Post on 17-Dec-2015
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The Economic Outlook:Will the Headwinds or
Tailwinds Prevail?
Lynn Reaser, Ph.D.Houston, March 25, 2010
Key Topics
Global Outlook
U.S. Economy
Financial Markets
Texas/Houston
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The Fermanian Business & Economic Institute – business & economics in action © FBEI 2010
Global Outlook
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Global Manufacturing Rebounds
Index, 50 plus = expansion
2005 2006 2007 2008 200930
35
40
45
50
55
60
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2007 2008 2009 2010f-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
World Trade Dives, RecoversReal Volumes, annual percent change
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China’s Motor Remains OnReal GDP, annual percent change
2006 2007 2008 2009 2010f0
2
4
6
8
10
12
14
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Nations’ Growth Rates to Diverge
Percent change in 2010 real GDP, forecast
Emer
ging
Mar
kets
U.S.
Euro
zone U.K
.
Japa
n0.0
2.0
4.0
6.0
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f95
100
105
110
115
120
125
130Actual
Crosscurrents Keep Dollar Stable in 2010
Broad Trade-Weighted Index, Jan 97=100, December average
Forecast
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U.S. Economy
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2006 2007 2008 2009 2010f-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
U.S. Real GDP to Rebound4th quarter, percent change over prior
year
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Consumers Save More, but Trauma Contained
Saving rate, percent
0
2
4
6
8
10
12Actual Forecast
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57-58 73-75 81-82 07-10f-6-4-202468
101214
Trough to 6 qtrs later
Peak-to-trough
Recovery Weaker than NormalReal GDP, percent change
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12,400
12,600
12,800
13,000
13,200
13,400
13,600
13,800Actual Forecast
2007 2008 2009 2010f
Output to Recoup Losses in 2010GDP, billions of chained 2005 dollars
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Q1-09 Q2-09 Q3-09 Q4-09 Q1-10f Q2-10f Q3-10f Q4-10f-800
-600
-400
-200
0
200
400
Job Growth to Slowly ResumeChange in nonfarm employment, thousands
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2006
2007
2008
2009
2010f
0
2
4
6
8
10
12Fore-cast
Actual
Jobless Rate to Edge Lower by Year-end 2010
Quarterly average, percent
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2006 2007 2008 2009 2010f0.0
1.0
2.0
3.0
4.0
5.0
Consumer Prices Still Subdued4th quarter, percent change over prior year
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Financial Markets
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2007 2008 2009 2010700
900
1100
1300
1500
1700
1900
2100
2300
Fed’s Balance Sheet Explodes
Billions of dollar, month-end
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2006
2007
2008
2009
2010f
0.0
1.0
2.0
3.0
4.0
5.0
6.0
10-year Treasury Note
Fed Funds Tar-get
Interest Rates to Slowly RiseQuarter-end, percent
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Profits to Bounce HigherAfter-tax profits, annual percent
change
2006 2007 2008 2009e 2010f-15
-10
-5
0
5
10
15
20
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Potential Potholes
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House
hold
Busin
ess
Stat
e an
d Lo
cal G
over
nmen
t
Fede
ral
-5
5
15
25
Debt Shifts to the Public Sector
Q3 2009, Percent change from prior quarter, annualized
Federal Deficit Continues to Deepen
Deficit as percent of GDP, fiscal years
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The Fermanian Business & Economic Institute – business & economics in action © FBEI 2010
Risks
•Terrorism
•Commercial Real Estate
•Oil Prices
•China
•Sovereign Risk
10-15%
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Texas Tracks U.S. Job Performance Percent change over prior year
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
U.S.
Texas
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
U.S.
Hous-ton
Houston and U.S. Job Trends ConvergePercent change over prior year
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Oil Prices Forecast to Stay at Higher LevelsDollars per barrel, quarterly average, WTI
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f0
20
40
60
80
100
120
140Actual Forecast
The Fermanian Business & Economic Institute – business & economics in action © FBEI 2010
Most Houston Sectors Suffer Job Losses
January, percent change over prior year
Construction
Manufacturing
Mining
Total
Private Services
Government
-15 -13 -11 -9 -7 -5 -3 -1 1 3
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Houston Home Prices* to Rise Moderately
4th quarter, percent change over prior year
2006 2007 2008 2009 2010f0.0
1.0
2.0
3.0
4.0
5.0
6.0
*FHFA Index
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PositivesOil drillingExportsHealth careHomebuilding
NegativesCommercial real
estateOil refining
marginsTight credit
Houston
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Houston to See More JobsDecember average, change over prior year,
thousands
2006 2007 2008 2009 2010f-150
-100
-50
0
50
100
150
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Recap
Global Economy Uneven
U.S. Recovers
Higher Interest Rates and Stock
Prices
Houston Outperforms Nation
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Real Change
Emerging Markets Take the Lead
Government Debt Escalates
Less Trust in Markets
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Change, but How Permanent?
Consumer Thrift
Green Economy
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Real Change
Complex Tax System
Risk Taking
Small Business