US Macro Overview March 5, 2019
Overview • Real GDP grew 3.1% in 2018, well above the economy’s potential growth rate. • Labor markets continued to tighten while the rate of increase of wages and trend inflation moved higher. • Growth of real GDP expected to slow in 2019, but there are a wide range of opinions about how much slowing will occur. • We expect growth to slow from the 3.1% (Q4/Q4) but to remain above the economy’s potential growth rate (around 1 ¾%), leading to further tightening of labor markets and some gradual increase in the underlying inflation rate. 1
Growth of Real GDP Four Quarter Percent Change Four Quarter Percent Change 6 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 -5 -5 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2 Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
Labor Market Indicators Percent Percent 12 68 10 66 Labor Force Participation Rate 8 64 (Right Axis) 6 62 Employment to Population Ratio 4 60 (Right Axis) Unemployment Rate (Left Axis) 2 58 0 56 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Bureau of Labor Statistics 3 via Haver Analytics Note: Shading shows NBER recessions.
Employment Cost Index and the Unemployment Rate % Change, Year to Year % Change, Year to Year ECI: Wages & Salaries for Private 3 3 Industry Workers (SA) 2.5 2.5 2 2 1.5 1.5 1 1 3 4 5 6 7 8 9 10 4 Civilian Unemployment Rate: 16 yr + (SA, %) Note: Data reported quarterly Source: Bureau of Labor Statistics from Q1-2009 to Q4-2018
Measure of Underlying PCE Price Inflation 12 Month % Change 12 Month % Change 5 5 Core PCE: FOMC Objective for 4 4 Services Headline PCE Inflation 3 3 2 2 1 1 Core PCE 0 0 -1 -1 Core PCE: -2 -2 Goods -3 -3 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Bureau of Economic Analysis 5 Note: Shading shows NBER recessions. via Haver Analytics
S&P 500 and 10Yr BB+ ̶ 10Yr AAA Industrial Bonds Spread Log Index, 1941-43=10 Percentage Points 8.5 5 4.5 Yield Spread 8 4 (Right Axis) 3.5 7.5 3 7 2.5 2 S&P 500 6.5 (Left Axis) 1.5 6 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Wall Street Journal and Standard & Poor’s 6 Global Fixed Income Research via Haver Analytics.
Spot Prices for Copper and Crude Oil Dollar per Pound Dollar Per Barrel 3.5 120 Copper 3 (Left Axis) 100 2.5 80 2 60 1.5 Crude Oil 40 (Right Axis) 1 20 0.5 0 0 2014 2015 2016 2017 2018 2019 Source: Wall Street Journal and EIA/Chicago 7 Mercantile Exchange via Haver Analytics.
Real Consumer Spending and the Personal Saving Rate 12 Month % Change % 14 14 12 12 10 10 Personal Saving Rate 8 8 6 6 4 4 2 2 0 0 Real Personal Consumption -2 -2 Expenditures -4 -4 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Bureau of Economic Analysis, 8 Note: Shading shows NBER recessions. Federal Reserve Board via Haver Analytics
Consumer Confidence and Expectations Index, 1985=100 Index, 1985=100 180 180 Consumer 160 160 Confidence (Left Axis) 140 140 120 120 100 100 80 80 60 60 Consumer Expectations 40 40 (Right Axis) 20 20 0 0 2010 2012 2014 2016 2018 Source: The Conference Board via Haver 9 Analytics.
Household Liabilities over Disposable Income Ratio Ratio 1.4 1.4 1.2 1.2 1 1 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 0 0 1980 1990 2000 2010 Source: Federal Reserve Board and Bureau 10 of Economic Analysis via Haver Analytics. Note: Shading shows NBER recessions.
Transition into Serious Delinquency (90+) by Loan Type Percent of Balance Percent of Balance 12 12 Student Loan 10 10 8 8 6 6 Mortgage Credit Card 4 4 Auto Loan 2 2 HE Revolving 0 0 11 Note: 4 Quarter Moving Sum Source: New York Fed Consumer Credit Panel/Equifax Student loan data are not reported prior to 2004 due to uneven reporting
Credit Score at Origination: Auto Loans* Score Score 800 800 750 750 50th percentile 700 700 650 650 25th percentile 600 600 10th percentile 550 550 500 500 Source: New York Fed Consumer Credit Panel/Equifax 12 * Credit Score is Equifax Riskscore 3.0
Mortgage Rates and New Single-Family Home Sales % 3MMA SAAR, Thous. 5.2 700 FRM 30-Year New Single-Family Interest Rate Houses Sold 4.8 600 (Left Axis) (Right Axis) 4.4 500 4 400 3.6 300 3.2 200 2012 2014 2016 2018 Source: Mortgage Bankers Association, US 13 Census Bureau via Haver Analytics
Percent Change in New Home Sales by Region and Price Range 2017Q4 to 2018Q3 US NE MW S W Total -7.4% -28.2% 0.0% -4.8% -11.0% Price Range Up to $200K 2.3% -11.1% 5.8% -1.1% N/A $200K to $300K -1.9% -46.2% 18.5% 1.1% -15.2% $300K to $500K -7.5% 7.7% 24.4% -12.5% -6.0% Over $500K -20.6% -13.8% -11.1% -2.4% -23.9% 2016Q2 to 2017Q1 US NE MW S W Total 10.3% 19.2% 14.8% 6.3% 15.1% Price Range Up to $200K -8.3% -19.6% -12.1% 12.4% N/A $200K to $300K 11.7% -40.4% 17.2% 15.2% 12.4% $300K to $500K 9.8% 19.2% 14.8% 3.8% 18.0% Over $500K 25.6% 19.2% 167.9% 31.4% 12.4% 2013Q1 to 2013Q4 US NE MW S W Total -1.0% -15.5% -2.2% 14.6% -23.8% Price Range Up to $200K -11.2% 12.6% -21.7% 5.4% -71.0% $200K to $300K -10.2% -43.7% -18.5% 10.6% -32.2% $300K to $500K 10.1% -24.9% 46.8% 38.3% -15.5% Over $500K 20.1% 12.6% 95.7% 38.3% 16.2% 14
Credit Score at Origination: Mortgages* Score Score 800 800 50th percentile 750 750 25th percentile 700 700 10th percentile 650 650 600 600 550 550 500 500 Source: New York Fed Consumer Credit Panel/Equifax * Credit Score is Equifax Riskscore 3.0; mortgages include first-liens only. 15
Business Fixed Investment Four Quarter Percent Change Four Quarter Percent Change 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 -20 -20 2007 2009 2011 2013 2015 2017 16 Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
Nondefense Capital Goods ex. Aircraft 3MMA 3MMA 75000 75000 New Orders (Left Axis) 70000 70000 65000 65000 60000 60000 Shipments (Right Axis) 55000 55000 50000 50000 2010 2012 2014 2016 2018 17 Source: Census Bureau via Haver Analytics.
Real Government Consumption and Gross Investment 4 Quarter % Change 4 Quarter % Change 10 10 8 8 6 6 Federal 4 4 2 2 0 0 -2 -2 State and Local -4 -4 -6 -6 -8 -8 -10 -10 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Bureau of Economic Analysis 18 Note: Shading shows NBER recessions. via Haver Analytics
Real Net Exports as a % of GDP Percent Percent -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 -7 -7 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 19 Source: BEA; Haver Analytics. Note: Shading shows NBER recessions.
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