The State of the Consumer Kathleen Stephansen Director of Global Economics 212-538-3260...
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Transcript of The State of the Consumer Kathleen Stephansen Director of Global Economics 212-538-3260...
The State of the ConsumerThe State of the Consumer
Kathleen StephansenKathleen StephansenDirector of Global Economics
May 2003
I, Kathleen Stephansen, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was,Iis or will be directly or indirectly related to the specific recommendations or views expressed in this report.
2
A Global OverviewA Global Overview
Global consumer spending is set to remain steadyLabor Markets Not Yet StableTax cuts are likely to be an important buffer in the US
3
G3 real consumption growthG3 real consumption growth
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04
G3+ US
Euro area Japan
yoy %
Sources: Datastream International Limited, CSFB estimates
4
Unemployment Rates Rising In The OECDUnemployment Rates Rising In The OECD
Sources: Datastream International Limited, CSFB estimates
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0USEuro areaJapan (rhs)
%
5
Further Rise In Unemployment ExpectationsFurther Rise In Unemployment Expectations
Sources: Datastream International Limited, CSFB estimates
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03
10
15
20
25
30
35
EU-12 unemploy. exp next 12mUK unemp exp next 12mUS fewer jobs next 6m (rhs)
6
Weak Labor Markets Have Contributed To The Decline In Weak Labor Markets Have Contributed To The Decline In Consumer ConfidenceConsumer Confidence
Sources: Datastream International Limited, CSFB estimates
40.0
60.0
80.0
100.0
120.0
140.0
Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02
-35.0
-30.0
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
US - Conference boardJapanEuro area - Eu Comm survey (rhs)
7
G4 Savings RatesG4 Savings Rates
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03
US UK
Germany Japan
%
Sources: Datastream International Limited, CSFB estimates
8
Slowing Disposable Income Slowing Disposable Income (Real Disposable Income)
Sources: Datastream International Limited, CSFB estimates
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02
US UK
Japan euro area
yoy%
9
Rising House Prices: A Buffer To Household Wealth Rising House Prices: A Buffer To Household Wealth
Sources: Datastream International Limited, CSFB estimates
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
'88 '90 '92 '94 '96 '98 '00 '02
US Japan
Euro area UK
yoy %
10
A Closer Look At The USA Closer Look At The US
What the 2001 Consumer Survey tells usHousehold wealth shakenRefi WaveEquity Extraction From HousingConsumption Holds On
11
Household Survey 1998-2001Household Survey 1998-2001(thousands of 2001 dollars)
Income Growth(percent change by income group)
Net Worth Growth(percent change by income group)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
All Families Less than 20 20-39.9 40-59.9 60-79.9 80-89.9 90-100
Median % change Mean % change
0%
10%
20%
30%
40%
50%
60%
70%
80%
All Families Less than 20 20-39.9 40-59.9 60-79.9 80-89.9 90-100
Median Mean
Sources: FRB, CSFB
12
US Household Wealth ShakenUS Household Wealth Shaken($ billion, annual changes)
-3000
-2000
-1000
0
1000
2000
3000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002-400
-200
0
200
400
600
800
Corporate Equities(LHS)
Real Estate (LHS)
Consumer Spending (RHS)
Sources: BEA, Flow of Funds, CSFB estimates
13
Refi Applications BoomRefi Applications Boom(Index of Number of mortgage refinancing applications (SA, 3/16/1990=100))
Sources: MBA, CSFB
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '035.5
6.5
7.5
8.5
9.5
10.5
11.5
Mortgage Refi Index (left)
30-Year Fixed Fannie Mae Interest Rate (%, right)
14
Strength in Housing: US Home Sales..Strength in Housing: US Home Sales..(Thousands of Units, SAAR)
Sources: Census, NAR, CSFB
300
400
500
600
700
800
900
1000
1100
1200
1992-Jan 1994-Jan 1996-Jan 1998-Jan 2000-Jan 2002-Jan1000
2000
3000
4000
5000
6000
7000
New Home Sales, Left
Existing Home Sales, right
Mar '03
15
……And Housing StartsAnd Housing Starts(SAAR, Thousands of Units)
800
1000
1200
1400
1600
1800
2000
Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03
Mar '03
Building Permits
Housing Starts
Sources: Census, CSFB
16
The 2002 Home Mortgage Results: SourcesThe 2002 Home Mortgage Results: Sources
$200 billion accumulated home equity “cash-outs” $350 billion in mortgage net debt increase
(from $600bn in mortgage originations) $130 billion in net increase of home equity loans $680 billion in total equity extraction
Source: Estimates Provided by the Federal Reserve Board
17
The 2002 Home Mortgage Results: UsesThe 2002 Home Mortgage Results: Uses
Consumption of big ticket items/ home improvementRepayment of higher-cost consumer debt
18
Consumer Spending GrowthConsumer Spending Growth(year/year % change)
Source: BEA, CSFB
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
1960-Q1 1964-Q3 1969-Q1 1973-Q3 1978-Q1 1982-Q3 1987-Q1 1991-Q3 1996-Q1 2000-Q3
Real PCE
Spending on Durable Goods
Q1 '03
19
US Auto Sales SofteningUS Auto Sales Softening(but incentives help)
Sources: BEA, CSFB
14
15
16
17
18
19
20
21
22
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03
Apr '03
20
Household: Debt Restructuring Is Taking PlaceHousehold: Debt Restructuring Is Taking Place
-4
-2
0
2
4
6
8
10
12
14
16
18
Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-030.0
2.0
4.0
6.0
8.0
10.0
12.0
Consumer Credit, yr/yr%(Left)
Savings Rate (Right)
Sources: FRB, BEA, CSFB
21
Homeowners’ Equity as a % of Household Real EstateHomeowners’ Equity as a % of Household Real Estate
50
55
60
65
70
75
'60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02
Source: FRB, CSFB
22
Mortgage Debt Servicing Costs Relatively StableMortgage Debt Servicing Costs Relatively Stable(Household Debt Service Ratio)
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
1980-Q1
1981-Q4
1983-Q3
1985-Q2
1987-Q1
1988-Q4
1990-Q3
1992-Q2
1994-Q1
1995-Q4
1997-Q3
1999-Q2
2001-Q1
2002-Q4
10.00
10.50
11.00
11.50
12.00
12.50
13.00
13.50
14.00
14.50
15.00
Debt Service Payments (RHS)
Mortgage Debt Service Payment (LHS)
Consumer Debt Service Payment (LHS)
Sources: FRB, CSFB
23
……Even though Mortgage Debt Ratio Rose SharplyEven though Mortgage Debt Ratio Rose Sharply(Household Debt)
8.00
8.50
9.00
9.50
10.00
10.50
11.00
11.50
12.00
12.50
13.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20020
100
200
300
400
500
600
700
800
Mortgage Debt As a % of Total Assets
Consumer Debt
Motgage Debt
Sources: Flow of funds, CSFB
24
The Consumer Needs Additional BufferThe Consumer Needs Additional Buffer
Low Interest RatesTax Cuts
25
US: 2002 Tax Cuts Helped Income GrowthUS: 2002 Tax Cuts Helped Income Growth(Yr/Yr % change)
Sources: BEA, CSFB
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1992-Q1 1993-Q1 1994-Q1 1995-Q1 1996-Q1 1997-Q1 1998-Q1 1999-Q1 2000-Q1 2001-Q1 2002-Q1 2002-Q5
Real Wage & Salary Growth
Real Disposable Personal Income
26
2003 Tax Cuts2003 Tax Cuts(Impact on budget by quarters, $ billion)
Q3:03 Q4:03 Q1:04 FY03 FY04Tax Rate Cuts 5.5 9.0 14.5 5.5 36.0Marriage Penalty Relief 3.0 6.0 10.0 3.0 27.0Child Credit 15.0 1.0 0.0 15.0 5.0Expansion of 10% Bracket 1.0 2.0 2.0 1.0 8.0Increase Expensing Limits 1.0 1.0 0.0 1.0 1.0AMT-held harmless 3.0 0.0 5.0 3.0 9.0Unemployment 0.0 0.0 0.0 4.0 0.0Total (1) 28.5 19.0 31.5 32.5 86.0
Dividends 4.0 0.0 16.0 4.0 25.0
Total (2) 32.5 19.0 47.5 36.5 111.0
Baseline Budget Deficit 49.0 114.0 134.0 281.0 316.0
Budget including the measures 81.5 133.0 181.5 317.5 427.0
Note: We assume the final settlements to 2003 income tax returns will be accomplished in Q1:2004. People who are getting a refund may file earlier than the April 15th deadline. Alternate assumptions would change the numbers on a quarterly but not annual basis.
Sources: Dept. of Treasury, CSFB
27
Real Disposable Income Under The Bush PlanReal Disposable Income Under The Bush Plan(billions $, annual rate)
6400
6600
6800
7000
7200
7400
7600
7800
q101 q201 q301 q401 q102 q202 q302 q402 q103 q203 q303 q403 q104 q204
Level of real disposable income 1.0% higher than baseline by mid-year 2004
w/ stimulus Plan
Baseline
Sources: BEA, CSFB estimates
28
US Forecast Table
Source: CSFB
q102 q202 q302 q402 q103 q203 q303 q403 01 02 03E 04E 01 02 03E 04EReal GDP 5.0 1.3 4.0 1.4 1.6 2.3 3.7 3.7 0.1 2.9 2.8 3.5 0.3 2.4 2.4 3.5Consumer Spending 3.1 1.8 4.2 1.7 1.4 3.2 3.5 3.7 2.8 2.7 2.9 3.6 2.5 3.1 2.6 3.7Residential Investment 14.3 2.6 1.0 9.4 12.0 4.2 2.9 1.9 1.1 6.8 5.3 1.1 0.3 3.9 6.3 1.7Business Investment -5.8 -2.4 -0.8 2.3 -4.2 -0.9 3.5 3.8 -9.2 -1.7 0.5 5.2 -5.2 -5.7 -0.4 4.3 Equipment & Software -2.7 3.3 6.7 6.2 -4.4 2.5 6.2 6.1 -8.7 3.4 2.6 6.9 -6.4 -1.7 2.6 6.4 Non-Res Structures -14.2 -17.6 -21.3 -9.9 -3.5 -3.2 -3.8 -1.9 -9.7 -15.8 -3.1 1.9 -1.7 -16.4 -8.1 0.2Total Government 5.6 1.4 2.9 4.6 0.9 4.4 2.1 2.1 5.2 3.6 2.3 2.7 3.7 4.4 2.7 2.6 Federal Government 7.4 7.5 4.3 11.0 2.6 10.5 5.6 5.6 7.6 7.6 6.1 5.4 4.8 7.5 6.7 5.8 State & Local 4.6 -1.7 2.2 1.2 -0.1 0.8 0.0 0.0 4.0 1.6 0.2 1.1 3.1 2.8 0.5 0.6Domestic Demand 3.0 1.3 3.3 2.6 1.2 3.3 3.4 3.5 1.6 2.6 2.8 3.7 1.6 2.4 2.5 3.6Net Exports (contr. to GDP) -0.8 -1.4 0.0 -1.9 1.0 -0.1 -0.1 -0.7 -0.1 -1.0 0.0 -0.6 -0.2 -0.8 -0.3 -0.6 Real Exports 3.5 14.2 4.7 -5.8 -3.2 2.3 7.8 8.8 -11.3 4.1 3.9 9.1 -5.4 -1.6 1.4 8.5 Real Imports 8.5 22.2 3.3 7.4 -7.9 2.0 5.9 10.7 -7.9 10.3 2.7 9.7 -2.9 3.7 2.7 9.2Inventories (contr. to GDP) 2.6 1.3 0.6 0.3 -0.5 -0.9 0.4 0.9 -1.5 1.2 0.0 0.2 -1.4 0.7 0.0 0.3Nominal GDP 6.5 2.5 5.1 3.2 4.2 3.4 5.1 5.8 2.0 4.3 4.6 5.4 2.6 3.6 4.1 5.4CPI (Y/Y%) 1.2 1.3 1.6 2.2 2.9 2.2 1.9 2.0 1.8 2.2 2.0 1.9 2.8 1.6 2.2 1.8Core CPI (Y/Y%) 2.5 2.4 2.3 2.1 1.8 1.5 1.4 1.4 2.7 2.1 1.4 1.8 2.7 2.3 1.5 1.7Corp. Profits w/CCadj and IVA (Y/Y%) 12.9 8.8 12.2 -1.9 4.4 6.8 12.9 14.8 8.2 -1.9 14.8 9.0 -7.2 7.6 9.7 8.5Industrial Production (y/y%) -3.8 -1.3 0.8 1.4 1.2 -0.2 0.2 2.2 -5.7 1.4 2.2 4.7 -3.5 -0.8 0.8 4.5Unemployment Rate (qtr. avg.) 5.6 5.8 5.8 5.9 5.8 6.1 6.1 6.0 4.9 5.8 6.0 5.8Current Account (% GDP) -3.9 -4.7 -4.6 -4.6Federal Budget Balance (% GDP) 1.3 -1.5 -4.2 -5.1Fed Funds Rate 1.75 1.75 1.75 1.25 1.25 1.25 1.25 1.2530yr Mortgage Rate 6.95 6.48 5.67 5.75 5.50 5.50 5.50 5.50
Ann. Avg2002 2003E Q4/Q4
29
Global Forecast
Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 01E 02E 03E 04E 01 02E 03E 04EGlobal Real GDP (y/y) 1.7 2.6 3.2 3.4 3.2 2.4 2.5 2.8 1.1 3.4 2.8 3.8 1.9 2.8 2.7 3.7
IP (y/y) -0.3 3.0 4.3 5.6 5.6 3.4 3.7 5.0 -2.1 5.6 5.0 6.2 0.2 3.1 4.4 6.1Inflation (y/y) … … … … … … … … ... … … … 3.1 2.8 3.0 2.6
US Real GDP (q/q ann) 5.0 1.3 4.0 1.4 1.6 2.3 3.7 3.7 0.1 2.9 2.8 3.5 0.3 2.4 2.4 3.5IP (y/y) -3.8 -1.3 0.8 1.4 1.2 -0.2 0.2 2.2 -5.7 1.4 2.2 4.7 -3.5 -0.8 0.8 4.5Inflation (y/y) 1.2 1.3 1.6 2.2 2.9 2.2 1.9 2.0 1.8 2.2 2.0 1.9 2.8 1.6 2.2 1.8Policy rate 1.8 1.8 1.8 1.3 1.3 1.3 1.3 1.3 ... … … … ... … … …
Japan Real GDP (q/q ann) 0.4 5.5 3.1 2.2 -1.8 1.0 -0.3 -1.6 -2.4 2.8 -0.7 1.9 0.4 0.3 0.7 1.0IP (y/y) -9.9 -3.8 3.1 5.9 7.4 5.8 4.3 2.3 -14.2 5.7 2.3 0.4 -6.8 -1.4 4.9 -0.2Inflation (y/y) -1.4 -0.7 -0.7 -0.7 -0.2 -1.3 -1.3 -0.9 -1.0 -0.5 -0.9 -0.8 -0.7 -0.9 -0.9 -0.8Policy rate 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ... … … … ... … … …
Euro-12 Real GDP (q/q ann) 2.0 1.5 1.3 0.3 0.9 0.6 1.6 1.4 0.5 1.3 1.1 2.6 1.4 0.9 1.0 2.3IP (y/y) -2.7 -1.0 -0.3 1.1 1.4 0.1 -0.3 0.6 -3.0 1.1 0.6 5.4 0.6 -0.7 0.5 3.5Inflation (y/y) 2.5 2.1 2.1 2.3 2.3 2.0 1.8 1.7 2.1 2.3 1.7 1.0 2.3 2.3 2.0 1.3Policy rate 3.3 3.3 3.3 2.8 2.5 2.3 2.3 2.0 ... … … … ... … … …
UK Real GDP (q/q ann) 0.5 2.4 4.3 1.5 1.2 2.4 2.9 2.7 1.6 2.2 2.3 3.2 2.0 1.8 2.3 3.0IP (y/y) -5.6 -4.0 -2.8 -1.3 0.1 0.2 0.3 1.6 -5.0 -1.3 1.6 2.2 -2.1 -3.5 0.6 2.1Inflation (y/y) 2.4 1.9 2.0 2.5 3.0 3.3 3.0 2.8 2.0 2.5 2.8 2.5 2.1 2.2 3.0 2.5Policy rate 4.0 4.0 4.0 4.0 3.8 3.8 3.8 4.0 ... … … … ... … … …
NJ Asia Real GDP (q/q ann) … … … … … … … … … … … … 5.2 6.7 5.6 6.4IP (y/y) 8.8 13.6 12.9 14.8 14.9 10.4 10.4 11.5 6.2 14.8 11.5 12.9 6.1 12.5 11.8 13.2Inflation (y/y) ... ... … … … … … … … … … … 2.1 0.9 1.4 1.8
Lat. America Real GDP ... ... … … … … … … ... … … … 0.4 -0.4 1.4 3.0IP (y/y) -3.8 0.6 1.6 4.2 4.4 3.0 4.0 5.7 -4.3 4.2 5.7 3.7 -0.8 0.7 4.3 4.7Inflation (y/y) ... ... … … … … … … ... … … … 5.4 10.0 11.1 8.3
Annual Avg.2002E Q4 to Q42003E
30
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