ON THE ECONOMIC, BUSINESS AND POLITICAL CLIMATE Roger Tutterow, Ph.D. Coles College of Business Kennesaw State t University it rtuttero@kennesaw.edu CCUL Coastal Supervisory Committee & Internal Auditor Conference July 24, 2015 Charleston, SC
6.0 5.0 U.S. Quarterly GDP Average Growth Rates Last 4 Expansions 5.0 Quarterly GDP Average 4 expansion average 4.0 3.0 3.4 2.9 3.4 2.0 2.3 1.0 0.0 1982-1987 1991-1995 2001-2006 2009-2014 6% GDP vs. Final Sales 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 Page 1
Contributions To GDP Growth GDP = Consumption Gross Net Exports Government Investment 2013:Q3 4.5 1.39 2.50 0.59 0.04 2013:Q4 3.5 2.51 0.62 1.08-0.71 2014:Q1-2.1 0.83-1.13-1.66-0.15 2014:Q2 46 4.6 175 1.75 287 2.87-0.34 034 031 0.31 2014: Q3 5.0 2.21 1.18 0.78 0.80 2014: Q4 2.2 2.98 0.61-1.03-0.35 2015: Q1-0.2 1.43 0.40-1.89-0.11 Gross Investment = Nonresidential Residential Inventory 2013: Q3 2.50 0.67 0.34 1.49 2013: Q4 062 0.62 123 1.23-0.28-0.34 2014: Q1-1.13 0.20-0.17-1.16 2014: Q2 2.87 1.18 0.27 1.42 2014: Q3 1.18 1.10 0.10-0.03 2014: Q4 0.61 0.60 0.12-0.10 2015: Q1 0.40-0.26 0.21 0.45 65 ISM s PMI 60 55 50 45 40 35 30 25 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Sep-06 May-07 Sep-08 May-09 Jan-10 Sep-10 May-11 Sep-12 May-13 Jan-14 Sep-14 May-15 Page 2
120 Foreign Exchange: Trading Partners 110 100 90 80 70 60 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Sep-06 May-07 Sep-08 May-09 Jan-10 Sep-10 May-11 Sep-12 May-13 Jan-14 Sep-14 Consumer Sentiment 115 110 105 100 95 90 85 80 75 70 65 60 55 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 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Page 3
Retail Sales: 12% 9% 6% 3% -3% -6% -9% RS Total RS ex-auto -12% Jan-96 Nov-96 Sep-97 Jul-98 May-99 Mar-00 Jan-01 Nov-01 Sep-02 Jul-03 May-04 Mar-05 Nov-06 Sep-07 Jul-08 May-09 Mar-10 Jan-11 Nov-11 Sep-12 May-14 Mar-15 14 13 12 Car & Truck Sales (SAAR, in millions) Auto Light Truck 11 10 9 8 7 6 5 4 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Page 4
Leading Economic Indicators (source: Conference Board, % change in last 6 months) 9% 6% 3% -3% -6% -9% -12% -15% Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Nov-13 Mar-14 Jul-14 Nov-14 600 Change in Employment (non-farm payrolls) 400 200 0-200 -400-600 -800-1000 Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Apr-05 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Oct-12 Apr-14 Jan-15 Page 5
State Employment (Jobs Lost) 15% 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 State Employment (Jobs Added) 18% 15% 12% 9% 6% 3% -3% -6% North Dakota Utah Texas Colorado California Florida Idaho Washington Nevada Michigan Tennessee South Carolina Oregon Georgia Arizona North Carolina Delaware Indiana District of Col Kentucky Oklahoma Hawaii New York Ohio Massachusetts Minnesota Montana Maryland Alaska Iowa Nebraska South Dakota Louisiana Wisconsin Kansas Vermont Wyoming Connecticut Illinois Rhode Island Virginia Arkansas Pennsylvania Alabama New Hampshire Mississippi New Jersey Missouri New Mexico West Virginia Maine Page 6
State Employment (Net Change) 21% 18% 15% 12% 9% 6% 3% -3% -6% North Dakota Texas District of Col Utah Alaska Colorado Washington New York Massachusetts South Dakota Oklahoma Nebraska California Louisiana Iowa Montana Tennessee Minnesota Idaho South Carolina Kentucky Vermont Georgia Maryland Kansas Oregon North Carolina Indiana Wyoming Florida Hawaii Delaware West Virginia Virginia Pennsylvania New Hampshire Arkansas Michigan Wisconsin Ohio Connecticut Rhode Island Illinois Missouri New Jersey New Mexico Arizona Mississippi Maine Alabama Nevada US Employment Shift by Sector 4 3 Loss Recover 2 1-1 -2-3 -4 Total Mining Const Manuf T T & Util Info Fin Prof & Biz Ser Educ & HC Leis & Hosp Other Serv Govt Page 7
1 5% Employment: North Carolina Net L12M -5% -1-15% NC Asheville Burlington Charlotte Durham Fayetteville Goldsboro Greenville Durham Hickory Jacksonville New Bern Raleigh Rocky Mount Wilmington Winston-Salem Employment Change: SC Cities 16% Charleston HHI G'ville 14% Myrtle Beach Sp'burg 12% SC 1 Recovery Columbia Sumter 8% 6% Florence 4% 2% -14% -12% -1-8% -6% -4% -2% Recession Page 8
8% 6% 4% 2% -2% Employment: South Carolina Net L12M -4% SOUTH CAROLIN NA Charlesto on Columb bia Florenc ce Greenvil lle Hilton Hea ad Myrtle Beac ch Spartanbu rg Sumt er 25% 2 15% Employment: Florida Net L12M 1 5% -5% -1 FL Daytona Gainesville Jacksonville Lakeland Ocala Orlando Melborne Port St Lucie Vero Beach The Villages W Palm Beach Page 9
Employment Change: GA Cities 16% 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 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 10
Prices: Still talk of Deflation/Inflation? CPI rose by 0.4% in May after having risen by 0.1% and 0.2% in April and March. Core CPI up 0.1% in May after having been up by 0.3% and 0.2% in April & March. Overall CPI is flat over last 12 months. Core up 1.7% over same period. Energy component was up by 4.3% in May and down by 16.3% over the last 12 months Core CPI & Core PCE (% change, L12M) 3.5% 3. Core CPI Core PCE 2.5% 2. 1.5% 1. 0.5% 0. Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Page 11
Crude Oil (Spot Price, WTI) 140 120 100 80 60 40 20 Jan-04 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Jan-15 Federal Funds Rate Short Rates on Hold to mid 15? Page 12
10-Year Treasury Bonds: When Up? 7% 6% 5% 4% 3% 2% 1% Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Apr-05 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Oct-12 Apr-14 Jan-15 14% Five Little PIIGS 12% 1 8% 6% 4% 2% Portugal Ireland Italy Greece Spain Page 13
Bankers on C&I Loan Demand? 60 40 20 0-20 -40-60 -80 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97 Oct-98 Oct-99 Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 18% 16% Credit Card 14% Consumer Business 12% 1 8% 6% 4% 2% Loan Delinquency 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 Mar-13 Page 14
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Credit Unions: Credit Quality 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Delinquency Ratio Net Charge-Off Ratio 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08 1Q-09 2Q-09 3Q-09 4Q-09 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 2Q-11 3Q-11 4Q-11 1Q-12 2Q-12 3Q-12 4Q-12 1Q-13 2Q-13 3Q-13 4Q-13 1Q-14 2Q-14 3Q-14 4Q-14 1Q-15 Net Interest Margin 5. 4.5% 4. 3.5% 3. 2.5% 2. 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 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Page 16
Credit Unions: Net Worth Ratio 12.0 11.5 11.0 10.5 10.0 95 9.5 9.0 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08 1Q-09 2Q-09 3Q-09 4Q-09 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 2Q-11 3Q-11 4Q-11 1Q-12 2Q-12 3Q-12 4Q-12 1Q-13 2Q-13 3Q-13 4Q-13 1Q-14 2Q-14 3Q-14 4Q-14 1Q-15 25% 2 15% 1 5% -5% -1-15% -2-25% -3 Construction Spending Public Private Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Page 17
Construction Spending: Private 4 3 2 1-1 -2-3 -4-5 Residential Non-Residential Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Sep-12 Apr-13 Nov-13 Jun-14 Non-Residential Construction 6 5 4 3 2011-12 2012-13 2013-14 2 1-1 -2-3 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 Page 18
US Housing Starts: SF and Total (12 month moving average) 2100 1800 1500 Total SF 1200 900 600 300 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 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 450 US Housing Starts: Multi-family (12 month moving average) 375 300 225 150 75 0 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 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Jul-14 Page 19
NC Housing Starts: Multi-family (12 month moving average) 25 20 15 10 5 0 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 12 SC Housing Starts: Multi-family (12 month moving average) 10 8 6 4 2 0 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Page 20
FL Housing Starts: Multi-family (12 month moving average) 80 70 60 50 40 30 20 10 0 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 30 GA Housing Starts: Multi-family (12 month moving average) 25 20 15 10 5 0 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jan-05 Jul-05 Jul-06 Jan-07 Jul-07 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-12 Jan-13 Jan-14 Page 21
The Demographics: Boom & Bust The Demographics: Living Longer (life expectancy at 60) 22 20 18 16 14 12 10 1930 1940 1950 1960 1970 1980 1990 2000 2010 Page 22
Home Prices & CPI 400 350 300 CPI Case-Shiller 250 200 150 100 50 0 Jan-87 Nov-87 Sep-88 Jul-89 May-90 Mar-91 Jan-92 Nov-92 Sep-93 Jul-94 May-95 Mar-96 Jan-97 Nov-97 Sep-98 Jul-99 May-00 Mar-01 Jan-02 Nov-02 Sep-03 May-05 Mar-06 Jan-07 Nov-07 Sep-08 Jul-09 May-10 Mar-11 Nov-12 CS/S&P Home Price Index (FROM PEAK TO DECEMBER 2014) 2 1-1 -2-3 -4-5 Drop Since peak -6-7 Dallas Denver Boston Charlotte Cleveland New York National-US Portland Seattle Washington Composite-20 Composite-10 Minneapolis Chicago Atlanta Los Angeles San Diego San Francisco Detroit Tampa Miami Phoenix Las Vegas Page 23
3 Home Prices: SE Region 2 1-1 AL AR FL GA IA IL IN KY LA MO -2 MS NC SC TN TX -3 1998 Q2 1998 Q4 1999 Q2 1999 Q4 2000 Q2 2000 Q4 2001 Q2 2001 Q4 2002 Q2 2002 Q4 2003 Q2 2003 Q4 2004 Q2 2004 Q4 2005 Q2 2005 Q4 2006 Q2 2006 Q4 2007 Q2 2007 Q4 2008 Q2 2008 Q4 2009 Q2 2009 Q4 2010 Q2 2010 Q4 2011 Q2 2011 Q4 2012 Q2 2012 Q4 NC MSA Home Prices 2 Bust 15% 1 5% -5% -1-15% -2-25% -3 Recover Net Asheville Burlington Charlotte Durham-CH Fayetteville Goldsboro Greensboro-HP Greenville Hickory Jacksonville New Bern Raleigh Rocky Mount Wilmington Winston-Salem Page 24
SC MSA Home Prices 2 1-1 -2 Bust -3-4 Recover Net Charlesto on Columb bia Florenc ce Greenvil lle Hilton Head Islan nd Myrtle Beac ch Spartanbu rg Sumt er 6 4 2 FL MSA Home Prices Bust Recover Net -2-4 -6 Gainesville e Jacksonville Lakeland Lakeland Melbourne e Ocala a Orlando Port St. Lucie The Villages s Vero Beach W Palm Beach Page 25
GA MSA Home Prices 3 Bust 2 Recover 1 Net -1-2 -3-4 Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins Household RE Equity (in $ Billions) 16000 14000 12000 10000 8000 6000 4000 2000 0 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Sep-06 May-07 Sep-08 May-09 Jan-10 Sep-10 May-11 Sep-12 May-13 Jan-14 Sep-14 Page 26
Currents Issues in Fiscal Affairs Federal: Government default avoided in 2011 & 2013 what about 2015? In Play: Affordable Care Act, Keystone, Dodd-Frank, EPA, NLRB, SCOTUS. National solution to student debt? States: Bond ratings preserved during downturn Tax Reform Initiatives in other States Recent gains in manufacturing facilities due to reshoring SE states domination biz location ranking Local: RE valuation and revenues rising Fiscal distress moderating Page 27