US Macro Overview March 8, 2018 · US Macro Overview March 8, 2018. Overview ... Broad...

US Macro OverviewMarch 8, 2018

Overview

• Growth in the US has firmed in recent quarters as the shocks that hit the economy in mid 2014—dollar appreciation and falling commodity prices—have largely run their course. • Fiscal stimulus will boost growth in 2018 and 2019.

• Several indicators suggest that the economy is at or near full employment, with clearer evidence that the rate of increase of wages/compensation has moved higher.

• Underlying inflation slowed in 2017 and remains below the FOMC’s objective of 2%, but recent indicators suggest that an upturn in inflation is underway.

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

2000 2002 2004 2006 2008 2010 2012 2014 2016

Growth of Real GDP

Four Quarter Percent Change Four Quarter Percent Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.

1

60

80

100

120

140

0

200

400

600

800

1000

1200

1400

1600

1800

2011 2012 2013 2014 2015 2016 2017

Broad Trade-Weighted

Exchange Value of US $

(right axis)

Nominal Trade-Weighted Value of US$ and Rig Count

Active Oil Rigs Index

Source: Federal Reserve Board and Baker

Hughes Note: Shading shows NBER recessions.

Rig Count

(left axis)

2

4647484950515253545556575859606162

4647484950515253545556575859606162

2013 2014 2015 2016 2017 2018

Manufacturing Indicators for Major Economies

Index Level Index Level

Source: IHS Markit and Institute for Supply

Management via Haver Analytics Note: Shading shows NBER recessions.

EU

US

China

3

-150

-100

-50

0

50

100

150

-150

-100

-50

0

50

100

150

Citi Economic Surprise Index

Index

Source: Bloomberg.

U.S.

Global

Index

4

Goldman Financial Conditions Index

Index

Source: Bloomberg.

95

96

97

98

99

100

101

102

103

104

105

93

95

97

99

101

103

105

Index

Tightening

Easing

5

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

0

2

4

6

8

10

12

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Real PCE and the Personal Saving Rate

12 Month % Change %

Source: Bureau of Economic Analysis,

Federal Reserve Board via Haver Analytics Note: Shading shows NBER recessions.

Real Personal

Consumption

Expenditures

Personal

Saving Rate

6

20

40

60

80

100

120

140

50

60

70

80

90

100

110

2003 2005 2007 2009 2011 2013 2015 2017

Consumer Sentiment and Confidence

Index, Q1-66 = 100

Source: University of Michigan, Conference

Board. Note: Shading shows NBER recessions.

University of

Michigan:

Consumer

Sentiment

(Left Axis)

Conference

Board:

Consumer

Confidence

(Right Axis)

Index, 1985 = 100

7

400

450

500

550

600

650

700

400

450

500

550

600

650

700

2000 2002 2004 2006 2008 2010 2012 2014 2016

Household Net Worth at Record High

Percent Percent

Note: Shading shows NBER recessions.

Source: Federal Reserve Board via Haver

Analytics

(Net Worth over Disposable Income)

8

0

2

4

6

8

10

12

400 450 500 550 600 650 700

0

2

4

6

8

10

12

Source: Bureau of Economic

Analysis and Federal Reserve Board

Households’ Net Worth as a Percent of Disposable Income

2006Q1 to

present

Note: Fitted line is from 1983Q1 to 2005Q4.

Personal Saving Rate and Household Net WorthPersonal Saving Rate (Percent) Personal Saving Rate (Percent)

2017Q3

(673.02, 3.3)

1983Q1 to

2005Q4

2006Q1

(651.7, 3.8)

9

Estimated

2017Q4

(687.7, 2.6)Estimated

2017Q4 with 10%

Decline

(666.8, 2.7)

14.5

15

15.5

16

16.5

17

17.5

18

18.5

19

14.5

15

15.5

16

16.5

17

17.5

18

18.5

19

1980 1990 2000 2010

Household Financial Obligation Ratio

Ratio Ratio

Source: Federal Reserve Board via Haver

Analytics Note: Shading shows NBER recessions.

10

0

2

4

6

8

10

12

0

2

4

6

8

10

12

03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 13:Q1 14:Q1 15:Q1 16:Q1 17:Q1

Student Loan

Transition into Delinquency (90+) by Loan Type

Source: New York Fed Consumer Credit Panel/Equifax

Note: 4 Quarter Moving Sum

Student loan data are not reported prior to 2004 due to uneven reporting

Credit Card

Mortgage

Auto Loan

HE Revolving

Percent of BalancePercent of Balance

11

Single Family Housing Market

3

4

5

6

7

8

9

10

11

12

13

0

20

40

60

80

100

120

140

160

180

200

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Index Level Months

Source: CoreLogic, National Association of

Realtors, via Haver Analytics Note: Shading shows NBER recessions.

Single Family

House Price Index

(Left Axis)

Months’

Supply

(Right Axis)

12

0

0.005

0.01

0.015

0.02

0.025

0.03

0

0.005

0.01

0.015

0.02

0.025

0.03

1968 1978 1988 1998 2008 2018

Housing Starts and Existing Homes Sales Per Capita

Units Units

Source: BLS, Census Bureau, NAR Note: Shading shows NBER recessions.

Housing Starts

Existing Home

Sales

.0178

(average over 1968-2003)

.009

(average over 1968-2003)

13

500

550

600

650

700

750

800

500

550

600

650

700

750

800

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Credit Score at Mortgage OriginationCredit Score Credit Score

Source: FRBNY / Consumer Credit Panel Note: Shading shows NBER recessions.

Median

10th Percentile

25th Percentile

14

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

-20

-15

-10

-5

0

5

10

15

2007 2009 2011 2013 2015 2017

Business Fixed Investment Firming

Four Quarter Percent Change Four Quarter Percent Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.

15

-40

-30

-20

-10

0

10

20

-40

-30

-20

-10

0

10

20

2009 2011 2013 2015 2017

Nondefense Capital Goods excl. Aircraft

Percent Change Year-to-Year

Source: Census Bureau/Haver. Note: Shading shows NBER recessions.

Mfrs’

Shipments

Mfrs’ New

Orders


16

-40

-30

-20

-10

0

10

20

30

40

-40

-30

-20

-10

0

10

20

30

40

2005 2007 2009 2011 2013 2015 2017

Real Exports and Imports

4 Quarter % Change 4 Quarter % Change


Exports

Imports

Source: Bureau of Economic Analysis

via Haver Analytics

17

-10

-8

-6

-4

-2

0

2

4

6

8

10

-10

-8

-6

-4

-2

0

2

4

6

8

10

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

4 Quarter % Change 4 Quarter % Change


via Haver Analytics Note: Shading shows NBER recessions.

Federal

State and Local

Real Government Consumption and Gross Investment

18

Estimated Revenue Effects of The Tax Cuts and Jobs Act

Fiscal Years 2018-2022 (Percent of GDP)

2018 2019 2020 2021 2022

Tax Reform for Individuals

House -0.2 -0.6 -0.5 -0.5 -0.5

Senate -0.3 -0.8 -0.7 -0.6 -0.6

Conference Agreement -0.4 -0.8 -0.8 -0.7 -0.7

Business Tax Reform

House -0.6 -0.6 -0.5 -0.5 -0.4

Senate -0.1 -0.4 -0.5 -0.4 -0.4


Taxation of Foreign Income and Foreign Persons

House 0.3 0.2 0.1 0.1 0.1

Senate 0.3 0.2 0.1 0.1 0.1

Conference Agreement 0.3 0.2 0.1 0.1 0.1

Total (static)

House -0.6 -1.1 -1.0 -0.8 -0.7

Senate -0.2 -1.1 -1.2 -1.0 -0.9


Source: Joint Committee on Taxation; Congressional Budget Office19

Effect of Bipartisan Budget Act of 2018 on Discretionary Spending

(Billions of Dollars, Fiscal Years)

2016 2017 2018 2019

Budget Control Act Caps

Defense 548 551 552 562

BA 80 85

Nondefense 518 519 520 529

BA 63 68

Adjustments to Caps

Defense 59 83 85 86

Nondefense 26 36 36 35

Total

Nom

inal

Defense 607 634 717 733

Percent Change 4.4 13.0 2.3

Nondefense 544 555 619 632


Real

Defense 555 570 636 642


Nondefense 484 481 525 525

Percent Change -0.6 9.2 0.020

56

58

60

62

64

66

68

0

2

4

6

8

10

12

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Labor Market IndicatorsPercent Percent


Unemployment Rate

(Left Axis)

Labor Force

Participation Rate

(Right Axis)

Employment to

Population Ratio

(Right Axis)

Source: Bureau of Labor Statistics

via Haver Analytics

21

0

1

2

3

4

0

1

2

3

4

2007 2009 2011 2013 2015 2017

Annual % change Annual % change

Source: Bureau of Labor Statistics


Average Hourly

Earnings

Employment

Cost Index:

Private Sector

Wages &

Salaries

Growth of Average Hourly Earnings and ECI

22

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

12 Month % Change 12 Month % Change



Core PCE

Deflator

FOMC Objective for

Headline PCE Inflation

Measure of Underlying PCE Price Inflation

23

-1

-0.5

0

0.5

1

1.5

2

2.5

3

-1

-0.5

0

0.5

1

1.5

2

2.5

3

2009 2011 2013 2015 2017

Personal Consumption Expenditures Price Indices


Source: BEA/Haver. Note: Shading shows NBER recessions.

Core PCE

PCE: Goods

less Food &

Energy

PCE: Services

Excl. Energy


FOMC Objective For

Headline PCE Inflation

24

-8

-6

-4

-2

0

2

4

6

8

-4

-3

-2

-1

0

1

2

3

4

1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

Import Price Index and the PCE Deflator for Core Goods

% Change – Year to Year % Change – Year to Year

Source: Bureau of Labor Statistics via Haver

Analytics Note: Shading shows NBER recessions.

PCE Deflator:

Core Goods

(Left Axis)

Import Price Index:

Nonpetroleum Imports,

16 Month Lead

(Right Axis)

25

Michigan Inflation Expectations 5 to 10 Years

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Percent Percent

Source: University of Michigan Note: Shading shows NBER recessions.

25th Percentile

Median

75th Percentile

26

-1

0

1

2

3

4

-1

0

1

2

3

4

2005 2007 2009 2011 2013 2015 2017

TIPS Based Inflation Expectations

Percent Percent

Source: Federal Reserve Board Note: Carry-adjusted

4-5 Years

2-3 Years

5-10 Years

Mar 7:

2.18

Mar 7:

2.11

Mar 7:

2.11

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US Macro Overview March 8, 2018 · US Macro Overview March 8, 2018. Overview ... Broad...

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