ECONOMIC OUTLOOK SECOND-LONGEST US EXPANSION IN HISTORY, CAN IT SET A RECORD?

Transcription

1 ECONOMIC OUTLOOK SECOND-LONGEST US EXPANSION IN HISTORY, CAN IT SET A RECORD? Augustine Faucher Chief Economist Florida School Finance Officers Association Hyatt Regency Jacksonville June 15, 2018 Gus Faucher Chief Economist Stuart Hoffman Senior Economic Advisor William Adams Senior Economist Kurt Rankin Economist

2 NOW THE SECOND-LONGEST EXPANSION IN HISTORY Length of expansion, months, by starting date of recovery /33 6/38 10/45 10/49 5/54 4/58 2/61 11/70 3/75 7/80 11/82 3/91 11/01 6/09 Source: NBER 2

3 BETTER CONFIDENCE WITH THE ELECTION Small business optimism index, 1986=100 (R) Consumer confidence index, 1985=100 (L) J'15 A J O J'16 A J O J'17 A J O J'18 A Sources: The Conference Board, NFIB 3

4 RUNUP IN STOCK PRICES HAS STALLED, WITH HIGHER VOLATILITY CBOE Volatility Index (R) S&P 500 (L) J'15 A J O J'16 A J O J'17 A J O J'18 A 5 Sources: S&P, CBOE 4

5 AND HIGHER INTEREST RATES Interest rate, % year Treasury bond (R) 3-month Treasury bill (L) J'16 A J O J'17 A J O J'18 A Source: Federal Reserve 5

6 BETTER GROWTH OVER PAST YEAR, EVEN WITH HURRICANES Real, % change year ago Final sales of domestic product Gross domestic income Gross domestic product -6 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: BEA 6

7 SYNCHRONIZED GLOBAL GROWTH, FOR FIRST TIME SINCE GLOBAL FINANCIAL CRISIS 7

8 WEAKER DOLLAR IS HELPING EXPORTS U.S. exports, 3-mo. moving average, % change year ago (L) Broad U.S. $ index, 3-mo. moving average, % change year ago, reverse axis (R) -25 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 ' Sources: BEA, Federal Reserve 8

9 ENERGY NO LONGER A DRAG ON GROWTH, LOW PRICES ARE GOOD NEWS FOR LONGER RUN Oil and gas extraction, 6-mo. moving average, % change year ago (L) Natural gas price, 6-mo. moving average, $ per mmbtu (R) '80 '85 '90 '95 '00 '05 '10 '15 0 Sources: Federal Reserve, NYMEX 9

10 PRIVATE SERVICE INDUSTRIES, CONSTRUCTION DRIVING JOB GROWTH Payroll employment, change year ago, mil Government All other private Manufacturing, mining Retail Total '11 '12 '13 '14 '15 '16 '17 '18 Source: BLS 10

11 TAX CUTS ARE COMING Budget impact, fiscal year, $ bil Personal Corporate/Small business International '18 '19 '20 '21 '22 Source: JCT 11

12 MORE SPENDING, TOO Increase in spending caps, fiscal year, $ bil '18 '19 Source: CBO 12

13 CONSUMERS BENEFITTING FROM JOB GAINS, TAX CUTS A PLUS IN 2018 Real, % change year ago Consumer spending Personal disposable income '12 '13 '14 '15 '16 '17 '18 Source: BEA 13

14 AND WAGE GROWTH IS PICKING UP Quit rate, % of employment, 3-quarter lead (L) Average hourly earnings, all private-sector workers, % change year ago (R) Private-sector wages, ECI, % change year ago (R) '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 ' Source: BLS 14

15 HIGHER GASOLINE PRICES WILL EAT UP MUCH OF THE TAX CUT 4.00 Price of unleaded gasoline, $ per gallon (L) Consumer spending on gasoline, annualized, $ bil (R) '00 '02 '04 '06 '08 '10 '12 '14 '16 ' Sources: Oil Price Information Service, BEA 15

16 AUTO SALES HOLDING UP IN Employment, motor vehicles and parts, 3-mo. moving average, change, ths (L) Cash for clunkers Light vehicle sales, SAAR, mil (R) '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 8 Sources: AutoData, BLS 16

17 STILL ROOM FOR IMPROVEMENT IN HOMEBUILDING 2,400 2,000 Residential construction employment, ths (R) 3,500 3,250 3,000 1,600 2,750 1,200 2, Housing starts, SAAR, 3-month moving average, ths (L) '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 2,250 2,000 1,750 Sources: Census, BLS 17

18 WITH HOUSE PRICE GROWTH RUNNING AT A SUSTAINABLE PACE REO and short sale share of total existing single-family sales, reverse axis, % (R) Case-Shiller house price index, peak=100 (L) '02 '04 '06 '08 '10 '12 '14 '16 '18 35 Sources: S&P/Case-Shiller, CoreLogic, PNC 18

19 SMALL BUSINESSES HIRING INTENTIONS HAVE IMPROVED IN 2018 Expectations of own hiring, % of respondents Decrease Same Increase '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: PNC 19

20 SHORT-TERM INTEREST RATES WILL CONTINUE TO RISE AS FED WORRIES ABOUT INFLATION Personal consumption expenditures price index, % change year ago FOMC s 2% target Excluding food and energy Overall 0.0 '14 '15 '16 '17 '18F '19F Sources: BEA, PNC 20

21 AND WATCH OUT FOR INVERTED YIELD CURVE Yield spread: interest rate on 10-year U.S. government bond minus interest rate on 1-year U.S. government bill, percentage points Shaded areas are recessions -4 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 Sources: Federal Reserve Board; NBER 21

22 STRONGER ECONOMIC GROWTH IN 2018 AND 2019, MOVING PAST FULL EMPLOYMENT Real GDP, % change year ago (L) Unemployment rate, % (R) '14 '15 '16 '17 '18F '19F '20F Sources: BEA, BLS, PNC 22

23 A FEW POCKETS OF WEAKNESS IN MID

24 BUT EXPANSION ALMOST EVERYWHERE IN THE SPRING OF

25 AND IMPROVEMENT THROUGHOUT THE YEAR 25

26 STEEP RECESSION, BUT STRONG EXPANSION IN FLORIDA Payroll employment, 3-month moving average, cyclical peak= U.S Florida 88 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: BLS 26

27 SERVICES ARE LEADING FLORIDA JOB GROWTH Payroll employment, 3-month moving average, change year ago, ths Government -400 Private service-providing -500 Goods-producing Total -600 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: BLS 27

28 MIAMI HAS THE GREATER EXPOSURE TO TRADE RETALIATION Goods exports, 2016, % of GDP/GSP/GMP Orlando Tampa Bay Florida US Greater Miami Source: BEA, Census 28

29 30 LESS VULNERABLE THAN LAST TIME TO BIG HOUSE PRICE SWINGS Purchase-only home price index, % change year ago '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 US Florida Source: FHFA 29

30 SALES EXPECTATIONS IN FLORIDA HAVE IMPROVED Expectations of own sales, % of respondents Increase Same Decrease Spring '17 Fall '17 Spring '18 Source: PNC 30

31 WITH A BIG JUMP IN HIRING EXPECTATIONS Expectations of own hiring, % of respondents 120 Increase Same Decrease Spring '17 Fall '17 Spring '18 Source: PNC 31

32 POPULATION GROWTH ONCE AGAIN WELL ABOVE AVERAGE Population, % change Florida U.S. 0.0 '00 '02 '04 '06 '08 '10 '12 '14 '16 Source: Census 32

33 BIG RISKS TO THE UPSIDE AND DOWNSIDE President Trump Fiscal policy Monetary policy/interest rates Trade war Business leverage/commercial real estate Global economy/weak dollar Stock market Jobs/income/confidence Regulatory reform Immigration Budget deficit Brexit/Europe China/emerging economies Housing market Commercial construction Terrorism 33

34 PNC ECONOMIC OUTLOOK Q&A For more information from PNC Economics: 34

35 Disclaimer: The material presented is of a general nature and does not constitute the provision of investment or economic advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions and forecasts expressed herein are subject to change without notice. Relevant information was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy. You should seek the advice of an investment professional to tailor a financial plan to your particular needs The PNC Financial Services Group, Inc. All rights reserved. 35

36 PUT IT ALL TOGETHER, TWO GREAT YEARS FOR REAL INCOMES Real median household income, % change '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 Source: Census Bureau 36

37 CONSUMERS WILLING TO TAKE ON MORE DEBT, BUT THAT S NOT A PROBLEM % of disposable income Financial obligations ratio (R) Mortgage debt service ratio (L) '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 ' Source: Federal Reserve 37

38 STRUCTURAL SLOWDOWN IN PRODUCTIVITY GROWTH IS BAD NEWS FOR LONG RUN Productivity, nonfarm business sector, 4-quarter MA, % change year ago '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: BLS 38

39 AS WILL LONG-TERM RATES, BUT MORE SLOWLY, AS FED REDUCES BALANCE SHEET Federal Reserve assets, $ tril Treasury Bills Other Treasuries MBS/GSA Debt Other '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: Federal Reserve 39