A View from the Fed: Slouching toward 2016

Transcription

1 A View from the Fed: Slouching toward th Annual Economic Outlook Conference, University of Alabama Culverhouse College of Commerce Montgomery, AL January 14, 2016 The views expressed are those of the author and do not necessarily represent those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

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3 Sources: Bureau of Economic Analysis, FRBA 3 It appears that growth in the last three months of 2015 will look very weak. Real GDP Component Tracking Forecasts Q3 BEA Estimate, Dec. 22 Change in GDP (annualized % change) Q4 GDPNow, Jan. 8 Annualized GDP Growth Note: Most Q4 growth forecasts are tracking between 1.75 and 2.25 percent (annualized).

4 Source: Census Bureau data through November Inventories continue to weigh on near term growth. 1.5 Inventory to Sales Ratio: Total Business SA 1.7 Inventory to Sales Ratios SA Retailers Manufacturers Wholesalers

5 The divergence between topline GDP growth and final sales continues but Q4 is tracking soft nonetheless. Sources: Bureau of Economic Analysis, FRBA 5 Real GDP Component Tracking Forecasts Q3 BEA Estimate, Dec. 22 Change in GDP (annualized % change) Q4 GDPNow, Jan. 8 Annualized GDP Growth Annualized Final Sales Growth

6 Source: Federal Reserve Board; Institute for Supply Management Data through November The manufacturing sector has struggled as the dollar has strengthened Index, Jan-97=100 The Dollar and the Manufacturing Sector Nominal Broad Trade-Weighted Exchange Value of the US$ ISM Manufacturing: PMI Composite Index (right axis) ISM Mfg: New Export Orders Index (SA, 50+ = Econ Expand) SA, 50+ = Expansion

7 Source: Energy Information Administration, Baker Hughes Through January 1, We expect that the drag on structures investment is not done yet. $150 Spot Oil Price and Baker Hughes Active Rig Count 2000 $120 Rig Count, number of ac<ve rigs (rhs) 1500 $90 Brent Spot, $/barrel (lhs) 1000 $ $30 Jan-14 Mar-14 Jun-14 Sep-14 Dec-14 Feb-15 May-15 Aug-15 Nov-15 0

8 Recent data on consumer spending hasn t been as strong as it was through the middle of % Personal Consumption Expenditure Growth four-quarter annualized percent 3.0% 2.5% 2.0% Average: 2.3% 1.5% 1.0% 0.5% 0.0% 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 Source: Bureau of Economic Analysis, Atlanta Fed Actual through Q3 2015, forecast through Q4 8

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10 Despite the limp finish to 2015, we anticipate above trend growth in Real GDP Growth Current FRBA Staff Forecast Dec. FOMC SEP median 2015:q4/ q4 2016:q4/ q4 Longerrun 1.8 a a: assumes 0.8% in QIV. Sources: FRBA forecasts; FOMC Summary of Economic Projections 10

11 Payroll growth has been exceptionally strong and suggests more strength in the economy than GDP growth might suggest. 450 Payroll Employment Changes thousands of jobs, SA Monthly change month average month average 12-month average 284,000 jobs/ month 221,000 jobs/ month Source: Bureau of Labor Statistics through December

12 Solid income (and increased savings) should provide a favorable environment for consumption growth in the future. 5% Real Disposable Personal Income year-over-year percent change, SA 6.0 Personal Savings Rate percent 4% 5.5 3% 5.0 2% 4.5 1% % Source: Census Bureau through November 2015 Source: Bureau of Economic Analysis through November

13 Trend wage growth has been weak for some time, but may be picking up. 5 Wage Measures Average Hourly Earnings of All Employees, year-over-year percent change Atlanta Fed Wage Growth Tracker, 3-mo. moving average Source: Bureau of Labor Statistics Wage tracker through November 2015; data through December

14 Over the balance of the recovery, productivity growth has been decidedly weak. 14

15 A lack of investment seems to be the smoking gun. 15

16 Inflation continues at a pace that is well below the Fed s target pace. 4.0 PCE Price Index year-over-year percent change, monthly 3.5 PCE FOMC Inflation Objective Sources: Bureau of Economic Analysis; through November

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18 Even trend measures that look through temporary influence are running soft to the FOMC s objective PCE Core PCE FRBD trimmed-mean PCE PCE Price Index year-over-year percent change, monthly FOMC Inflation Objective Sources: Bureau of Economic Analysis; Federal Reserve Bank of Dallas through November

19 We are probably close to full employment, but not quite there. 95 ZPOP: The Share of the Population Fully Utilized percent, seasonally-adjusted through December 2015 Source: Bureau of Labor Statistics, authors calculations 19

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21 The U.S. Economic Outlook: Slouching Towards 2016