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National Financial Trends and Their Effects on Southern Utah

National Financial Trends and Their Effects on Southern Utah. Alan Hamlin, Ph.D. Chair, Dept. of Management Southern Utah University. Current Macro-Economic Trends. Declining GDP: Factory orders down 4 th straight month in Nov 08 (US Commerce Dept.)

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National Financial Trends and Their Effects on Southern Utah

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  1. National Financial Trends and Their Effects on Southern Utah Alan Hamlin, Ph.D. Chair, Dept. of Management Southern Utah University

  2. Current Macro-Economic Trends • Declining GDP: Factory orders down 4th straight month in Nov 08 (US Commerce Dept.) • Declining Employment- 693,000 jobs lost in December • Declining Interest Rates- Fed funds rate 0.09% 1/6/09 • Declining Interbank lending (2009 commercial lending will not improve- Moody’s 12/08) • Declining Consumer lending (November Consumer Conf. Index=38, lowest in history) • Increasing defaults and foreclosures- highest since 1930s • Declining personal consumption- 73,000 stores to close in next 6 months (Int. Council of Shopping Ctrs.) • Declining state and local revenue

  3. Federal Rescue Efforts • Recent actions include: • Increase the money supply to reduce interest rates, currently 0-0.5% • Allow non-banks to borrow from Fed • Convert non-banks to bank status to allow access to bailout monies- ex. GMAC • Borrow extensively from EU banks to fund emergency measures • Buy lower-quality mortgage-backed securities from FNMA and others

  4. US Treasury Efforts • Recent actions include: • Obtaining $700B in TARP funds to buy “toxic” assets from troubled banks and non-banks • Shut down failed banks & investment banks • Guarantee share prices of all publicly offered money market funds that desire to participate, inc. those w/NAV below zero. • Take over FHLMC and FNMA, guarantee their debts and assume stock ownership.

  5. Current State and Local Data • State of Utah statistics -19,000 jobs w/b lost in 2009 (DWS 1/7/2008) - Heavy losses in const. & mfg. • Iron County statistics 2008 -Sales tax down 11% yr. over yr. (12/15 SL Tribune) -Residential bldg. permit valuation down over 61% -Projected unemployment rate for 2009= 5% (DWS) • Washington County statistics 2008 -Retail sales tax down 12%- SG budget cut 15% -Residential building permits down from 982 in 2005 to 156 in 2008, $183M to $24M. • Defaults & foreclosures up significantly • Projected unemployment rate for 2009= 6% (DWS)

  6. Prognostications • What does this year look like for Southern Utah? • Unemployment higher • Construction and mfg. lower • Consumer and commercial spending • Housing estimates • Low interest income for retirees • Continued volatility in equity & capital mkts.

  7. Who Will This Affect? • Real Estate: builders, lenders, realtors, appraisers, all others. • Tourism: hotels, restaurants, golf, airlines. • All luxury retailers: upscale malls, automobiles, RV/Boat retailers, etc. • Local and State Governments • Education

  8. What Can Be Done? • Governments, businesses and households must: • Cut spending • Increase revenues if possible • Refinance debt • Change habits and thinking • Ride out the storm- 18 months is normal, this recession will probably be longer and deeper.

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