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Omair AliAntonio Alfonso
Shehab ChowdhuryMohammad Zubair
Ahsan Syed
Federal Reserve Open Market CommitteeFed Challenge 2011
AGENDA
I. General Comments
II. GDP growth trends
III. Consumer Sector
IV. Housing Market
V. Labor Markets and Productivity
VI. Inflation
VII. Financial Markets
VIII. Specific Issues of Concern: Eurozone Worries
IX. Policy Action
I. General Comments: U.S. Economic Climate
p GDP growth has improvedp Labor market is weak with the unemployment rate
stuck at 9.1%p Consumers remain cautious – Consumer confidence
still low.p Business investment picking up.p Oil Prices are volatile.p Financial market worries dominate.p Policy actions – focus on reducing unemployment
II. GDP Growthp 3Q 2011 marks ninth consecutive quarter increase in real
GDP.p 3Q 2011 real GDP growth stepped up to a 2.5% rate from
1.3% in 2Q and 0.4% in 1Q. p Growth is up 1.6% compared to a year ago.p Strength seen in consumer spending (up 2.4%) and fixed
nonresidential investment (up 14%).p Final sales grew at a healthy 3.6% rate, but inventories
subtracted 1.1% from this to give us 2.5% 3Q growth.p Core PCE deflator was up at a 2.4% rate in 3Q, which is high,
but better than the 3.3% rate seen in 2Q.p Despite 3Q improvement, the GDP gap – the difference
between actual and potential GDP is sizeable at 6.7%
Large GDP Gap
-10
-8
-6
-4
-2
0
2
4
6
7000
8000
9000
10000
11000
12000
13000
14000
15000
90 92 94 96 98 00 02 04 06 08 10
GDP_GAP (% left axis)REAL_GDP (2005 $ bill, right axis)REAL_GDP_POTENTIAL (2005 $ BILL, RIGHT AXIS)
% Real $ BillGDP GAP, Actual Vs. Potential GDP
p Overall Assessment: Despite firmer 3Q growth, downside risks
remain.
III. Consumer Outlook
p 3Q 2011 revival in consumer spending but negative signs
dominate.p Consumer confidence slipped in October. p Income growth is meager
IV. Housing
p Some stabilization seenp Consumer confidence slipped in October. p Income growth is meager
Mortgage rates
Housing starts
Home Sales and the NAHB Housing Market Index
Foreclosure activity and Delinquency
Case Shiller Home Price Indexes
Case-Shiller continued
Retail Sales
V. Labor Markets and Productivity
p Unemployment rate is stuck at 9.1%p Consumer confidence slipped in October. p Income growth is meager
Unemployment
Under Utilized labor
Pay Roll
Job less
ISm
Industrial Production
Inventory Sales
Durable goods
Non Defense Captial goods
Trade Balance
U.S Dollar Index
Federal Deficit In terms of GDP
Out Put Per Hour
PPI
Capacity
Federal Funds Rate
Commercial Paper
CDS