Markets, He Wrote. By: Anirban Basu Sage Policy Group, Inc.

Transcription

1 Markets, He Wrote On Behalf of The Wisconsin Asphalt Pavement Association Annual Conference and Business Meeting By: Anirban Basu Sage Policy Group, Inc. November 28 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: 3.6% Source: International Monetary Fund: World Economic Outlook Database, October Growth (Estimate) World: 3.2% Euro Area: 1.8% United States: 1.5% Japan: 1.0% 2.2% 2.1% 1.6% 2.1% 1.5% 3.1% 1.5% 1.7% 3.0% 2.2% 2.2% 4.6% 2.6% 4.5% 1.8% 2.6% 1.2% 2.1% 0.7% 6.5% 6.8% 6.7% -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 Nation Population (Millions) Net Change % Change Nigeria % Ethiopia % Egypt % Pakistan % Philippines % Mexico % India 1, , % Bangladesh % Indonesia % United States % Vietnam % Brazil % China 1, , % Germany % Russian Federation % Japan % World 7.6 billion 9.8 billion 2.2 billion 29.4% Source: United Nations, Department of Economic and Social Affairs (DESA)/Population Division. World Population Prospects: The 2017 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, 2015) Rank* Top 15 Bottom 15 Country Fertility Rate Rank* Country Fertility Rate 1 Niger Malta Somalia Italy Dem. Rep. of the Congo Slovak Republic Mali Mauritius Chad Cyprus Burundi Bosnia and Herzegovina Angola Poland Uganda Spain Timor-Leste Greece Nigeria Macao SAR, China Gambia, The Moldova Burkina Faso Singapore Mozambique Korea, Rep Tanzania Portugal Benin Hong Kong SAR, China 1.20 Source: World Bank, World Development Indicators *Rank among 201 countries for which data are available for the most recent year (2015) **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 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 $/Barrel NYMEX Crude Oil Future Prices in U.S. Dollars October 2001 through October 2017 $140 $120 $100 October 2017: $51.59 /Barrel $80 $60 $40 $20 $0 Source: U.S. Energy Information Administration *Month of October = average of daily prices from 10/2-10/31

9 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct =100 Metal Price Indices October 2007 through October 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 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 Nov-17 Baltic Dry Index November 2009 through November ,000 4,000 3,000 2,000 1,000 November 24 th 1,458 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 1990Q3 1991Q2 1992Q1 1992Q4 1993Q3 1994Q2 1995Q1 1995Q4 1996Q3 1997Q2 1998Q1 1998Q4 1999Q3 2000Q2 2001Q1 2001Q4 2002Q3 2003Q2 2004Q1 2004Q4 2005Q3 2006Q2 2007Q1 2007Q4 2008Q3 2009Q2 2010Q1 2010Q4 2011Q3 2012Q2 2013Q1 2013Q4 2014Q3 2015Q2 2016Q1 2016Q4 2017Q3 % Change from Preceding Period (SAAR) Gross Domestic Product 1990Q3 through 2017Q3* 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 2017Q3: +3.0% Source: Bureau of Economic Analysis *1 st (advance) Estimate

13 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Thousands Net Change in U.S. Jobs, BLS October 2002 through October October 2017: +261K Source: U.S. Bureau of Labor Statistics

14 National Nonfarm Employment by Industry Sector October 2016 v. October 2017 Professional and Business Services Education and Health Services Leisure and Hospitality Construction Manufacturing Financial Activities Trade, Transportation, and Utilities Other Services Mining and Logging Government Information All told 2,004K jobs gained Thousands, SA Source: U.S. Bureau of Labor Statistics

15 Oct-00 Apr-01 Oct-01 Apr-02 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 U.S. Employment to Population Ratio October 2000 October October 2017: 60.2% Source: U.S. Bureau of Labor Statistics Note: Civilian employment-population ratio, population 16 years and over, seasonally adjusted (SA).

16 Wisconsin Employment by Industry Sector Groups (SA) October 2016 v. October 2017 Absolute Change Manufacturing 13,000 Leisure and Hospitality 7,100 Professional and Business Services 6,800 Trade, Transportation, and Utilities 4,300 Education and Health Services 3,900 Other Services 3,800 Government 3,000 Construction Mining and Logging 300 1,800 WI Total (SA): +42.4K; +1.4% Financial Activities Information -1, US Total (SA): +2,004K; +1.4% -5, ,000 10,000 15,000 Source: U.S. Bureau of Labor Statistics *According to the Local Area Unemployment Statistics (LAUS) series WI gained 65,393 jobs between October 2016 and October 2017.

17 Milwaukee-Waukesha-West Allis MSA Employment by Industry Sector Groups (NSA) October 2016 v. October 2017 Absolute Change Manufacturing 2,600 Professional and Business Services 1,600 Leisure and Hospitality 1,200 Education and Health Services 1,200 Government 200 Mining and Logging Information Milwaukee MSA Total: +2.1K; +0.2% Other Services Construction Trade, Transportation, and Utilities Financial Activities -1,500-1, WI Total (SA): +42.4K; +1.4% US Total (SA): +2,004K; +1.4% -3,000-1,000 1,000 3,000 Source: U.S. Bureau of Labor Statistics

18 Madison MSA Employment by Industry Sector Groups (NSA) October 2016 v. October 2017 Absolute Change Professional and Business Services 3,300 Trade, Transportation, and Utilities 1,900 Education and Health Services 1,600 Mining, Logging, and Construction 1,200 Manufacturing 1,100 Government Other Services Financial Activities Madison MSA Total: +6.8K; +1.7% WI Total (SA): +42.4K; +1.4% Information Leisure and Hospitality -2, US Total (SA): +2,004K; +1.4% -4,000-3,000-2,000-1, ,000 2,000 3,000 4,000 Source: U.S. Bureau of Labor Statistics

19 Employment Growth, U.S. States (SA) October 2016 v. October 2017 Percent Change RANK STATE % RANK STATE % RANK STATE % 1 NEVADA MINNESOTA IOWA UTAH WISCONSIN NEW HAMPSHIRE TEXAS COLORADO RHODE ISLAND OREGON ARIZONA VIRGINIA IDAHO MONTANA MAINE FLORIDA OKLAHOMA DELAWARE SOUTH CAROLINA TENNESSEE NEW JERSEY WASHINGTON HAWAII MISSISSIPPI MARYLAND MISSOURI NORTH DAKOTA GEORGIA NEW YORK LOUISIANA ARKANSAS OHIO WEST VIRGINIA MASSACHUSETTS PENNSYLVANIA ILLINOIS NORTH CAROLINA MICHIGAN ALASKA NEW MEXICO NEBRASKA CONNECTICUT ALABAMA VERMONT SOUTH DAKOTA CALIFORNIA DISTRICT OF COLUMBIA KANSAS KENTUCKY INDIANA WYOMING -0.5 Source: U.S. Bureau of Labor Statistics U.S. Year-over-year Percent Change: +1.4%

20 Unemployment Rates, 24 Largest Metros (NSA) September 2017 Rank MSA UR Rank MSA UR 1 Denver-Aurora-Lakewood, CO MSA Atlanta-Sandy Springs-Roswell, GA MSA Minneapolis-St. Paul-Bloomington, MN-WI MSA Phoenix-Mesa-Scottsdale, AZ MSA Orlando-Kissimmee-Sanford, FL MSA Portland-Vancouver-Hillsboro, OR-WA MSA Boston-Cambridge-Nashua, MA-NH Metro NECTA San Diego-Carlsbad, CA MSA San Francisco-Oakland-Hayward, CA MSA Seattle-Tacoma-Bellevue, WA MSA Tampa-St. Petersburg-Clearwater, FL MSA Detroit-Warren-Dearborn, MI MSA Dallas-Fort Worth-Arlington, TX MSA Los Angeles-Long Beach-Anaheim, CA MSA St. Louis, MO-IL MSA (1) Washington-Arlington-Alexandria, DC-VA- MD-WV MSA 10 Baltimore-Columbia-Towson, MD MSA Charlotte-Concord-Gastonia, NC-SC MSA Miami-Fort Lauderdale-West Palm Beach, FL MSA Source: U.S. Bureau of Labor Statistics U.S. Unemployment Rate Sept.: 4.2% Oct.: 4.1% Philadelphia-Camden-Wilmington, PA-NJ- DE-MD MSA Chicago-Naperville-Elgin, IL-IN-WI MSA 4.7 New York-Newark-Jersey City, NY-NJ-PA MSA Houston-The Woodlands-Sugar Land, TX MSA Riverside-San Bernardino-Ontario, CA MSA Area boundaries do not reflect official OMB definitions.

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

22 Nov-95 May-96 Nov-96 May-97 Nov-97 May-98 Nov-98 May-99 Nov-99 May-00 Nov-00 May-01 Nov-01 May-02 Nov-02 May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 Rate 15-Year & 30-Year Fixed Mortgage Rates November 1995 through November 2017* 10% 9% 8% 7% 15-yr 30-yr 6% 5% 4% 3% 2% 3.92% 3.32% 1% Source: Freddie Mac *Week ending 11/22/2017

23 1980Q3 1981Q3 1982Q3 1983Q3 1984Q3 1985Q3 1986Q3 1987Q3 1988Q3 1989Q3 1990Q3 1991Q3 1992Q3 1993Q3 1994Q3 1995Q3 1996Q3 1997Q3 1998Q3 1999Q3 2000Q3 2001Q3 2002Q3 2003Q3 2004Q3 2005Q3 2006Q3 2007Q3 2008Q3 2009Q3 2010Q3 2011Q3 2012Q3 2013Q3 2014Q3 2015Q3 2016Q3 2017Q3 U.S. Homeownership (NSA) 1980Q3-2017Q3 70% 68% 2017Q3: 63.9% 66% 64% 62% 60% 58% Source: U.S. Census Bureau *NSA: not seasonally adjusted

24 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 $ Billions (SAAR) U.S. Private New Multifamily Construction September 1993 through September 2017 $70 $60 $50 $40 $30 $20 $10 $0 Source: U.S. Census Bureau

25 12-Month % Change S&P/Case-Shiller Home Price Indices for Select Metros August 2017, 12-Month Percentage Change 9% 8.6% 8% 7% 6% 5% 4% 3.4% 3.7% 4.4% 4.9% 5.4% 5.9% 6.1% 6.1% 6.9% 7.1% 7.2% 7.3% 3% 2% 1% 0% Source: Standard & Poor s

26 Oct-99 Apr-00 Oct-00 Apr-01 Oct-01 Apr-02 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Thousands, SAAR U.S. Single-Family Housing Starts October 1999 through October ,000 1,800 1,600 1,400 1,200 1, October 2017: 877K Source: U.S. Census Bureau

27 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 Oct-17 Architecture Billings Index October 2008 through October October 2017: Source: The American Institute of Architects

28 Dec- Mar- Jun-07 Sep-07 Dec-07 Mar- Jun-08 Sep-08 Dec- Mar- Jun-09 Sep-09 Dec- Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 SAAR ($billions) Nonresidential Construction Put-in-Place December 2006 through September Public Private Oct-08: $719.5B Sept-17: $698.1B 600 Jan-11: $506.8B Source: U.S. Census Bureau

29 National Nonresidential Construction Spending by Subsector September 2014 v. September 2017 Lodging Office Amusement and recreation Communication Commercial Educational Health care Transportation Highway and street Power Manufacturing Conservation and development Religious Public safety Water supply Sewage and waste disposal -0.5% -1.6% -2.8% -7.4% -11.5% -14.0% -17.1% -18.1% 6.0% 4.9% 17.2% 40.0% 39.9% 36.5% 27.7% Total Nonresidential Construction: +$68.3B; +10.8% 70.5% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 3-year % Change Source: U.S. Census Bureau

30 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

31 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.

32 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct month % Change Inputs to Construction PPI (NSA) October 2001 October % 10% Oct v. Oct. 2017: +4.3% 5% 0% -5% -10% Source: U.S. Bureau of Labor Statistics

33 Construction Materials PPI (NSA) 12-month % Change as of October 2017 Softwood Lumber Iron and Steel Steel Mill Products Nonferrous Wire and Cable Crude Petroleum Concrete Products Fabricated Structural Metal Products Crude Energy Materials Plumbing Fixtures and Fittings Prepared Asphalt & Tar Roofing/Siding Products Natural Gas -7.3% 2.9% 2.8% 2.1% 1.8% 0.1% 8.1% 7.7% 9.9% 13.6% 15.4% -10% -5% 0% 5% 10% 15% 12-month % Change Source: U.S. Bureau of Labor Statistics

34 Oct-00 Apr-01 Oct-01 Apr-02 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct month % Change Asphalt Paving Mixtures & Blocks Products* PPI October 2000 October % 40% 30% 20% Oct v. Oct. 2017: -0.2% 10% 0% -10% -20% Source: U.S. Bureau of Labor Statistics *Industry: Asphalt paving mixture & block manufacturing Product: Asphalt paving mixtures & blocks

35 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 Oct Month % Change Prepared Asphalt and Tar Roofing & Siding Products* PPI 10% October 2010 October % Oct v. Oct. 2017: +0.1% 2% -2% -6% -10% Source: U.S. Bureau of Labor Statistics *PPI-Commodities. Group: Nonmetallic mineral products.

36 Down to The Wire Photo: RecapGuide.com

37 Sales Growth by Type of Business October 2016 v. October 2017* Building Material & Garden Supplies Dealers Gasoline Stations Internet, etc. Retailers Motor Vehicle & Parts Dealers Furniture & Home Furn. Stores Health & Personal Care Stores Food & Beverage Stores Food Services & Drinking Places General Merchandise Stores Electronics & Appliance Stores Clothing & Clothing Accessories Stores Miscellaneous Store Retailers Sporting Goods, Hobby, Book & Music Stores -2.5% 1.8% 1.3% 2.0% 3.3% 3.2% 2.9% 4.4% 3.8% 5.6% 6.8% 7.5% 8.8% -5% 0% 5% 10% 12-month % change Source: U.S. Census Bureau *October 2017 advanced estimate Total Retail Sales: +4.6% YOY

38 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 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 Savings Rate (%) U.S. Saving Rate, September 2005 September 2017 (Savings as Percentage of Personal Disposable Income) September 2017: 3.1% Source: Bureau of Economic Analysis

39 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 U.S. Gross Private Domestic Investment (SAAR) % Change from Previous Quarter, 2000Q3 2017Q3* Q3: +6.0% Source: Bureau of Economic Analysis *1 st (advance) Estimate

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, only a bit less true in 2016; Inflationary pressures are on the rise so, too, are interest rates eventually -- that could begin to squeeze asset prices in 2018, triggering negative wealth effects and sentiment 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 longerterm outlook may be deteriorating even as the short-run improves; Momentum should see us through 2017/18 from an economic perspective, but tighter monetary policy combined with a heavy dose of political intrigue could render 2018 different from an asset price perspective. 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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