ON THE ECONOMIC, BUSINESS AND POLITICAL CLIMATE Roger Tutterow, Ph.D. Coles College of Business Kennesaw State University rtuttero@kennesaw.edu 2017 Spring Workshop May 25, 2017 Buford, GA
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) 11 37 July 1953(II) May 1954 (II) 10 45 August 1957(III) April 1958 (II) 8 39 April 1960(II) February 1961 (I) 10 24 December 1969(IV) November 1970 (IV) 11 106 November 1973(IV) March 1975 (I) 16 36 January 1980(I) July 1980 (III) 6 58 July 1981(III) November 1982 (IV) 16 12 July 1990(III) March 1991(I) 8 92 March 2001(I) November 2001 (IV) 8 120 December 2007 (IV) June 2009 (II) 18 73??? 95 Average, all cycles: 1945 2009 (11 cycles) 11.1 58.4 6% 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
Contributions To GDP Growth (Source: Bureau of Economic Analysis) GDP = Consumption Gross Net Exports Government Investment 2015: Q3 2. 1.81% 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% 0.3 2016: Q3 3.5% 2.03% 0.5 0.85% 0.14% 2016: Q4 2.1% 2.4 1.47% 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% 0.4 0.36% 2016: Q1 0.56% 0.44% 0.29% 0.41% 2016: Q2 1.34% 0.12% 0.31% 1.16% 2016: Q3 0.5 0.18% 0.16% 0.49% 2016: Q4 1.47% 0.11% 0.35% 1.01% 2017: Q1 0.69% 1.12% 0.5 0.93% 65 ISM s PMI (Source: Institute of Supply Management) 60 55 50 45 40 35 30 25 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
120 Foreign Exchange: Trading Partners (Source: Board of Governors of the Federal Reserve System) 110 100 90 80 70 60 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) 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 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
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 - 64.6 versus 64.4. 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, 120.1 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
14 13 12 Car & Truck Sales (Source: Department of Commerce, 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 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
600 Change in Payroll Employment (Source: Bureau of Labor Statistics) 400 200 0-200 -400-600 -800-1000 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
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
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
3 2 Employment: Georgia Recess Recover 1-1 -2-3 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 0.3% 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
Crude Oil: West Texas Intermediate (Source: US Energy Information Administration) 140 120 100 80 60 40 20 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
10 9 8 7 6 5 Market s FFR Outlook (Source: CME Group) 75-100 bps 100-125 bps 125-150 bps 150-175 bps 175-200 bps 200-225 bps 4 3 2 1 6/14/2017 7/26/2017 9/20/2017 11/1/2017 12/13/2017 1/31/2018 10-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
30-Year Fixed Rate Mortgages (Source: Freddie Mac) 4.6% 4.4% 4.2% 4. 3.8% 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% 3. 2.5% 2. Biz CRE 1.5% 1. 0.5% 0. -0.5% 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 0-10 -20 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 Page 14
3 Construction Spending: By Source (source: U.S. Bureau of the Census) 2 1-1 -2 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-2017 3 2 1 Construction Spending: By Sector (Source: U.S. Bureau of Census) -1-2 -3-4 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
5 4 3 2 Non-Residential Construction (Source: U.S. Bureau of Census) 2011-12 2012-13 2013-14 2014-15 2015-16 1-1 -2 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) 90 80 70 60 50 40 30 20 10 0 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
US Housing Permits: SF and Total (source: U.S. Bureau of Census) 2000 1700 1400 Total SF 1100 800 500 200 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) 450 375 300 225 150 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 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
GA Housing Starts: Multi-family (12 month moving average) 30000 25000 20000 15000 10000 5000 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 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 40000 35000 30000 25000 Total SF 20000 15000 10000 5000 0 Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins Page 18
Permits: GA Cities 3500 3000 2500 2000 Total SF 1500 1000 500 0 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 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) 4 3 2 1-1 -2-3 -4-5 -6-7 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
3 Home Prices: SE Region (source: Federal Housing Finance Agency) 2 1-1 -2 AL FL GA MS NC SC TN -3 1999 Q1 1999 Q4 2000 Q3 2001 Q2 2002 Q1 2002 Q4 2003 Q3 2004 Q2 2005 Q1 2005 Q4 2006 Q3 2007 Q2 2008 Q1 2008 Q4 2009 Q3 2010 Q2 2011 Q1 2011 Q4 2012 Q3 2013 Q2 2014 Q1 2014 Q4 2015 Q3 2016 Q2 GA MSA Home Prices 4 3 2 Bust Recover Net 1-1 -2-3 -4 Albany Athens Atlanta Augusta Brunswick Columbus Dalton Gainesville Hinesville Macon Rome Savannah Valdosta Warner Robins Page 21
Household RE Equity (Source: Board of Governors of Federal Reserve System) 14000 12000 10000 8000 6000 4000 2000 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
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