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Wichita 2011 Review
2012 Forecast
Jeremy Hill, directorCenter for Economic Development and Business
ResearchW. Frank Barton School of Business
Wichita State UniversityOctober 2011
Debt Ceiling GDP debt ratio Federal Reserve – Twisty European debt crisis Political uncertainty Corporate profits Employment number Consumer confidence China – inflationary pressures Standard & Poor’s credit downgrade of the U.S. Stock market volatility GDP
National/Global Influencing Factors
U.S. Gross Domestic Product
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Recession Series2 Gross domestic product
Sources: Bureau of Economic Analysis, National Bureau of Economic Research
Agriculture prices Energy Investment Defense cuts/ Super Committee General Aviation – fast recovery Commercial Aviation – orders Wichita Exports
Kansas/Wichita Influencing factors
Top 5 Exports from Kansas
Jan-
02
Oct-0
2
Jul-0
3
Apr-0
4
Jan-
05
Oct-0
5
Jul-0
6
Apr-0
7
Jan-
08
Oct-0
8
Jul-0
9
Apr-1
0
Jan-
11 $-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
Food & Agri Chemicals Machinery Aerospace
Sources: USA Trade Online
Wichita Business Concerns
GLOBALLY NATIONALLY LOCALLY
Eu
ro.
deb
t cri
sis
Com
peti
tive
posit
ion
Glo
bal d
em
an
d
Tax s
tru
ctu
re
Fed
era
l d
eb
t
Bu
sin
ess
reg
ula
tion
En
vir
on
men
tal
reg
.D
efl
ati
on
Sta
te a
nd
local
gov.
Real esta
te
mark
et
Tig
ht
cre
dit
con
dit
ion
s
Extremely Concerned
Very Concerned
Moderate Concern
Little Concern
No Concern
Sources: CEDBR
Rising Staying the same
Falling0%
10%
20%
30%
40%
50%
60%
70%
80%
Prices Charged
2009 2010 2011
Rising Staying the same
Falling0%
10%
20%
30%
40%
50%
60%
70%
80%
Costs: Price of Inputs
2009 2010 2011
Existing Conditions
Sources: CEDBR
Rising Staying the same
Falling0%
10%
20%
30%
40%
50%
Volume of Demand
2009 2010 2011
Existing Conditions
Sources: CEDBR
Rising Staying the same
Falling0%
10%
20%
30%
40%
50%
Profit Margins
2009 2010 2011
Costs
37% - costs will increase Prices Charged -
64% - prices will stay the same Employment –
29% expect increases 50% expect no changes
Factors that are holding us back Uncertainty about future economic policies Low consumer and business confidence Sustained high unemployment The burden of new regulations
Overall Business Expectations Next 3 to 6 Months
Sources: CEDBR
Kansas Employment
2005
2006
2007
2008
2009
2010
2011
2012
-20%
-15%
-10%
-5%
0%
5%
Goods Producing
Trade, Trans. & Utili-ties
Services
Rolling Annual Average
Sources: Bureau of Labor Statistics, CEDBR
Wichita Employment
2005
2006
2007
2008
2009
2010
2011
2012
-20%
-15%
-10%
-5%
0%
5%
Goods Producing
Trade, Trans. & Utili-ties
Services
Rolling Annual Average
Sources: Bureau of Labor Statistics, CEDBR
Goods Production• Aviation• Commercial - strong• General – “top half” should be good – excess
demand will go to back logs• Military - mixed
• Chemicals - strong• Construction – will remain fragile
Non-Durable
DurableNat. Res. & Const.
Production Sectors
1.8%
1.4%
2.0%
1.1%
Trade, Transportation & Utilities
• Retail/Consumption- • Upper middle and high end consumer –
strong demand• Middle income consumer – will remain cash
strapped
• Wholesale – will be down due to excess slack
Trans. & Utilities
RetailWholesaleTrade, Trans. &Util. Sectors
-0.5%
2.3%
0.5%
0.3%
Services• Information – following the national trend
• Financial Services – following the national trend
• Healthcare – following national trend
• Temporary agencies – continued demand
• Education – slowing as employment opportunities becomes available
Services
-5.0%
2.1%
-1.5%
6.1% 0.9% 2.1% 1.6%
Information
Fin. Act.
Pro. & Bus.
Edu. & Health
Leisure & Hosp.
Other
General Expectations - Wichita
Global and National “uncertainties” within the market need to be alleviated before business confidence returns.
Global business profits have to remain high before local moderate GDP growth.
Acceleration in manufacturing (EMP 1.2%) will spill over to the service and retail sectors.
Input costs will continue to rise in 2012, putting pressure on businesses that sell locally.
Upper middle and high income households will increase consumption, but the slightest negative news will cause an abrupt decline in purchases.
Wichita’s labor market will continue to heal, but it will remain fragmented with a portion of the labor market underemployed in 2012.
Employment is expected to increase by 1.3% (3,800) in 2012. This is a welcomed relief, but minimal growth.