama Michigan Mississippi New Hampshire Virginia New Mexico Illinois Maryland California Florida Rhode Island Alaska New Jersey Delaware Connecticut Nevada 25% Home Prices: MT and Neighbors 2 15% 1 5% -5% -1-15% ID MT ND SD WY Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Page 24

26 CS/S&P Home Price Index (Source: S&P Case Shiller) Bust Net -8 Denver Dallas Seattle Portland Charlotte Boston San Francisco National-US Atlanta Los Angeles Composite-20 San Diego Composite-10 Cleveland Minneapolis Detroit New York Washington Tampa Miami Chicago Phoenix Las Vegas MT Home Prices Bust Recovery Net MT Billings Great Falls Missoula Page 25

27 Household RE Equity (Source: Board of Governors of Federal Reserve System) Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct Migration (source: NAMS Report) Page 26

28 Tax Reform: Some Headlines Corporate tax rates cut 35% to 21% - changes value of loss carry forwards, but lower cost of capital Preferential treatment for pass-through. Individual rate lowered in some brackets. Standard deduction increase, but exemption disappear and limits on SALT and other preferred items will more than offset for some. AMT fillers reduced. Global taxation reduces inversion and encourages repatriation. ACA individual mandate disappears. Currents Issues in Fiscal Affairs Federal: Government default avoided in 2011, 2013 & 2015 where from here? Back in Play: Affordable Care Act (Mandate gone), Keystone, Dodd- Frank, EPA, NLRB Now in Play: Tax Reform (done for now), Infrastructure Always was in Play: SCOTUS. New Play: Revising Trade» Bilateral vs Multilateral» Lumber deals and tariffs Does the Deficit Matter? States: Tax Reform Initiatives in other States does SALT matter? Recent gains in manufacturing facilities due to reshoring SE states domination biz location ranking, but not exclusive. Amazon HQ2 changes the way we compete? Local: RE valuation and revenues rising, fiscal distress moderating Page 27