July 2012 Robert Johnson, CFA Director of Economic Analysis

Transcription

1 U.S. Consumer: Key to World Growth Macro Overview July 2012 Robert Johnson, CFA Director of Economic Analysis 1

2 U.S. Economic Forecast 2012 Outlook: A Slow Start Before an Acceleration Real U.S. GDP Growth of 2.0%-2.5% Inflation Slows to 2%-2.5% due to Falling Commodities Employment Growth Accelerates to 195,000 Per Month Unemployment Rate Drops to 8.0% or Lower 2

3 Economic Drivers Consumer Spending Housing and Construction Lower Inflation Autos 3

4 Risks to Economic Growth Inflation: Drought Could Cause Food Inflation Consumer Spending Outpacing Incomes Geopolitical Issues European Sovereign Debt Slowing Manufacturing Economy Outside the United States 4

5 5 Where Are We Now? Muddling Through.

6 This Recovery Has Grown at Half the Normal Rate Year After Bottom, 33-Month GDP Growth Rate Prior GDP Contraction % -2.7% % -1.0% % -1.1% % -3.2% % -2.6% % -3.7% % -1.4% % -0.3% % -2.2% Average 11.6% -2.0% % -5.1% Source: BEA, Morningstar calculations 6

7 In a Recession Already? Not So Fast. Source: St Louis Federal Reserve, Morningstar estimates for June. Updated July 13,

8 Exports a Big Contributor to Growth Source: St. Louis Federal Reserve. Updated June 28,

9 A Fall in U.S. Exports to Europe by Itself Won't Kill the Economy Major U.S. Export Markets 2011 % of Billions % of U.S U.S. Exports to: U.S. $ Exports GDP North America % 4.5% Europe % 3.1% Pacific Rim % 3.5% South America % 1.6% Other % 1.3% Total % 13.9% China 104 7% 1.0% Source: Bureau of Economic Analysis, Census Bureau, Morningstar Calculations. Updated March 9,

10 Exports to Europe and China Not Growing as Fast Continent Growth Growth Growth Thru May North America 24.0% 15.7% 8.5% Europe 10.9% 15.0% 4.9% Pacific Rim 28.7% 12.8% 5.2% South America 26.4% 21.6% 10.7% Other 11.9% 20.4% 5.2% Total 21.0% 15.9% 6.8% China 31.4% 13.0% 6.0% Source: Bureau of Economic Analysis, Census Bureau, Morningstar Calculations. Updated July 11,

11 Consumer Takes the Stage, Represents 71% of the Economy 11 Source: The Gleaner

12 Watching the Consumer Is Key 12

13 13 Reasons for Consumer Optimism

14 Private Sector Employment Continues to Grow Source: Bureau of Labor Statistics. Updated July 6,

15 Initial Claims Point to a Stronger Job Market Source: Bureau of Labor Statistics. Updated July 12,

16 Consumer Fixed Payments Improved Sharply Source: U.S. Federal Reserve, Morningstar. Updated June 26,

17 Inflation Falling Back, Key to Continued Recovery Bars Are Recessions; Line Is Recession Danger Point. Source: Bureau of Labor Statistics. Updated July 17,

18 18 The Consumer Is Far From Worry-Free

19 Drought Could Drive Food Prices Skyward Source: 19

20 Consumer Income Growth Is Stagnant Source: Bureau of Economic Analysis, Morningstar estimate for June. Updated June 29,

21 Home Prices Still Moving Down Source: St. Louis Federal Reserve. Updated June 26,

22 22 The Stages of Consumer Confidence

23 Retail Sales Continue to Chug Along Short-Term Confidence Source: International Council of Shopping Centers. Updated July 17,

24 Auto Sales Could Jump in 2012 Intermediate-Term Confidence U.S. Auto Sales Year Millions of Units E 13.6 (Rev. Est. 14.5) Source: Automotive News, updated Jan. 4, 2012, and April 10,

25 Improved Consumer Confidence Means More Auto Sales 25 Interpretation: January 2012 sales were 81% of 2005 levels. Source: BEA, Bureau of Labor Statistics, Morningstar. Updated July 5, 2012.

26 but Not Enough to Help the Housing Market Long-Term Confidence Red bar represents average natural demand, Morningstar estimate. Source: Census Bureau, Morningstar. Updated June 19,

27 Housing??? Source: newhomessection.com 27

28 Housing Has a Lot of Potential Positives Artificially Small Household Formations Can't Last Forever Record High Affordability Ratio Foreign/Income Investors--Potential Block Sales 28

29 Housing Market Picking Up Steam Source: Core Logic, U.S. Census Bureau, FHFA, National Association of Realtors, S&P Case Shiller 29

30 But Negatives Remain Credit Requirements Remain Tight Foreclosure Pipeline Is Still Large Prices Are Down Over the Past Year Young Buyer Psychology 30

31 Economic Data Suggests (But Some of This Is Priced In): Caution Toward Emerging Markets (Dependent on Europe and Each Other) Bonds Look Risky (U.S. Economy Strengthening) U.S. Wide-Moat Stocks (More Pricing Power) Small-Cap Stocks (Less Non-U.S. Exposure) 31