PowerPoint Presentation€¦ · PowerPoint Presentation Author: RF Created Date: 6/24/2020 10:09:24...
Transcript of PowerPoint Presentation€¦ · PowerPoint Presentation Author: RF Created Date: 6/24/2020 10:09:24...
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Presented by:
Elliot F. Eisenberg, Ph.D.
President: GraphsandLaughs, LLC
June 24, 2020
THE ECONOMY IN 2020: THE AUDACITY OF SLOPE
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SEGMENT 1 –
GDP GROWTH
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The Economy Has Bottomed
GDP = C+I+G+(X-M)
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Bloomberg Consumer Comfort Index Bottoms! Index low was 25 during the last recession
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Real Retail Sales Collapse and Rebound Household spending was at its worst down by about 25%
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US Light Vehicle Sales Reverse Their SlideMarch and April sales were terrible. Then improvement. Reluctance to use public transit?
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Auto Sales Recover by 20Q4!A deep decline but a strong recovery
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Auto Sales Recover by 20Q4!A deep decline but a strong recovery. Reluctance to use public transit
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US Gasoline Consumption Driving is down 20% up from a decline of 45%
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Used Car Sales Sink How much better will the last even months of the year be?
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Used Car Values Sink How much better will the last even months of the year be?
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Used Car Values Sink How long will this last
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Percent of Balance 90+ Days Delinquent Credit card rates keep rising along with auto loans
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US Restaurant Traffic; It’s Generally Improving But very very slowly
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Hotel Occupancy Rates Start Recovering!Occupancy is 41.7% Y-o-Y! ADR down 33.9% ($89.09), RevPar down 62.6% ($37.15)
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Annual Y-o-Y Percent Change in PCEA very solid growth rate of about 2.5%, but now a huge collapse
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Economics Conditions CollapseTen daily and weekly high-frequency relevant variables
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Small Business Confidence BottomsThe level remains well below the long-term average of 98 and will fall further
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ISM Manufacturing Numbers Bounce BackManufacturing is less important than in decades past, but……
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Rail Traffic Slows Slightly2019 was weaker than 2018 and 2020 is a disaster
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2020 Corporate Profits Look Dismal Firms halt or reduce dividends
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As For Industrial ProductionIt was at a new high, then fell and recently it has fallen off a cliff
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Factory Utilization Rates are DecliningCombination of trade wars, weak oil prices, a strong dollar and Coronavirus
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ISM Non-Manufacturing Numbers BottomAbout as bad as in the Great-Recession.
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CARES Package Will Largely Protect the EconomyBut, only in the short run. We need more help!
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CARES Package #2 Helps the EconomyPrevented the worst from happening
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Federal Aid Packages Have Helped the EconomyWill it be enough, or will more be needed?
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HEROES ACT Is A MustPrevents us from going backwards
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Budget Deficit Will ExplodeThe recent CARES act and other coronavirus spending will vastly increase the deficit
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The Dollar Is Surprisingly StrongApproaching highest level in a long time!
Weak
Stronger
Strong
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$550 Billion Trade War Hurts US GDPThe impact peak at 0.6% of GDP and then wane
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Duration of All Recorded US Recessions Since the Depression they tend to be quite short
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GDP Shrinks in 20H1 Due to Coronavirus Growth returns in Q3 and beyond
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SEGMENT 2 –
INFLATION…WHAT INFLATION?
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Inflation?It’s MIA!
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CPI: Inflationary Pressures are NonexistentThere appears to be deflationary pressure, but it is leveling
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Core PCE Price IndexInflation is not rising, that is for sure
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Monetary Base Is Growing FastIt does not matter. It is not meaningfully correlated with inflation
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Monetary Velocity Drops Like a RockInflation is not a worry
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Excess Reserves Are HugeBanks are not lending as firms do not want to invest
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Federal Reserve Behavior
As For Rates:
They Can’t
Fall More!
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Federal Reserve BehaviorBest Case Scenario
• Fed funds is currently 0.125%
• 12/31/20: 0.125% 10-yr Treasury @ 1.10%
12/31/21: 0.125% 10-yr Treasury @ 1.35%
• 12/31/22: 0.375% 10-yr Treasury @ 1.50%
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Labor Markets: They Were Tight but Are
No Longer
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The Unemployment Rate Underestimates the ProblemThis is the misclassification problem
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Involuntary SeparationRecent trend is improving but still terrible
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State and Local Gov’t Employment Government employment is collapsing. This not good
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It is Now Unfortunately Crashing This will improve but by how much and how fast?
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Unemployment Benefits vs. Normal SalaryIn many states, workers are better of not working!
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Unemployment By EducationRates now skyrocket, especially for the less educated
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Manufacturing Employment GrowthIt collapsed due to the Coronavirus but is now improving
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Total Employment LevelSuppression vs. Recession
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Now For Politics!
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Consensus House Outcome Consensus of: Cook’s Political Report, Sabato’s Crystal Ball, Inside Elections and Politico
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Consensus Senate Outcome Consensus of: Cook’s Political Report, Sabato’s Crystal Ball, Inside Elections and Politico
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Consensus Presidential OutcomeBeige races are key
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SEGMENT 3 –
CONSTRUCTION…IT’S BETTER
THAN WE THOUGHT
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Now For Housing
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Mortgage Purchase Applications Skyrocket1st time applications are up 21% Y-o-Y, at level of the late 1990s.
2020 purchase volume should be about $1.2 trillion, largely unchanged from 2019
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Mortgage Purchase Applications Recover2020 purchase volume should be about $1 trillion, well down from 2019
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Existing Home Sales Have Bottomed!May is the bottom, maybe June and then sales should rise strongly
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Inventory Is Low and Keeps Shrinking Inventory is regularly reaching new lows
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Inventory Is Low and Keeps ShrinkingInventory is disappearing!
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Housing Activity Is at a Multi-Decade LowSupply of new housing is so low
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Single-Family and Multifamily Starts – A big DeclineStarts will turn around quickly
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New Home Sales Bounce BackThey were rising, then fell but are on the road to recovery
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New Home Inventories Fell Fast, Now Are Stable and lowBuilders are being careful
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Builder Misery is OverPent-up demand, low rates, demographics, Covid-19 SIP and more
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Prices May Fall Slightly! Prices in ‘90 and ‘00 didn’t collapse. Y-o-Y prices are up 3.3%, 3.9% or 4.4%
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New Home Prices Are High, but Falling A sign of slow sales? Prices are slightly weaker of late
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Pending Home Sales Collapse, But… Low inventories, limited new building and pent up demand
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Housing Improvements & Repairs Are FineHome prices rise more slowly, wealth has fallen, and existing sales slip
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Construction Activity DeclinesNon-Residential, Residential & Non-Building all perform the same
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Food for Thought
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Hello Forbearance My Old Friend At 8.55% or 4.3 million HH, up from 8.53% a week earlier and way up from early March
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US Coronavirus Cases Declined Will this continue now that we are opening?
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We Are Slowly Returning to Normal It may take a while longer to get there. A vaccine would be nice
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Employment Growth Could Be Slow We will all learn to do more with less
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Elliot F. Eisenberg, Ph.D.
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www.econ70.com
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