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Economic Outlook

Economic Outlook. Mark Zandi Economy.com, Inc. An Improving Economy. Demand. Potential GDP Growth. Output. Labor hours. % change year ago Sources: BEA, BLS. States in Recession October 2003. Enormous Policy Stimulus. Real GDP growth % change year ago Sources: BEA, Economy.com.

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Economic Outlook

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  1. Economic Outlook Mark Zandi Economy.com, Inc.

  2. An Improving Economy Demand Potential GDP Growth Output Labor hours % change year ago Sources: BEA, BLS

  3. States in Recession October 2003

  4. Enormous Policy Stimulus Real GDP growth % change year ago Sources: BEA, Economy.com Actual Without stimulus

  5. Surging Mortgage Borrowing Cash raised via mortgage borrowing $ bil Source: Economy.com $118 $178 Home equity Refinance $103 Home sales

  6. Plunging Tax Payments Cash raised from lower tax payments $ bil Source: Economy.com $180 $98 - $6

  7. Soaring Government Outlays Real federal government spending % change year ago Source: BEA

  8. Defense Spending Boost Seattle (1.0%) Philadelphia (1.6%) Boston (1.8%) Sacramento (3.2%) New Haven (1.3%) Salt Lake City (2.2%) Cincinnati (1.5%) San Jose (1.9%) Baltimore (2.5%) Denver (1.1%) St. Louis (4.8%) Norfolk (8.8%) Los Angeles (2.6%) Washington DC (5.9%) Riverside (1.0%) Phoenix (2.7%) Orange County (1.0%) Atlanta (2.2%) Fort Worth (5.8%) San Diego (3.9%) Dallas (1.7%) Orlando (3.1%) San Antonio (3.8%) New Orleans (1.5%) Tampa (1.2%) Austin (1.2%) Metro areas where defense procurement contracts are ≥ 1% of gross product, 2002 (Red indicates greater than 3% of gross product)

  9. Amazing Productivity Growth... Nonfinancial businesses % change year ago, 4-qtr MA Source: BLS

  10. ...Lifts Profitability... Profits $ bil (L) Nonfinancial businesses Source: BEA Profit margin (R)

  11. ...Which Prompts Business to Invest... Business spending on information technology $ bil Source: BEA

  12. ...and Finally to Hire? Jobs, mil Source: BLS

  13. Higher Profits...More Jobs Sources: BEA, BLS Profits growth 1 year lead (L) Employment growth (R)

  14. Near-Term Outlook % change year ago Real GDP Employment

  15. Vehicle Spent-Up Demand Vehicle sales, mil, 12 mo MA Sources: Census, Economy.com Actual Trend

  16. Potential Housing Market Problems Buffalo Detroit Portland Syracuse Boston Milwaukee Nassau Pittsburgh Bergen-Passaic Salt Lake/Provo Cleveland Newark San Francisco Indiannapolis Monmouth Columbus San Jose Las Vegas Jersey City St. Louis Los Angeles Louisville Orange County Baltimore Tulsa Washington DC San Diego El Paso Corpus Christi Tampa Ft. Lauderdale New Orleans Miami Potential Bubbles Ft. Myers Potentially Overbuilt Naples

  17. Households Are Under Stress Sources: MBA, U.S. District Courts Mortgage foreclosure rate (R) Bankruptcy rate per 1,000 households (L)

  18. Ballooning Trade Deficit Trade deficit $ bil, 12 mo moving sum Source: Census China (R) Total excluding OPEC (L)

  19. Ongoing State Budget Woes State and local government deficit Source: BEA Share of GDP (R) $ bil (L)

  20. What if Jobs Fail to Rebound? Real cashflow less wages % change year ago Source: Economy.com Real cashflow Real wages and salaries

  21. Outlook Summary • There is substantial optimism regarding the economy's prospects. Demand, production, and even the job market are improving. • Massive monetary and fiscal stimulus are the principal catalysts for the economic revival. • The economy is also benefiting as the principal excesses of the late 1990s have been largely worked off and productivity growth remains robust. • While the economy will come back, it will not coming roaring back. Vehicle and housing demand are spent and household leverage is high. Also weighing on the economy are a struggling global economy and fiscally stressed state governments. • The recovery will evolve into a self-sustaining rebound only if the recent revival in jobs continues.

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