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Economic Overview. September 2009. www.wellscap.com. Jay N. Mueller, CFA Wells Capital Management Fixed Income Group. Growth: Q3 bounce followed by weak recovery Employment: job losses slowing Inflation: headline about to turn up; core stable Monetary: Fed on hold
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Economic Overview September 2009 www.wellscap.com Jay N. Mueller, CFA Wells Capital Management Fixed Income Group
Growth: Q3 bounce followed by weak recovery Employment: job losses slowing Inflation: headline about to turn up; core stable Monetary: Fed on hold Fiscal: short term uncertainty; long run train-wreck International: USA lags global recovery Big Six Summary
U.S. GDP: quarterly growth rate (annualized) Rate of contraction has moderated: Q3 likely to be positive Source: Bloomberg
Personal Consumption (real growth rate annualized) Following a small bounce in Q1 consumption resumed its decline in Q2 Source: Bloomberg
Private Domestic Fixed Investment % change Though an improvement over Q1, PDI contracted for the 8th straight quarter in Q2 Source: Bloomberg
Payrolls: monthly change (non-farm, 000) The pace of job loss is slowing, but still worrisome Source: Bloomberg
Unemployment Rate Closing in on 10% Source: Bloomberg
Broad Unemployment (U6) Including discouraged workers and underemployed
Initial Claims for Unemployment Insurance (4 wk ma) Claims off peak but remain uncomfortably high
Initial Claims for Unemployment Insurance (4 wk ma) Prior peaks in claims coincide with business cycle troughs
Initial Claims (4 wk ma) versus Unemployment Rate The 1982 claims peak was swiftly followed by a drop in the unemployment rate. Not so for the 1991 and 2001 peaks.
Average Work Week Hours worked remains very low
Mean Period of Unemployment (weeks) Out of work for nearly half a year on average
CPI YOY Energy-driven deflation likely to revert to inflation later this year Source: Bloomberg
CPI YOY – long term view Most significant headline deflation in sixty years Source: Bloomberg
CPI Ex-food and Energy YOY Core inflation is low and fairly stable Source: Bloomberg
Crude Oil – West Texas Intermediate spot price Crude has trended higher since late ‘08 Source: Bloomberg
Natural Gas – near futures contract Much weaker than oil Source: Bloomberg
Copper – near futures contract Substantial rally so far this year Source: Bloomberg
Federal Funds Target Rate Short term rate management has reached its downside limit Source: Bloomberg
Monetary Base Quantitative Easing: a massive injection of bank reserves Source: Bloomberg
M1 year over year growth rate Fastest money supply growth in twenty-five years Source: Bloomberg
Consumer Credit Outstanding No traction from easy policy so far – consumer credit has been shrinking since September ‘08 Source: Bloomberg
U.S. Federal Surplus/Deficit as a % of GDP With Projection for 2009 Source: Bloomberg
Deficit Projections – Obama Budget Federal spending is running wild with worse to come SOURCE: CBO, White House Office of Management and Budget | The Washington Post - March 21, 2009
Public Federal Debt Outstandingwith projection for 2009 Source: Bloomberg
U.S. Federal Debt Projection Federal public debt outstanding likely to double or worse over the next decade
Global Data Cross Section The U.S. was first into recession but Europe and Japan have been hit harder: Source: Bloomberg
Japan Unemployment Rate Highest on record
Euro/US Dollar safe haven trade is unwinding
Gold $/ounce gold supported by doubts about the dollar
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