Economic Outlook Presented: April 22, 2010 Presented by: Keith B. Hembre, CFA Chief Economist & Chief Investment Strategist, FAF Advisors Investment products, including shares of mutual funds, are not deposits or obligations of, or guaranteed by, U.S. Bank or any of its affiliates, nor are they insured by the Federal Deposit Insurance Corporation, or any other government agency. An investment in such products involves investment risk, including possible loss of principal. This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Opinions are subject to change.
Key Questions for 2010 U.S. growth recovery: how fast and durable? When will the labor market participate? Will inflation kill the recovery? How will we return to a sustainable policy stance?
2010 Growth: V or Not V Which will it be? Deeper recession faster recovery Housing bust comparisons negates prior cyclical
Inventory Contribution 5% 3% Business Inventory Contribution to GDP Growth (By Quarter) Q4 2009 Contribution = 3.9% 1% -1% -3% -5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: U.S. Department of Commerce Additional information is provided on the Disclosures page
Huge Damage Done During the Past Two Years Job Losses Relative to Past Recessions (Millions) 0-1 -2-3 -4-5 -6-7 -8-9 2008-2009 2001 1990-1991 1981-1982 1980 1973-1975 Source: U.S. Department of Labor Additional information is provided on the Disclosures page
Sustained Inflation Unlikely Absent an Acceleration in Labor Costs 16 14 12 10 8 6 4 2 0-2 -4-6 Nonfarm Unit Labor Costs and CPI Ex. Food and Energy (Year/Year Percent Change) 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 Source: U.S. Department of Labor Additional information is provided on the Disclosures page CPI Ex Food & Energy Jan 2010 Unit Labor Costs Dec 2009
Bank Credit Still Contracting 8000 U.S. Commercial Banks Loans and Leases Outstanding ($ Billions) 7000 6000 2/24/10 5000 4000 3000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Federal Reserve Additional information is provided on the Disclosures page
What About This Exit Strategy? 4% 2% 0% -2% -4% -6% -8% Federal Budget Deficit Relative to GDP -10% FY 2010 Est -12% 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Source: Congressional Budget Office Additional information is provided on the Disclosures page
Questions?
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