ON THE ECONOMIC, BUSINESS AND POLITICAL CLIMATE

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1 ON THE ECONOMIC, BUSINESS AND POLITICAL CLIMATE Roger Tutterow, Ph.D. Coles College of Business Kennesaw State University 2017 Spring Workshop May 25, 2017 Buford, GA

2 Expansion Getting Tired? (Source: National Bureau Economic Research Peak Trough Contraction Expansion February 1945(I) October 1945 (IV) 8 80 November 1948(IV) October 1949 (IV) July 1953(II) May 1954 (II) August 1957(III) April 1958 (II) 8 39 April 1960(II) February 1961 (I) December 1969(IV) November 1970 (IV) November 1973(IV) March 1975 (I) January 1980(I) July 1980 (III) 6 58 July 1981(III) November 1982 (IV) July 1990(III) March 1991(I) 8 92 March 2001(I) November 2001 (IV) December 2007 (IV) June 2009 (II) 18 73??? 95 Average, all cycles: (11 cycles) % GDP vs. Final Sales (Source: Bureau of Economic Analysis) 4% 2% -2% -4% -6% GDP Final Sales -8% -1 1Q-07 3Q-07 1Q-08 3Q-08 1Q-09 3Q-09 1Q-10 3Q-10 1Q-11 3Q-11 1Q-12 3Q-12 1Q-13 3Q-13 1Q-14 3Q-14 1Q-15 3Q-15 1Q-16 3Q-16 1Q-17 Page 1

3 Contributions To GDP Growth (Source: Bureau of Economic Analysis) GDP = Consumption Gross Net Exports Government Investment 2015: Q % 0.35% 0.52% 0.34% 2015: Q4 0.9% 1.53% 0.39% 0.45% 0.18% 2016: Q1 0.8% 1.11% 0.56% 0.01% 0.28% 2016: Q2 1.4% 2.88% 1.34% 0.18% : Q3 3.5% 2.03% % 0.14% 2016: Q4 2.1% % 1.82% 0.03% 2017: Q1 0.7% 0.23% 0.69% 0.07% 0.3 Gross Nonresidential Residential Inventory Investment = 2015: Q3 0.35% 0.49% 0.43% 0.57% 2015: Q4 0.39% 0.43% % 2016: Q1 0.56% 0.44% 0.29% 0.41% 2016: Q2 1.34% 0.12% 0.31% 1.16% 2016: Q % 0.16% 0.49% 2016: Q4 1.47% 0.11% 0.35% 1.01% 2017: Q1 0.69% 1.12% % 65 ISM s PMI (Source: Institute of Supply Management) Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Jul-16 Apr-17 Page 2

4 120 Foreign Exchange: Trading Partners (Source: Board of Governors of the Federal Reserve System) Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Consumer Sentiment (source: University of Michigan, Survey Research Center) Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Page 3

5 Comments from Curtin Normally, the implication would be that consumers expected Trump's election to have a positive economic impact. That is not the case since the gain represents the result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth. Indeed, the difference between these two parties is nearly identical to the difference between the all-time peak and trough values in the Expectations Index versus While the expectations of Democrats and Republicans largely offset each other, the overall gain in the Expectations Index was due to selfidentified Independents, who were much closer to the optimism of the Republicans than the pessimism of the Democrats. (Note: the February Expectations Index was 55.5 among Democrats, among Republicans, and 89.2 among Independents.) Retail Sales (source: U.S. Bureau of the Census, annual rate of growth) 12% 9% 6% 3% -3% -6% -9% RS Total RS ex-auto -12% Jan-96 Dec-96 Nov-97 Oct-98 Sep-99 Aug-00 Jul-01 Jun-02 May-03 Apr-04 Mar-05 Feb-06 Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Apr-15 Mar-16 Feb-17 Page 4

6 Car & Truck Sales (Source: Department of Commerce, in millions) Auto Light Truck Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Leading Economic Indicators (source: Conference Board, % change in last 6 months) 9% 6% 3% -3% -6% -9% -12% -15% Jul-04 Dec-04 May-05 Oct-05 Mar-06 Aug-06 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Page 5

7 600 Change in Payroll Employment (Source: Bureau of Labor Statistics) Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16 15% State Employment (Jobs Lost) (source: Bureau of Labor Statistics) 12% 9% 6% 3% -3% -6% -9% -12% -15% North Dakota Alaska District of Col South Dakota Texas Nebraska West Virginia New York Louisiana Massachusetts Iowa Oklahoma New Hampshire Vermont Pennsylvania Montana Maine Kansas Arkansas Virginia Wyoming Minnesota Missouri Maryland New Mexico Colorado Washington Wisconsin New Jersey Kentucky Rhode Island Mississippi Connecticut Illinois Hawaii Indiana Utah Delaware Tennessee Alabama Ohio North Carolina South Carolina Georgia California Oregon Idaho Michigan Florida Arizona Nevada Page 6

8 State Employment (Net Change) (source: Bureau of Labor Statistics) 21% 18% 15% 12% 9% 6% 3% -3% -6% North Dakota Texas Utah District of Col Colorado Washington Massachusetts New York California Oregon South Dakota Idaho Tennessee Florida Georgia South Carolina Nebraska Minnesota Alaska Hawaii North Carolina Virginia Montana Delaware Maryland Iowa New Hampshire Kentucky Oklahoma Indiana Michigan Vermont Louisiana Wisconsin Arkansas Ohio Missouri Pennsylvania Arizona Nevada Rhode Island Illinois Kansas New Jersey West Virginia Connecticut Maine Alabama New Mexico Mississippi Wyoming 6% State Employment (L12M) (source: Bureau of Labor Statistics) 5% 4% 3% 2% 1% -1% -2% -3% -4% Oregon Florida Washington Nevada Utah Georgia Missouri District of Col Massachusetts Hawaii California North Carolina Idaho Colorado Texas Michigan New Hampshire South Carolina Tennessee Minnesota South Dakota Arizona Virginia New York Maryland Wisconsin Alabama Montana Indiana Ohio Rhode Island Vermont Nebraska Kentucky Delaware Pennsylvania Iowa Illinois Arkansas New Jersey New Mexico West Virginia Maine Connecticut Louisiana Oklahoma Kansas Mississippi Alaska North Dakota Wyoming Page 7

9 Impact of Energy on Employment (source: BLS) 16% Employment Change: GA Cities 14% Gainesville 12% 1 Atlanta Savannah Recovery GEORGIA 8% Athens Augusta Macon 6% Valdosta Columbus 4% Hinesville Brunswick Rome 2% Albany Warner Robins Dalton -25% -2-15% -1-5% Recession Page 8

10 3 2 Employment: Georgia Recess Recover GEORGIA Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins 15% 1 5% Employment: Georgia Net L12M -5% -1-15% GEORGIA Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins Page 9

Growth Rate by County (source: BLS) Prices: Still talk of Deflation/Inflation? (source: Bureau of Labor Statistics) CPI was up by 0.2% in April after having been up 0.1% and down 0.

11 Growth Rate by County (source: BLS) Prices: Still talk of Deflation/Inflation? (source: Bureau of Labor Statistics) CPI was up by 0.2% in April after having been up 0.1% and down 0.3% in March and February. Core CPI rose 0.1% in March after falling by 0.1% and rising by 0.2% in two previous months. Overall CPI up 2.2% over last 12 months. Core up 1.9% over same period. Energy component was up 1.1% last month and up by 9.3% over the last 12 months Page 10

12 Crude Oil: West Texas Intermediate (Source: US Energy Information Administration) Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16 Nov-16 25% Federal Funds Rate Short Rates Finally Start Moving (Source: Board of Governors of Federal Reserve System) 2 15% 1 5% Jan-80 Sep-81 May-83 Jan-85 Sep-86 May-88 Jan-90 Sep-91 May-93 Jan-95 Sep-96 May-98 Jan-00 Sep-01 May-03 Jan-05 Sep-06 May-08 Jan-10 Sep-11 May-13 Jan-15 Sep-16 Page 11

13 Market s FFR Outlook (Source: CME Group) bps bps bps bps bps bps /14/2017 7/26/2017 9/20/ /1/ /13/2017 1/31/ Year Treasury Bonds (Source: Board of Governors of Federal Reserve System) 7% 6% 5% 4% 3% 2% 1% Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16 Page 12

14 30-Year Fixed Rate Mortgages (Source: Freddie Mac) 4.6% 4.4% 4.2% % 3.6% 3.4% 3.2% 3. 1/7/16 1/28/16 2/18/16 3/10/16 3/31/16 4/21/16 5/12/16 6/2/16 6/23/16 7/14/16 8/4/16 8/25/16 9/15/16 10/6/16 10/27/16 11/17/16 12/8/16 12/29/16 Charge Off Rates at Commercial Banks (source: Board of Governors of the Federal Reserve System) 3.5% % 2. Biz CRE 1.5% % % Jan-91 Mar-92 May-93 Jul-94 Sep-95 Nov-96 Jan-98 Mar-99 May-00 Jul-01 Sep-02 Nov-03 Jan-05 Mar-06 May-07 Jul-08 Sep-09 Nov-10 Jan-12 Mar-13 May-14 Jul-15 Sep-16 Page 13

CRE Loan Standards: Net Tightening (Source: Federal Reserve System, Senior Officers Lending Survey) 50 40 30 20 ADC Non-Res Multifam 10

15 CRE Loan Standards: Net Tightening (Source: Federal Reserve System, Senior Officers Lending Survey) ADC Non-Res Multifam Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Page 14

16 3 Construction Spending: By Source (source: U.S. Bureau of the Census) Public Private -3 Jan-2003 Jul-2003 Jan-2004 Jul-2004 Jan-2005 Jul-2005 Jan-2006 Jul-2006 Jan-2007 Jul-2007 Jan-2008 Jul-2008 Jan-2009 Jul-2009 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 Jul-2012 Jan-2013 Jul-2013 Jan-2014 Jul-2014 Jan-2015 Jul-2015 Jan-2016 Jul-2016 Jan Construction Spending: By Sector (Source: U.S. Bureau of Census) Residential Non-Residential -5 Jan-2003 Jul-2003 Jan-2004 Jul-2004 Jan-2005 Jul-2005 Jan-2006 Jul-2006 Jan-2007 Jul-2007 Jan-2008 Jul-2008 Jan-2009 Jul-2009 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 Jul-2012 Jan-2013 Jul-2013 Jan-2014 Jul-2014 Jan-2015 Jul-2015 Jan-2016 Jul-2016 Jan-2017 Page 15

17 Non-Residential Construction (Source: U.S. Bureau of Census) Lodging Office Commercial Health care Educational Religious Public safety Amuse & Rec Transportation Communication Power Highway and street Sewage & waste disp Water supply Conserv and develop Manufacturing NAHB Housing Market Index (Source: National Association of Home Builders) Mar-95 Oct-95 May-96 Dec-96 Jul-97 Feb-98 Sep-98 Apr-99 Nov-99 Jun-00 Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Jan-15 Aug-15 Mar-16 Oct-16 Page 16

18 US Housing Permits: SF and Total (source: U.S. Bureau of Census) Total SF Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 US Housing Permits: Multi-family (Source: U.S. Bureau of Census) Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Page 17

19 GA Housing Starts: Multi-family (12 month moving average) Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Permits: GA Cities Total SF Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins Page 18

20 Permits: GA Cities Total SF Albany Athens Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins The Demographics: Boom & Bust (Source: CDC, US Bureau of Census) Page 19

230 Home Prices & CPI (Source: S&P Case-Shiller & Bureau of Labor Statistics) 210 190 170 150 130 110 90 70 CPI Case-Shiller 50 Jan-98 Sep-98 May-99 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04

21 230 Home Prices & CPI (Source: S&P Case-Shiller & Bureau of Labor Statistics) CPI Case-Shiller 50 Jan-98 Sep-98 May-99 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 CS/S&P Home Price Index (Source: S&P Case Shiller) Denver Dallas Portland Seattle Charlotte Boston San Francisco US Atlanta Comp-20 Bust Los Angeles Cleveland San Diego Net Minneapolis Washington Detroit New York Chicago Tampa Miami Phoenix Las Vegas Page 20

22 3 Home Prices: SE Region (source: Federal Housing Finance Agency) AL FL GA MS NC SC TN Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 GA MSA Home Prices Bust Recover Net Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins Page 21

23 Household RE Equity (Source: Board of Governors of Federal Reserve System) Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Election 2016: What Did Everyone Miss? (Source: Iowa Electronic Markets) Page 22

24 Election 2016: What Did Everyone Miss? Currents Issues in Fiscal Affairs Federal: Government default avoided in 2011, 2013 & 2015 where from here? Back in Play: Affordable Care Act (somewhat), Keystone, Dodd- Frank, EPA, NLRB Now in Play: Tax Reform, Infrastructure Always was in Play: SCOTUS. Out of Play: Student debt? New Play: Revising Trade» Bilateral vs Multilateral» Lumber deals and tariffs States: Tax Reform Initiatives in other States Recent gains in manufacturing facilities due to reshoring Film Industry continues recent gains in GA SE states domination biz location ranking, but not exclusive Local: RE valuation and revenues rising, fiscal distress moderating Page 23

ON THE GLOBAL, REGIONAL & LOCAL ECONOMIC CLIMATE

ON THE GLOBAL, REGIONAL & LOCAL ECONOMIC CLIMATE ARC Regional Leadership Institute Roger Tutterow, Ph.D. Professor of Economics Mercer University Tutterow_RC@Mercer.edu Saint Simons Island, GA September