Post on 19-Mar-2016
description
transcript
John Silvia – Chief EconomistFebruary 2, 2004
Presentation to: Paris GIC Conference
Club Horizon Stratégie 2004 Outlook
Economics as Information
Getting Beyond the Bloomberg Headline
Where are we now?
20032002200120001999
10%
8%
6%
4%
2%
0%
-2%
10%
8%
6%
4%
2%
0%
-2%
REAL GDP GROWTHQuarter/Quarter Percent Change, Seasonally Adusted Annual Rate
4th Quarter 2003@ 4.0%
03020100999897
15%
10%
5%
0%
-5%
-10%
15%
10%
5%
0%
-5%
-10%
FINAL DOMESTIC DEMAND COMPONENTS(Year-on-Year Growth)
Blue Line = Consumer SpendingRed Line = Government Spending
Green Line = Business Fixed Investment
Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2
7%
6%
5%
4%
3%
2%
1%
0%
-1%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
NON-FARM PRODUCTIVITY and REAL GDPYear-over-Year Percent Change
Bars = Non-Farm Productivity, 3Q @ 5.0%
Line = Real GDP, 4Q @ 4.3%
2001 2002 2003
200
0
-200
-400
-600
-800
-1000
200
0
-200
-400
-600
-800
-1000
Non-Farm EmploymentNet Quarterly Change, in Thousands
4Q @ 144K
2001 2002 2003
Where are we going?• Outlook – Is the Recovery Picking Up Momentum?• Not Your Father’s Economic Recovery.
200420032002
500
450
400
350
300
500
450
400
350
300
INITIAL JOBLESS CLAIMSIn Thousands
Blue Line = 4-Week Moving Average @ 346.00
January 24
Green Line = Weekly Figure @ 342.00
0301999795939189878583
140000
130000
120000
110000
100000
90000
140000
130000
120000
110000
100000
90000
Employment - Payroll vs. HouseholdThousands of Persons
Household (left) Payrolls (right)
2003200220012000
139000
138500
138000
137500
137000
136500
136000
135500
133000
132500
132000
131500
131000
130500
130000
129500
Employment - Payroll vs. HouseholdThousands of Persons
Household (left) Payrolls (right)
03020100999897
70
65
60
55
50
45
40
35
70
65
60
55
50
45
40
35
ISM COMPOSITE INDEXDiffusion Index
December @ 66.2
03020100999897
70
65
60
55
50
45
40
35
70
65
60
55
50
45
40
35
ISM NON-MANUFACTURING INDEXBUSINESS ACTIVITY INDEX
December@ 58.6
Seasonally Adjusted
Consumer Fundamentals:• Income• Sentiment• Credit• Outlook – Better
020098969492
6%
5%
4%
3%
2%
1%
0%
6%
5%
4%
3%
2%
1%
0%
INCOME & SPENDING GROWTHYear to Year Percent Change, 12 Month Moving Average
Real Spending (Green Line) @ 3.1%Real, Disposable Income (Blue Line) @ 2.5%
November
Personal Consumption Expenditures6%
7%
3%
13%
5%
8%
13%5%
4%
4%
14%
4%
14%
Motor Vehicles and Parts
Furniture and Household Equipment
Other Durable Goods
Food
Clothing and Shoes
Other Nondurable Goods
Housing
Energy Goods and Services
Other Household Operation
Transportation
Medical Care
Recreation
Other Services
2002
Investment Spending:• Orders• Capacity Utilization • Financial Depth• Outlook - Improving
0302010099989796959493
20%
10%
0%
-10%
-20%
-30%
20%
10%
0%
-10%
-20%
-30%
MANUFACTURERS' NEW CAPITAL GOODS ORDERSNON-DEFENSE, EXCLUDING AIRCRAFT
December
Year-to-Year Percent Change @ 9.9%
Series is a 3-Month Moving Average
200320022001
20%
10%
0%
-10%
-20%
20%
10%
0%
-10%
-20%
REAL BUSINESS EQUIPMENT & SOFTWARE SPENDINGSeasonally Adusted Annual Rate
4th Quarter 2003@ 10.0%
Inventories Under Control
030201009998979695949392
1.60
1.50
1.40
1.30
1.60
1.50
1.40
1.30
TOTAL INVENTORY TO SALES RATIO
@ 1.35November
Housing:• Household Income• Employment• Credit• Outlook - Positive
030199979593918987
1.8
1.6
1.4
1.2
1.0
0.8
0.6
12%
11%
10%
9%
8%
7%
6%
5%
SINGLE FAMILY HOUSING STARTSSeasonally Adjusted Annual Rate - in Millions
Mortgage Rate @ 5.88%
(Right Scale)
(Left Scale)
Green Line
Single-Family Starts @ 1.66Blue Line
December
030199979593918987
50%
40%
30%
20%
10%
0%
-10%
-20%
50%
40%
30%
20%
10%
0%
-10%
-20%FHLMC/FNMA House Price Index
SAN JOSE MSA HOME PRICESQuarterly Percent Change, Annual Rate
Third Quarter 2003
Blue Bar = Qtrly Change @ 0.0%Red Line = Yr/Yr Change + 1.0%
Inflation:• Commodity Prices• Dollar• Energy• Productivity• Outlook - Creeping Up
03020100999897
6%
4%
2%
0%
-2%
-4%
6%
4%
2%
0%
-2%
-4%
U.S. CPI - SERVICES VS "CORE" COMMODITIESYear to Year Percent Change
December@ 2.8%Line is Services
Bars are Commodities, ex. Food & Energy @ - 2.5%
039995918783
7%
6%
5%
4%
3%
2%
1%
0%
390
360
330
300
270
240
210
180
CPI and Commodities PricesGreen Line is CRB Price Index (right)
Blue Line is Yr/Yr change in CPI (left)
0301999795939189878583
7%
6%
5%
4%
3%
2%
1%
0%
90
81
72
63
54
45
36
27
CPI and ISM Prices
Green Line is ISM Price Index (right)Blue Line is Yr/Yr change in CPI (left)
0301999795939189878583
7%
6%
5%
4%
3%
2%
1%
0%
90
87
84
81
78
75
72
69
CPI and Capacity Utilization
Green Line is Capacity Utilization (right)
Blue Line is Yr/Yr change in CPI (left)
0301999795939189878583
7%
6%
5%
4%
3%
2%
1%
0%
16%
14%
12%
10%
8%
6%
4%
2%
CPI and Unemployment
Green Line is Unemployment Rate (right)
Blue Line is Yr/Yr Change in CPI (left)
International• Outlook - Weak Driven By Weakness Abroad
030201009998
5%
4%
3%
2%
1%
0%
5%
4%
3%
2%
1%
0%
EUROZONE REAL GDP GROWTHYear-to-Year Percent Change
3Q 2003@ 0.3%
0201009998
10%
8%
6%
4%
2%
0%
-2%
10%
8%
6%
4%
2%
0%
-2%
REAL GDP GROWTHSource: IMF
2002
Blue Line = China @ 8.0%Red Line = Japan @ 0.3%
Jan.Nov.Sept.JulyMayMar.Jan.
105
100
95
90
85
80
105
100
95
90
85
80
FED'S "MAJOR CURRENCY" AND"OTHER IMPORTANT TRADING PARTNERS" CURRENCY INDICES
2003
Blue Line = Major Currency Index
Green Line = OITP Index
2004
030201009998979695
$800
$600
$400
$200
$0
$800
$600
$400
$200
$0
U.S. EXTERNAL INDICATORSIn Billions of Dollars
Blue Line = Current Account DeficitGreen Line = Private Capital Inflows
Public Policy:• Monetary Policy• Fiscal Policy• Regulation• Trade
030201009998979695949392
12%
10%
8%
6%
4%
2%
0%
-2%
12%
10%
8%
6%
4%
2%
0%
-2%
REAL FEDERAL FUNDS RATEVS. M2 MONEY GROWTH
Green Line = Real Fed Funds Rate*,Blue Line = M2 Growth, Yr/Yr % Change, December @ 4.3%
* Fed Funds Rate minus "Core" Consumer Price Index
December @ - 0.2%
030199979593918987
23%
22%
21%
20%
19%
18%
17%
16%
15%
23%
22%
21%
20%
19%
18%
17%
16%
15%
FEDERAL SPENDING vs. REVENUEAs Percent of GDP
December '03
15.9%
SPENDING
REVENUE
19.4%
Latest 12 months:
Spending $ 2,190 TrillionRevenue $ 1,796 Trillion
(Blue Line)
(Green Line)
Financial MarketsIs The Bond Market Still
Overbought?
JuneMar.Dec.Sept.JulyJuneMayApr.Mar.Feb.
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
FORWARD RATES90-Day Euro-Dollar Futures
Blue Line = CurrentRed Line = Two Weeks Ago
2004
Green Line = 6-Months Ago
2005
0403020100999897
9%
8%
7%
6%
5%
4%
3%
9%
8%
7%
6%
5%
4%
3%
10-YEAR TREASURY VS. BAA CORPORATE BOND YIELD
Green Line = BAA Yield @ 6.45%
January
Blue Line = 10-Yr Treasury @ 4.15%
A Profits Rebound?• Revenue• Costs
02009896949290
$1200
$1000
$800
$600
$400
$200
$1200
$1000
$800
$600
$400
$200
CORPORATE PROFITSIn Billions of Dollars, SAAR
3rd Quarter 2003@ $1124.2 B
Adjusted for Inventory Valuation & Capital Consumption
030201009998
6%
4%
2%
0%
-2%
-4%
6%
4%
2%
0%
-2%
-4%
PRODUCTIVITY AND UNIT LABOR COSTS (TOTAL NON-FARM)Yr-to-Yr Percent Change (4 Qtr. Moving Average)
3rd Qtr.
Productivity @ 4.1%
Unit Labor Cost @ -1.4%
(Blue Line)
(Green Line)
Uncommon Wisdom
Tyrannosaurus Rex
Big One Day, Dead the Next
0402009896949290888684828078
600
500
400
300
200
100
0
5000
4000
3000
2000
1000
0
S&P 400 MIDCAP INDEX VS. NASDAQJanuary
Blue Line = S&P 400 Midcap, left scaleGreen Line = Nasdaq, right scale
Uncommon Wisdom
“Whether you get soaked depends on proper
balance”
40%
30%
20%
10%
0%
40%
30%
20%
10%
0%
Total Return(Year-to-Date, January-2003 thru December 2003)
Gov't T-Bills
Wilshire
Corporate
High Yield
LBML 3-MoRussellRussellS&P 500
15%
10%
5%
0%
-5%
-10%
15%
10%
5%
0%
-5%
-10%
CAPITAL MARKETS PERFORMANCE SUMMARY5-Year Returns as of December 2003
Stocks BondsS&P 400
MSCIEAFE
LBIntermediate
G/C
NCREIFProperty
Index
Midcap
RealEstate
1000 Growth 2000 T-Bills Aggregate
Russell1000 Value
Economic Forecast*(Qtr/Qtr% Change, Annual Rate)
2001 2002 2003 2004
Real GDP* 0.5% 2.2% 3.1% 5.1%
Personal Consumption*
2.5% 3.4% 3.1% 3.8%
Equipment & Software*
-5.2% -2.8% 5.4% 17.2%
CPI (YoY) 2.8% 1.5% 2.3% 1.6%
Corporate Profits (YoY)
-5.8% 17.4% 16.9% 17.4%
10-Yr T-Note 4.98% 4.30% 3.89% 4.59%
www.wachovia.com/economics