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U.S. and Michigan Economic Outlook Passages Through a Sea of Uncertainty

U.S. and Michigan Economic Outlook Passages Through a Sea of Uncertainty. Robert A. Dye Chief Economist, Comerica Bank January, 2013. Mare Incognitum…The Sea of Uncertainty. EPUI Explains Persistent Weak Business Confidence. Components of NFIB Survey Employment plans Current job openings

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U.S. and Michigan Economic Outlook Passages Through a Sea of Uncertainty

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  1. U.S. and Michigan Economic OutlookPassages Through a Sea of Uncertainty Robert A. DyeChief Economist, Comerica Bank January, 2013

  2. Mare Incognitum…The Sea of Uncertainty

  3. EPUI Explains Persistent Weak Business Confidence Components of NFIB Survey Employment plans Current job openings Capital outlay plans Inventory plans Current inventory Expectations about economy Expectations about sales Expected credit conditions Good time to expand Earnings Economic Policy Uncertainty index (L) NFIB Business Optimism, (R)

  4. The Fiscal Cliff, Happy New Year! • Obama era payroll tax cut has expired for everyone • Increased income, capital gains, dividend taxes for the wealthy 1% • Will add up to about $160 billion in additional revenue in 2013 • RDPI set to fall 3.5-4.0 percent annualized 2013Q1 • Debt ceiling debate still to come • $110 budget sequester still unresolved • Long-term entitlement spending still unresolved

  5. Recent U.S. Data Is Mixed • 2012Q3 real GDP 3.1%, Q4 weaker • Dec. payroll employment +155,000 • Unemployment rate stable at 7.8% • House sales • Home prices • Home construction • Dec. auto sales 15.4 million unit rate • Dec. ISM MF Survey 50.7 percent Home Sales Trending Up Existing, ths (L) New, ths (R)

  6. 2012Q4 Helped by Household Sector, Hurt by Uncertainty • Consumer confidence improving • Vehicle sales, Sandy • Housing sector strengthening • Other credit fueled purchases • Labor markets • Asia • U.S. policy uncertainty • Europe continues to melt Auto Sales and Consumer Confidence Auto Sales, millions SAAR (L) Confidence Index (R)

  7. Consumer Deleveraging...And Releveraging Non-revolving cons. credit, pchya (L) Financial Obligations Ratio, (R)

  8. Job Creation Is Keyto Sustaining the Economy Monthly Job Creation, ths Unemployment Rate, percent

  9. Forecast for 2013, Fiscal Tightening Trumps Monetary Easing Forecast History

  10. Interest Rates Face Upward Pressure As Flight to Quality and Financial Repression Eventually Unwind 10-Year Treasury Fed Funds

  11. Forecast Risks Downside Risks • Consumer spending • Job growth • Biz investment • Federal Spending • Eurozone and Asia • More “transitory” factors/oil prices • Housing market languishes • Healthcare costs Upside Risks • QE3 gains traction • Equity markets rally • Jobs! • Construction • Households unleash pent-up demand • Low interest rates/investment boom • Energy/manufacturing renaissance • Technology

  12. Most Michigan Labor Markets Cooled 2012H2 Payroll Employment, pchya

  13. Robert A. Dye Subscribe www.comerica.com/economics Follow on Twitter @Comerica_Econ

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