Economic Forecast Breakfast April 10, 2015 Member FDIC. Member - PowerPoint PPT Presentation

Economic Forecast Breakfast April 10, 2015 Member FDIC. Member SIF. Equal Housing Lender. 800.581.5363 fidelitybankonline.com Fitchburg Gardner Leominster Millbury Shirley Worcester

Welcome Roy Nascimento President, North Central Massachusetts Chamber of Commerce

Introductions Ed Manzi Chairman & CEO, Fidelity Bank

Survey Review John Merrill President & COO, Fidelity Bank

Direct Survey Method • Conducted by Princeton Research Associates • Data collected over last 4 weeks • Phone surveys • 200 consumers • 200 businesses • All respondents within the North Central MA footprint 5

Survey Results Consumer

Consumer Survey Demographics 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Full time 45% Part time 28% Unemployed 6% Retired 19% Other 2% 7

Thinking about Massachusetts overall, over the next 12 months how do you think the economy will be in comparison to today? 60% 48% 50% 40% 30% 25% 16% 20% 10% 4% 4% 3% 0% Much Somewhat About the Somewhat Much Don't know better better same worse worse 8

Thinking about North Central Mass., over the next 12 months how do you think the economy will be in comparison to today? 50% 45% 45% 40% 35% 28% 30% 25% 18% 20% 15% 10% 4% 3% 2% 5% 0% Much Somewhat About the Somewhat Much Don't know better better same worse worse 9

Thinking only about your job opportunities or security, over the next 12 months how do you think they will be in comparison to today? 40% 35% 35% 30% 25% 25% 19% 20% 15% 11% 10% 5% 5% 5% 0% Much Somewhat About the Somewhat Much Don't know better better same worse worse 10

Thinking only about your advancement opportunities at work or in a new job, over the next 12 months how do you think they will be in comparison to today? 40% 35% 29% 30% 27% 25% 19% 20% 15% 15% 10% 6% 4% 5% 0% Much Somewhat About the Somewhat Much Don't know better better same worse worse 11

Which of the following best describes your personal spending plan in 2015? 50% 43% 45% 40% 35% 30% 30% 25% 20% 12% 12% 15% 10% 6% 5% 1% 0% Significant Slight increase No change Slight decrease Significant Don't know increase decrease 12

What do you think is the top challenge facing your region? 0% 5% 10% 15% 20% 25% 30% 35% Employment / job creation 20% Quality of public education 16% Corporate and personal taxes 12% Cost of health care 12% Cost of fuel & energy 10% 13

How would you rate your town or city’s snow removal efforts over the past winter? Don't know 1% Poor 16% Excellent 29% Not so good 13% Good 41% 14

Survey Results Business

Business Survey Demographics 0% 5% 10% 15% 20% 25% 30% 35% 40% Principal owner or partner 24% President / CEO 10% Senior management 34% Middle management 20% Other 12% 16

Thinking about Massachusetts overall, over the next 12 months how do you think the economy will be in comparison to today? 60% 51% 50% 40% 31% 30% 20% 9% 10% 4% 3% 2% 0% Much Somewhat About the Somewhat Much Don't better better same worse worse know 17

Thinking about North Central Massachusetts, over the next 12 months how do you think the economy will be in comparison to today? 50% 46% 45% 40% 35% 31% 30% 25% 20% 12% 15% 10% 4% 4% 3% 5% 0% Much Somewhat About the Somewhat Much Don't know better better same worse worse 18

Thinking only about your business, over the next 12 months how do you think the economy will be in comparison to today? 50% 46% 45% 40% 35% 29% 30% 25% 20% 20% 15% 10% 2% 2% 5% 1% 0% Much Somewhat About the Somewhat Much Don't know better better same worse worse 19

Which of the following best describes your hiring plan for this region in 2015? 60% 50% 46% 38% 40% 30% 20% 9% 10% 4% 2% 1% 0% Significant Slight No change Slight Significant Don't know increase increase decrease decrease 20

Which of the following best describes your business’s spending plan for this region in 2015? 60% 50% 40% 40% 30% 21% 20% 13% 9% 9% 8% 10% 0% Significant Slight No change Slight Significant Don't know increase increase decrease decrease 21

Thinking about your business, what is the most challenging issue you expect to face in the next two years? 0% 5% 10% 15% 20% 25% Transportation / infrastructure 18% Corporate and personal taxes 13% Real estate prices / market 10% Cost of healthcare 9% Availability of skilled labor 8% 22

What do you think is the top challenge facing this region? 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Corporate and personal taxes 15% Transportation / infrastructure 10% Quality of public education 10% International Competition 10% Cost of fuel & energy 8% 23

What effect did this season’s snow fall have on your business? Positive Negative 29% 31% No Effect 40% 24

Survey Takeaways - Overall • Both consumers and businesses continue to have a very favorable outlook on both the North Central MA and greater MA regions and this outlook continues to improve. • Both consumers and businesses plan to increase spending in 2015. 55% of consumers and 34% of businesses to at least “slightly increase.” • Consumers and businesses showing positive trending outlooks on employment. Consumer concerns fading and businesses planning to hire. 25

Survey Takeaways - Consumer • Top concern still employment but trending positive. • Quality of public education spiked as a major concern with 16% citing it as top challenge - up from 9%. • Cost of fuel and energy concerns faded with only 10% indicating it as a top challenge – down from 22%. • Concerns over the cost of health care faded slightly to 12% from 20%. 26

Survey Takeaways - Business Transportation and infrastructure a growing concern for region and • businesses. Commitment to hiring continued , with 55% stating at least a “slight • increase” in their hiring plan. Concern for availability of skilled labor subsiding with only 8% citing it as • top challenge – down from 18%. Concern over taxes decreased dramatically from 23% to 13% • Quality of public education spiked as a major concern for the region. • Concerns grew regarding real estate and the market from only 3% in 2014 • to 10%. 27

Economic Forecast Panelists Lt. Governor Karyn Polito Commonwealth of Massachusetts Jeff Fuhrer EVP & Sr. Policy Advisor, Federal Reserve Bank of Boston Deborah Weymouth President & CEO, HealthAlliance Hospital

Lt. Governor Karyn Polito Commonwealth of Massachusetts

Jeff Fuhrer Executive Vice President & Senior Policy Advisor Federal Reserve Bank of Boston

North Central MA Chamber of Commerce Economic Breakfast April 10, 2015 Jeff Fuhrer, EVP and Senior Policy Advisor Federal Reserve Bank of Boston

X X Not this lady Not this guy 32

1. Unprecedented depth and duration of recession 2. Extraordinary policy responses 3. Complications going forward as a consequence Employment, recession start=1.0 Federal Reserve Assets ($ trillions) 4.5 6 6.0 1.25 Agency and MBS 6+ YEARS 4 CB Swaps 5.0 5 1.20 3.5 CPFF Funds rate, percent Of ZERO 4.0 TAF 3 4 1.15 $ trillions Range of all Treasuries INTEREST 3.0 2.5 3 1.10 2 2.0 RATES… Funds rate Funds rate 1.05 1.5 2 Average of 1.0 (and counting) all postwar 1 1.00 1 0.0 0.5 2006:Jan 2006:Jul 2007:Jan 2007:Jul 2008:Jan 2008:Jul 2009:Jan 2009:Jul 2010:Jan 2010:Jul 2011:Jan 2011:Jul 2012:Jan 2012:Jul 2013:Jan 2013:Jul 2014:Jan 2014:Jul 2015:Jan 0.95 Current 0 0 2007:… 2009:… 2011:… 2013:… (2007-present) 2006:Jan 2006:Sep 2008:Jan 2008:Sep 2010:Jan 2010:Sep 2012:Jan 2012:Sep 2014:Jan 2014:Sep 0.90 0 8 16 24 32 40 48 56 64 72 80 Months after recession onset 33 of 16 Sources: Bureau of Labor Statistics (employment), Board of Governors of the Federal Reserve H.4.1, Haver Analytics

Contribution of government spending and investment to GDP growth 2 1.5 1 0.5 0 -0.5 1. Subtracting near zero in 2015 2. Taxes, transfers less -1 contractionary in 2015 3. Less craziness improves -1.5 Average, 1947-2006 Current recovery confidence, reduces uncertainty -2 0 2 4 6 8 10 12 14 16 18 20 22 Quarters into recovery 34 of 16 Sources: Bureau of Economic Analysis, Haver Analytics

Increase in Household Net Worth  By household income Housing assets growth (4% after Stock market assets $ Billions inflation over past 12 1.5 mos.)  By increases in net -1.0 worth 2011:Q1 2012:Q1 2013:Q1 2014:Q1 Consumer confidence and spending  By lower oil prices 100 4  We’ll talk more in a 80 2 minute 0 60 -2  Confidence has 40 Consumer sentiment -4 improved Consumer spending growth 20 -6 2004:Jan 2006:Jan 2008:Jan 2010:Jan 2012:Jan 2014:Jan Sources: Bureau Economic Analysis (spending, income, saving rate), Flow of Funds Accounts (HH wealth), Core Logic (house prices), Board of Governors H.15 release (mortgage rates), Haver Analytics 35 of 16