The Economy: Getting Through the Recession(updated)HRLBFebruary 19th, 2009
Presented by: Morris Segall, President SPG Trend Advisors
Gross Domestic ProductQ1 2001 – Q4 2008
Source: Bureau of Economic Analysis
Contributions to GDP Growth by Component
Q3 2007 - Q4 2008
Source: Bureau of Economic Analysis
Corporate Profits (before taxes on corporate income)
Q1 2000 – Q3 2008
Source: Bureau of Economic Analysis* The corporate profits is adjusted for inventory valuation and capital consumption.
Net Change in U.S. Jobs (Total Non-farm)June, 2005 – January, 2009
Source: Bureau of Labor Statistics
National Nonfarm Employment by Industry Sector GroupsJanuary, 2008 – January, 2009
Source: Bureau of Labor Statistics
Nonfarm Employment by Industry Sector Groups in Maryland:
December 2007-December 2008
Source: Bureau of Labor and Statistics
Unemployment rate by Education LevelsJanuary, 2007-January, 2009
Source: Bureau of Labor Statistics
Continued Unemployment Claims January, 2006 – January 31st, 2009
Source: Department of Labor
Source: (Left) Census Bureau, (Right) Federal Reserve Bank
Retail Sales Less Food and Fuel April, 2007 – December, 2008
Consumer CreditQ4 2005 – December, 2008
Existing Home SalesOctober, 2001-December, 2008
Source: (Left) National Association of Realtors, (Right) Census Bureau
New Home Sales Units Sold vs. Length on Market
February, 2006-December, 2008
Change in Home sales by Maryland JurisdictionDecember, 2007 – December, 2008
Source: Maryland Association of Realtors
County 2008 2007%
change County 2008 2007%
changeQueen Anne's 13 31 -58.10% Allegany 35 38 -7.90%
Baltimore City 319 445 -28.30%Baltimore County 450 471 -4.50%
Cecil 39 53 -26.40% Garrett 25 26 -3.80%Anne Arundel 301 401 -24.90% St. Mary's 66 68 -2.90%Carroll 81 107 -24.30% Prince George's 385 390 -1.30%Washington 63 81 -22.20% Somerset 10 10 0.00%Howard 171 196 -12.80% Caroline 19 19 0.00%Wicomico 45 51 -11.80% Calvert 48 48 0.00%Worcester 68 76 -10.50% Harford 160 159 0.60%Worcester 68 76 -10.50% Talbot 18 17 5.90%Charles 85 94 -9.60% Kent 14 13 7.70%Frederick 145 160 -9.40% Montgomery 644 576 11.80%MARYLAND 3,227 3,550 -9.10% Dorchester 23 20 15.00%
S&P/Case-Shiller Home Price Index 2006 – November, 2008
Source: Standard and Poors
Change in Average Home Price by Maryland Jurisdictions
December, 2007 – December, 2008
Source: Maryland Association of Realtors
County 2008 2007%
change County 2008 2007 % change
Washington 173,375227,69
8 -23.90% Anne Arundel 364,760 395,990 -7.90%
Prince George's 261,422
336,506 -22.30%
Baltimore County 284,627 306,021 -7.00%
Calvert 318,160405,26
5 -21.50% Harford 286,334 302,428 -5.30%
Caroline 175,807223,76
2 -21.40% Charles 305,849 321,100 -4.70%
Dorchester 114,443143,29
4 -20.10% Charles 305,849 321,100 -4.70%
Wicomico 184,842222,57
1 -17.00% Worcester 384,760 402,639 -4.40%
Montgomery 431,397519,01
7 -16.90% Baltimore City 169,907 177,397 -4.20%
Frederick 276,595326,37
3 -15.30% St. Mary's 303,452 316,500 -4.10%
Queen Anne’s 329,823387,48
8 -14.90% Cecil 256,910 262,338 -2.10%
Allegany $94,231 $109,6
60 -14.10% Carroll 344,906 345,820 -0.30%
Howard 416,933463,15
3 -10.00% Garrett 387,300 376,029 3.00%
Somerset 172,000189,90
0 -9.40% Kent 513,253 473,838 8.30%
MARYLAND 315,934$347,2
09 -9.00% Talbot 830,969 344,340 141.30%
Commercial Mortgage Delinquency Rates among Major Investor Groups
Q4 2005 -Q3 2008
Source: Mortgage Bankers Association
Changes in Consumer Price Index in Percentage Terms
2006 v. 2005
2007 v. 2006
2008 v. 2007
6 months ended in Dec. 2008
All items 2.5% 4.1% 0.1% -5.4%Food at Home 1.4% 5.6% 6.6% 4.7%Food Away Home 3.2% 4.0% 5.0% 5.3%Rent of Primary Res 4.3% 4.0% 3.4% 3.5%Owners Equiv of Rent of Prim Res 4.3% 2.8% 2.1% 2.0%Household Energy 2.4% 5.3% 5.9% -9.6%Water/Sewer/Trash 4.8% 5.4% 6.5% 8.1%Houshold Ops 4.4% 2.2% 6.0% 3.7%Car Repair 3.8% 3.3% 5.9% 5.3 %Pub. Transp 0.1% 7.2% 1.8% -11.7%Medical 3.6% 5.2% 2.6% 2.6%Education 6.3% 5.6% 5.6% 5.7%Energy 2.9% 17.4% -21.3% -52.8%Source: Bureau of Labor Statistics
Source: Energy Information Administration
NYMEX Crude Oil Spot rate in U.S. DollarsFebruary, 2001– February 10th, 2009
Value of the Dollar (Broad Dollar Index) January, 2000 – February, 2009
Broad Dollar Index: a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners.
Source: Federal Reserve Board
ConclusionsWe are in a deep and protracted recession that began in the fourth quarter of 2007. It began in housing and has spread through the entire U.S. and overseas economies. Economic weakness has intensified through 2008 and will worsen through the first half of 2009. Increased near term economic and market pressures include:
stubbornly high inflation in food and basic serviceslower corporate profitsincreased unemploymentcontinued weak levels of corporate capital and consumer spending
Conclusions continuedSevere reductions in State and Local Government spendingWeak exports as overseas economies fall into recessionContinued credit pressures in residential housing and consumer lending spreading to commercial real estate markets and corporate lending
Conclusions continued
However, a bottoming of the housing cycle and an abatement in bank credit losses in the second half of this year, could set the stage for cyclical capital markets and economic improvements in 2009 and 2010. After an expected cyclical recovery in 2010-2012, we believe the longer term socio-economic issues facing this country will result in slower future economic growth for the United States. The availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future.
How do I get through it?Manage business on cash flow basisIncrease efficiency of asset turnover; increase liquidity Intensify customer service initiativesBecome innovative in controlling costs
Outsource where appropriate
Join Co-ops to spread costs over larger group
Look for new ways to leverage existing employees and infrastructure by investigating new sources of revenue from new products and markets. BE A SOLUTIONS PROVIDERSecure access to bank credit; firm up bank lines
How do I get through it? (cont.)
Spend to increase productivity and market shareTake advantage of accelerated equipment write offs as part of government’s economic stimulus packageTake advantage of soft demand in economy to build for future by aggressive bargain purchasingIf access to capital and liquidity are not detriments, look to acquire troubled companies and/or strategic assets of other companiesTrain employees to be more productive and increase their value by enabling them to do more tasks
Increase networking and take advantage of trade associations for additional contacts and leadsPartner with other firms
Where are the opportunities?Healthcare – National ProgramEducationAgricultureEnergy ConservationEnvironmental Solutions Electric PowerTransportation – Increase Mass TransitExports
Water Conservation – New Supplies and RecyclingU.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC)Real Estate – Recycle and Rehab Existing Commercial and Residential Property
Thank YouYou can always reach me at [email protected], if you need us in a hurry, we are at 410.522.7243 Please contact us when you require economic, financial, business and capital markets research, analysis and strategies.Further information available at www.spgtrend.com and our blog at www.spgtrend.com/blog/www.spgtrend.com
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