Markets, He Wrote. By: Anirban Basu Sage Policy Group, Inc. On Behalf of The 5 th Annual Marcum Construction Summit. September 27 th, 2017

Transcription

1 Markets, He Wrote On Behalf of The 5 th Annual Marcum Construction Summit By: Anirban Basu Sage Policy Group, Inc. September 27 th, 2017

2 Macro P.I. (Just How Hairy is the Global Situation?) Photo: Flixter.com

3 Estimated Growth in Output by Select Global Areas 2017 Projected Advanced Economies Euro Area France Germany Italy Spain Japan United Kingdom Canada Australia United States Emerging Market & Developing Economies Sub-Saharan Africa Emerging & Developing Europe Russia Emerging & Developing Asia China India (3) Middle East, North Africa, Afghanistan, & Pakistan Latin America & the Caribbean Mexico Brazil 2017 Proj. Global Output Growth: 3.5% Source: International Monetary Fund: World Economic Outlook Update, July Growth (Estimate) World: 3.2% Euro Area: 1.8% United States: 1.6% Japan: 1.0% 2.0% 1.9% 1.5% 1.8% 1.3% 3.1% 1.3% 1.7% 2.5% 3.1% 2.1% 4.6% 2.7% 3.5% 1.4% 2.6% 1.0% 1.9% 0.3% 6.5% 6.7% 7.2% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Annual % Change

4 International Population Dynamics, 16 Largest Nations Population (Millions) Nation Net Change % Change Nigeria % Ethiopia % Egypt % Pakistan % Philippines % India 1, , % Mexico % Bangladesh % Indonesia % United States % Vietnam % Brazil % China 1, , % Germany % Russian Federation % Japan % World 7.3 billion 9.7 billion 2.4 billion 32.3% Source: United Nations, Department of Economic and Social Affairs, Population Division (2015). World Population Prospects: The 2015 Revision. *For statistical purposes, the data for China do not include Hong Kong and Macao, Special Administrative Regions (SAR) of China, and Taiwan Province of China.

5 Niamey Vice (Fertility Rates by Country, 2014) Rank* Source: World Bank, World Development Indicators Top 15 Bottom 15 Country Fertility Rate Rank* Country Fertility Rate 1 Niger Germany Somalia Italy Mali Malta Chad Hungary Angola Slovak Republic Congo, Dem. Rep Greece Burundi Poland Uganda Spain Gambia, The Bosnia and Herzegovina Nigeria Moldova Burkina Faso Singapore Mozambique Macao SAR, China Zambia Hong Kong SAR, China Tanzania Portugal Malawi Korea, Rep *Rank among 200 countries for which data are available for the most recent year (2014) **Total fertility rate represents the number of children that would be born to a woman if she were to live to the end of her childbearing years and bear children in accordance with age-specific fertility rates of the specified year.

6 Global Debt to Exacerbate Slow Growth? According to the IMF, global debt reached an all-time high in 2015; At $152 trillion, global gross debt of the nonfinancial sector now represents 225% of global GDP; About 2/3 of this debt is in the private sector; Current low nominal-growth environment is making adjustment difficult, setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown. 2 Sources: 1. International Monetary Fund. October World Economic Outlook: Subdued Demand: Symptoms and Remedies. 2. International Monetary Fund (IMF). October Fiscal Monitor: Debt Use It Wisely. Note: The nonfinancial sector comprises the general government, nonfinancial firms, and households. Gross debt represents the unconsolidated liabilities of the three.

7 Global Debt Reaches All Time Highs (IIF) According to the International Institute of Finance (IIF), global debt has reached an all-time high in 2016; At $215 trillion, global debt including household, government, and corporate now represents 325% of global GDP; Last year the IMF warned of risks to the global economy: sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery Sources: 1. Institute of International Finance (IFF), Global Debt Monitor. 2. Business Insider. 3. The Telegraph. 4. Reuters.

8 Aug-01 Dec-01 Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 $/Barrel NYMEX Crude Oil Future Prices in U.S. Dollars August 2001 through August 2017 $140 $120 $100 August 2017: $48.05 /Barrel $80 $60 $40 $20 $0 Source: U.S. Energy Information Administration *Month of August = average of daily prices from 8/1-8/31

9 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul =100 Metal Price Indices July 2007 through July Precious Metals 65 Base Metals 45 Iron Ore 25 Source: The World Bank US$ Nominal Base metals include aluminum, copper, lead, nickel, tin and zinc. Precious metals include gold, platinum, and silver.

10 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Baltic Dry Index September 2009 through September ,000 4,000 3,000 2,000 1,000 September 15 th 1,385 0 Jan. 4, 1985: 1,000 Source: Quandl.com The Baltic Dry Index (BDI) is a measure of the price of shipping major raw materials such as metals, grains, and fossil fuels by sea. The BDI is a composite of 3 sub-indices, each covering a different carrier size: Capesize, Panamax, and Supramax.

11 USA CSI (Commercial Situation Investigation) Photo: AMCNetworks.com

12 1990Q2 1991Q1 1991Q4 1992Q3 1993Q2 1994Q1 1994Q4 1995Q3 1996Q2 1997Q1 1997Q4 1998Q3 1999Q2 2000Q1 2000Q4 2001Q3 2002Q2 2003Q1 2003Q4 2004Q3 2005Q2 2006Q1 2006Q4 2007Q3 2008Q2 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4 2013Q3 2014Q2 2015Q1 2015Q4 2016Q3 2017Q2 % Change from Preceding Period (SAAR) Gross Domestic Product 1990Q2 through 2017Q2* 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 2017Q2: +3.0% Source: Bureau of Economic Analysis *2 nd Estimate

13 Percent Change from Preceding Period (SAAR) SAAR (%) Contributions to GDP Growth by Component 2016Q3 2017Q2* Q3 2016Q4 2017Q1 2017Q GDP -3.0 Personal Consumption Government Spending Net Exports Gross Investment Source: Bureau of Economic Analysis *2 nd Estimate 2017Q2: +3.0%

14 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Thousands Net Change in U.S. Jobs, BLS August 2002 through August August 2017: +156K Source: U.S. Bureau of Labor Statistics

15 National Nonfarm Employment by Industry Sector August 2016 v. August 2017 Professional and Business Services Education and Health Services Leisure and Hospitality Source: U.S. Bureau of Labor Statistics Construction Financial Activities Manufacturing Trade, Transportation, and Utilities Other Services Mining and Logging Government Information Thousands, SA All told 2,097K jobs gained

16 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Monthly Net Change (thousands) National Construction Employment Monthly Net Change August 2000 through August Industry Sector Aug-17 Jul-17 Aug-16 1-net 12-net 12-% Construction 6, , , % Residential Building % Nonresidential Building % Heavy & Civil Engineering % Specialty Trade Contractors 4, , , % August 2017: +28K Source: U.S. Bureau of Labor Statistics

17 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 U.S. Employment to Population Ratio August 2000 August August 2017: 60.1% Source: U.S. Bureau of Labor Statistics Note: Civilian employment-population ratio, population 16 years and over, seasonally adjusted (SA).

18 Employment Growth, U.S. States (SA) August 2016 v. August 2017 Percent Change RANK STATE % RANK STATE % RANK STATE % 1 NEVADA CALIFORNIA INDIANA GEORGIA KENTUCKY OHIO FLORIDA MASSACHUSETTS PENNSYLVANIA UTAH MONTANA NEW JERSEY TEXAS NORTH CAROLINA SOUTH DAKOTA MARYLAND MINNESOTA DELAWARE OREGON VIRGINIA HAWAII IDAHO ALABAMA MISSISSIPPI NEW HAMPSHIRE MICHIGAN VERMONT WASHINGTON NEW YORK WISCONSIN ARKANSAS ARIZONA CONNECTICUT RHODE ISLAND NEBRASKA ILLINOIS COLORADO NORTH DAKOTA MAINE MISSOURI LOUISIANA ALASKA TENNESSEE OKLAHOMA WEST VIRGINIA DISTRICT OF COLUMBIA IOWA KANSAS SOUTH CAROLINA NEW MEXICO WYOMING -0.9 Source: U.S. Bureau of Labor Statistics U.S. Year-over-year Percent Change: +1.4%

19 Connecticut Nonfarm Employment by Industry Sector Groups (SA) August 2016 v. August 2017 Absolute Change Other Services Leisure & Hospitality Education & Health Services Financial Activities 3,600 3,300 2,800 2,400 Manufacturing 800 Mining and Logging Trade, Transportation & Utilities Information Construction -1, CT Total: +6.0K; +0.4% Professional & Business Services Government -3,000-1,400 US Total (SA): +2,097K; +1.4% -4,000-2, ,000 4,000 Source: U.S. Bureau of Labor Statistics *According to the Local Area Unemployment Statistics (LAUS) series CT added 32,801 jobs between August 2016 and August 2017.

20 Hartford* Nonfarm Employment by Industry Sector Groups (NSA) August 2016 vs. August 2017 Absolute Change Professional & Business Services 3,300 Education & Health Services Trade, Transportation & Utilities 1,500 1,300 Other Services 700 Manufacturing 600 Mining, Logging, & Construction Information Financial Activities Hartford Total: +3.2K; +0.6% CT Total (SA): +6.0K; +0.4% Leisure & Hospitality Government -2,100-1,200 US Total (SA): +2,097K; +1.4% -3,000-2,000-1, ,000 2,000 3,000 4,000 Source: U.S. Bureau of Labor Statistics *Hartford-West Hartford-East Hartford, CT NECTA

21 Bridgeport-Stamford-Norwalk Nonfarm Employment by Industry Sector Groups (NSA) August 2016 v. August 2017 Absolute Change Leisure & Hospitality 3,500 Financial Activities Education & Health Services Other Services 1,200 2,000 2,600 Government 100 Mining, Logging, & Construction Information Manufacturing Bridgeport Total: +2.3K; +0.6% CT Total (SA): +6.0K; +0.4% Trade, Transportation & Utilities Professional & Business Services -5,200-1,000 US Total (SA): +2,097K; +1.4% -7,000-5,000-3,000-1,000 1,000 3,000 5,000 Source: U.S. Bureau of Labor Statistics

22 Massachusetts Nonfarm Employment by Industry Sector Groups (SA) August 2016 v. August 2017 Absolute Change Education and Health Services Professional and Business Services Other Services 7,600 Financial Activities 5,500 Construction 3,400 Government 2,200 Trade, Transportation, and Utilities 1,000 Information 400 Mining and Logging 100 Manufacturing -900 Leisure and Hospitality -1,300 16,800 MA Total: +57.4K; +1.6% US Total (SA): +2,097K; +1.4% 22,600-4, ,000 8,000 12,000 16,000 20,000 24,000 Source: U.S. Bureau of Labor Statistics *According to the Local Area Unemployment Statistics (LAUS) series MA added 62,584 jobs between August 2016 and August 2017.

23 Boston-Cambridge-Quincy MA-NH NECTA Nonfarm Employment by Industry Sector Groups (NSA) August 2016 v. August 2017 Absolute Change Education & Health Services 23,200 Professional & Business Services 14,000 Other Services Leisure & Hospitality 6,700 8,800 Financial Activities Government Trade, Transportation & Utilities Mining, Logging, and Construction Manufacturing Information ,800 2,600 2,600 2,400 Boston NECTA Total: +63.4K; +2.3% MA Total (SA): +57.4K; +1.6% US Total (SA): +2,097K; +1.4% -5, ,000 10,000 15,000 20,000 25,000 Source: U.S. Bureau of Labor Statistics

24 Rhode Island Nonfarm Employment by Industry Sector Groups (SA) August 2016 v. August 2017 Absolute Change Construction 3,200 Education and Health Services 2,600 Manufacturing 800 Trade, Transportation, and Utilities 400 Other Services 100 Mining and Logging 0 Professional and Business Services Financial Activities Information Government RI Total: +9.3K; +1.9% US Total (SA): +2,097K; +1.4% Source: U.S. Bureau of Labor Statistics -1, ,000 2,000 3,000 4,000 *According to the Local Area Unemployment Statistics (LAUS) series RI added 9,700 jobs between August 2016 and August **Employment figures for Rhode Island s Information sector not available on a seasonally adjusted basis

25 Providence-Warwick RI-MA NECTA Nonfarm Employment by Industry Sector Groups August 2016 v. August 2017 Absolute Change Construction 3,500 Education and Health Services 2,400 Information 1,400 Other Services 400 Government Financial Activities Mining and Logging Manufacturing Professional and Business Services Trade, Transportation, and Utilities Providence NECTA Total: +10.7K; +1.8K RI Total (SA): +9.3K; +1.9% US Total (SA): +2,097K; +1.4% -1, ,000 2,000 3,000 4,000 Source: U.S. Bureau of Labor Statistics

26 Employment Growth, 24 Largest Metros (NSA) August 2016 v. August 2017 Percent Change Rank MSA % Rank MSA % 1 Orlando-Kissimmee-Sanford, FL MSA Washington-Arlington-Alexandria, DC-VA- MD-WV MSA 2 Atlanta-Sandy Springs-Roswell, GA MSA Denver-Aurora-Lakewood, CO MSA Tampa-St. Petersburg-Clearwater, FL MSA Dallas-Fort Worth-Arlington, TX MSA Houston-The Woodlands-Sugar Land, TX MSA Philadelphia-Camden-Wilmington, PA-NJ- DE-MD MSA 5 Seattle-Tacoma-Bellevue, WA MSA Phoenix-Mesa-Scottsdale, AZ MSA Charlotte-Concord-Gastonia, NC-SC MSA San Francisco-Oakland-Hayward, CA MSA Portland-Vancouver-Hillsboro, OR-WA MSA New York-Newark-Jersey City, NY-NJ-PA MSA 7 Riverside-San Bernardino-Ontario, CA MSA Baltimore-Columbia-Towson, MD MSA Miami-Fort Lauderdale-West Palm Beach, FL MSA Boston-Cambridge-Nashua, MA-NH Metro NECTA San Diego-Carlsbad, CA MSA St. Louis, MO-IL MSA Detroit-Warren-Dearborn, MI MSA Los Angeles-Long Beach-Anaheim, CA MSA Minneapolis-St. Paul-Bloomington, MN-WI MSA Source: U.S. Bureau of Labor Statistics, Current Employment Statistics (CES) Survey Chicago-Naperville-Elgin, IL-IN-WI MSA 0.5

27 Unemployment Rates, 24 Largest Metros (NSA) July 2017 Rank MSA UR Rank MSA UR 1 Denver-Aurora-Lakewood, CO MSA Baltimore-Columbia-Towson, MD MSA Minneapolis-St. Paul-Bloomington, MN-WI MSA 3 Dallas-Fort Worth-Arlington, TX MSA Washington-Arlington-Alexandria, DC-VA-MD-WV MSA Detroit-Warren-Dearborn, MI MSA 4.4 Miami-Fort Lauderdale-West Palm Beach, FL MSA Phoenix-Mesa-Scottsdale, AZ MSA San Francisco-Oakland-Hayward, CA MSA Chicago-Naperville-Elgin, IL-IN-WI MSA Boston-Cambridge-Nashua, MA-NH Metro NECTA New York-Newark-Jersey City, NY-NJ-PA MSA 6 Orlando-Kissimmee-Sanford, FL MSA San Diego-Carlsbad, CA MSA Seattle-Tacoma-Bellevue, WA MSA Atlanta-Sandy Springs-Roswell, GA MSA St. Louis, MO-IL MSA (1) Houston-The Woodlands-Sugar Land, TX MSA 10 Portland-Vancouver-Hillsboro, OR-WA MSA Los Angeles-Long Beach-Anaheim, CA MSA Tampa-St. Petersburg-Clearwater, FL MSA Philadelphia-Camden-Wilmington, PA-NJ- DE-MD MSA 12 Charlotte-Concord-Gastonia, NC-SC MSA Riverside-San Bernardino-Ontario, CA MSA Source: U.S. Bureau of Labor Statistics U.S. Unemployment Rate July: 4.3% August: 4.4% 1. Area boundaries do not reflect official OMB definitions.

28 21 Jump Street (And Other Addresses of Interest) Photo: TheMoveDatabase.org

29 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 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 Jul-17 Architecture Billings Index July 2008 through July July 2017: Source: The American Institute of Architects

30 National Nonresidential Construction Spending by Subsector, July 2014 v. July 2017 Lodging Office Amusement and recreation Commercial Communication Manufacturing Educational Highway and street Transportation Health care Religious Conservation and development Power Public safety Water supply Sewage and waste disposal -0.8% -1.1% -8.5% -11.7% -14.1% -18.8% -20.6% -21.2% 5.1% 1.2% 17.1% 36.0% 31.3% 31.0% 49.4% Total Nonresidential Construction: +$51.2B; +8.0% 61.1% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 3-year % Change Source: U.S. Census Bureau

31 Billions of $US Commercial/Multifamily Offshore Investment Sales Volumes Reach New Heights in 2015/16 $60 $50 Foreign investment increases 85.1% in 2015 $40 $30 $20 $10 $ Source: Jones Lang LaSalle; Real Capital Analytics Cross-border investment remained elevated in 2016: Although down relative to a record 2015, offshore investment levels still exceeded the pre-2015 high in Note: Among transactions larger than $5.0 million

32 YTD Foreign Office Investment Activity as of 2016Q3 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Foreign Participation as a % of Total Office Volume 14.9% Foreign Office Investment by Destination Market (as a % of Total, 2016YTD) New York San Francisco Boston Washington, DC Dallas-Fort Worth Los Angeles Seattle-Bellevue Miami Northern New Jersey Chicago Atlanta Austin Philadelphia San Diego 8.4% 7.1% 6.8% 5.6% 4.8% 4.8% 2.8% 2.1% 1.9% 1.6% 1.4% 1.1% 1.1% 45.5% 0% 10% 20% 30% 40% 50% Source: Jones Lang LaSalle; Real Capital Analytics Note: Among transactions larger than $5.0 million; includes all office markets which received > 1.0% of offshore capital. Primary markets continue to capture the lion s share of inbound capital, receiving 78.2% of this capital YTD.

33 Aug-01 Dec-01 Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug month % Change Inputs to Construction PPI (NSA) August 2001 August % 10% Aug v. Aug. 2017: +3.7% 5% 0% -5% -10% Source: U.S. Bureau of Labor Statistics

34 Construction Materials PPI (NSA) 12-month % Change as of August 2017 Crude Petroleum Softwood Lumber Crude Energy Materials Iron and Steel Natural Gas 7.0% Steel Mill Products 6.7% Nonferrous Wire and Cable 5.2% Concrete Products 2.9% Plumbing Fixtures and Fittings 1.9% Fabricated Structural Metal Products 1.8% Prepared Asphalt & Tar Roofing/Siding Products -1.9% 9.5% 9.5% 11.3% 15.0% -5% 0% 5% 10% 15% 12-month % Change Source: U.S. Bureau of Labor Statistics

35 Down to The Wire Photo: RecapGuide.com

36 Sales Growth by Type of Business August 2016 v. August 2017* Internet, etc. Retailers Building Material & Garden Supplies Dealers Gasoline Stations Furniture & Home Furn. Stores Miscellaneous Store Retailers General Merchandise Stores Food Services & Drinking Places Food & Beverage Stores Motor Vehicle & Parts Dealers Clothing & Clothing Accessories Stores Health & Personal Care Stores Sporting Goods, Hobby, Book & Music Stores Electronics & Appliance Stores -3.5% -1.4% 0.6% 0.5% 1.5% 2.5% 2.3% 2.1% 8.4% 7.5% 6.4% 5.4% 5.2% -5% -2% 1% 4% 7% 10% 12-month % change Source: U.S. Census Bureau *August 2017 advanced estimate Total Retail Sales: +3.2% YOY

37 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Savings Rate (%) U.S. Saving Rate, July 2005 July 2017 (Savings as Percentage of Personal Disposable Income) July 2017: 3.5% Source: Bureau of Economic Analysis

38 2000Q2 2000Q4 2001Q2 2001Q4 2002Q2 2002Q4 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 U.S. Gross Private Domestic Investment (SAAR) % Change from Previous Quarter, 2000Q2 2017Q2* Q2: +3.6% Source: Bureau of Economic Analysis *2 nd Estimate

39 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 Jul-17 One-month Percent Change Conference Board Leading Economic Indicators Index August 2007 through July % 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% July 2017: where 2010: 100 Source: Conference Board

40 The Closer Global economy remains weak, and correspondingly... ; Global money has continued to pour into America in search of yield and safety, including into commercial real estate that was particularly true in 2015, a bit less true in 2016; Inflationary pressures are on the rise so, too, are interest rates that could begin to squeeze asset prices in 2017/18, producing negative wealth effects in the process; There are indications of mini-bubbles forming in commercial real estate, particularly in office, lodging and multifamily segments; There are also longer-term structural considerations, including the national debt and pending insolvencies of Medicare and Social Security the longer-term outlook may be deteriorating even as the short-run improves; Momentum should see us through 2017, but tighter monetary policy combined with a heavy dose of political intrigue could render 2018 different. By this time in 2019/20, the economy could be in a far different place and likely will be. Photo: Google *Kyra Sedgwick as Brenda Leigh Johnson

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