Economic Highlights: Growth & Profits Don Rissmiller August, - PowerPoint PPT Presentation

Economic Highlights: Growth & Profits Don Rissmiller August, 2013 Strategas Research Partners 212-906-0134 drissmiller@strategasrp.com

Where Are We In the Business Cycle? U.S. Real Gross Domestic Product % Change - Year to Year SAAR , Bil.Chn.2009$ 10.0 10.0 7.5 7.5 5.0 5.0 2.5 2.5 0.0 0.0 -2.5 -2.5 -5.0 -5.0 60 65 70 75 80 85 90 95 00 05 10 Source: Bureau of Econom ic Analysis

Where Are We In the Business Cycle? U.S. Real Gross Domestic Product % Change - Year to Year SAAR , Bil.Chn.2009$ 10.0 10.0 7.5 7.5 5.0 5.0 2.5 2.5 0.0 0.0 -2.5 -2.5 -5.0 -5.0 60 65 70 75 80 85 90 95 00 05 10 Source: Bureau of Econom ic Analysis

Even in Bad Times, It’s Easy To Get a “Bounce ” Real Gross Domestic Product % Change - Year to Year Bil.Chn.2009$ 15 15 1930s 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 30 31 32 33 34 35 36 37 38 39 Source: Bureau of Econom ic Analysis

Pent-Up Demand Is Powerful 3 U.S. Areas To Watch : 1) Capex 2) Housing 3) State & Local Govt

Pent-Up Demand Is Powerful M frs' Shipments: Nondefense Capital Goods ex Aircraft % Change - Year to Year SA, M il.$ 15.0 15.0 7.5 7.5 0.0 0.0 -7.5 -7.5 -15.0 -15.0 -22.5 -22.5 04 05 06 07 08 09 10 11 12 13 Source: Census Bureau

Pent-Up Demand Is Powerful M frs' Shipments: Nondefense Capital Goods ex Aircraft % Change - Year to Year SA, M il.$ All Employees: Total Nonfarm % Change - Year to Year SA, T hous 15.0 4 7.5 2 0.0 0 -7.5 -2 -15.0 -4 -22.5 -6 04 05 06 07 08 09 10 11 12 13 Sources: Census Bureau, Bureau of Labor Statistics

Household Formation Is Key Total Number of Households, Break-adjusted % Change - Year to Year T hous 2.4 2.4 2.0 2.0 1.6 1.6 1.2 1.2 0.8 0.8 0.4 0.4 0.0 0.0 90 95 00 05 10 Source: Census Bureau/H av er Analytics

Economic Symmetry 2007-2009 Deep Recession 2013-14 Recovery (We get housing & capex back) 2012 Muddle 2011 Muddle Through Through Late-2012, 2009-2010 (Deleveraging) (Deleveraging) early 2013 Moderate Slowdown Recovery (Fiscal Cliff / (Missing Sequester housing) Uncertainty)

But U.S. Inflation Is Not a Problem, With Wage Growth Restrained CPI-U: All Items % Change - Year to Year SA, 1982-84=100 Nonfarm Business Sector: Compensation Per Hour % Change - Year to Year SA, 2009=100 16 16 12 12 8 8 4 4 0 0 -4 -4 60 65 70 75 80 85 90 95 00 05 10 Source: Bureau of Labor Statistics

So What Is the Fed Doing With Tapering? Civilian Unemployment Rate: 16 yr + SA, % 12 12 10 10 8 8 6 6 4 4 2 2 60 65 70 75 80 85 90 95 00 05 10 Source: Bureau of Labor Statistics

Labor Share At a Low U.S. Corporate Compensation % Corporate GDP 66 66 64 64 62 62 60 60 58 58 56 56 50 55 60 65 70 75 80 85 90 95 00 05 10 Source: H av er Analytics

Future Productivity Gains Will Be Important Nonfarm Business Sector: Real Output Per Hour of All Persons % Change - Year to Year SA, 2009=100 6 6 4 4 2 2 0 0 -2 -2 60 65 70 75 80 85 90 95 00 05 10 Source: Bureau of Labor Statistics