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United States – The glass is still half emptyUnited States – The glass is still half empty
Samiran Chakraborty10 November 2013
The glass is still half emptyThe glass is still half empty
G4: The US recovery stands outRebased GDP (Q1-2008=100)
100
102
104
106
108
90
92
94
96
98
100
Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010
US
Sources: Datastream, Standard Chartered Research
Euro area
UK
Japan
Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013
2
US GDP growth has shifted down a gear since the financial crisis
4
6
8
10
Nominal US GDP growth (since 1990), % y/y
-4
-2
0
2
4
Dec-90 Jul-92 Feb-94 Sep-95 Apr-97 Nov-98 Jun-00 Jan-02
US GDP growth has shifted down a gear since the financial crisis
Source: Bloomberg, Standard Chartered Research 3
3.1
02 Aug-03 Mar-05 Oct-06 May-08 Dec-09 Jul-11 Feb-13
Business surveys are rather upbeatBusinesses seem to have seen through the political uncertainty
Manufacturing
Non
50
55
60
ISM business surveys
30
35
40
45
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10
Business surveys are rather upbeatBusinesses seem to have seen through the political uncertainty
Manufacturing
Non-manufacturing
Sources: Bloomberg, Standard Chartered Research 4
Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13
But consumer surveys are less upbeat
University of Michigan consumer confidence survey (index)
75
80
85
55
60
65
70
Nov-07 Nov-08 Nov-09 Nov
But consumer surveys are less upbeat
University of Michigan consumer confidence survey (index)
Source: Bloomberg, Standard Chartered Research 5
72.0
Nov-10 Nov-11 Nov-12 Nov-13
Mortgage rates are higher than in early 2013, but gas prices are lower
4.5
5.0
5.5
Average gasoline prices (USD/gallon) and average 30
3.0
3.5
4.0
4.5
Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
Mortgage rates are higher than in early 2013, but gas prices are lower
Average gasoline prices (RHS)
4.0
4.5
Average gasoline prices (USD/gallon) and average 30-year mortgage rates, %
Sources: Bloomberg, Standard Chartered Research 6
MBA 30Y avg mortgage rate, % (LHS)
2.5
3.0
3.5
12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Car sales have moderated after a solid summer
14
15
16
17
18
Monthly car sales, mn (annualised)
8
9
10
11
12
13
14
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10
Car sales have moderated after a solid summer
Sources: Bloomberg, Standard Chartered Research 7
Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13
Unemployment vs. GDP growth: something will have to giveThe unemployment rate has dropped more than anticipated given the still
US real GDP growth (%, y/y) vs. 1Y change in the unemployment rate, %
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Sep-93 Sep-95 Sep-97 Sep-99 Sep-01 Sep-Other assets
Unemployment vs. GDP growth: something will have to giveThe unemployment rate has dropped more than anticipated given the still-soft growth backdrop
US real GDP growth (%, y/y) vs. 1Y change in the unemployment rate, %
Unemployment, 1Y chg. (inverted, LHS)
2
4
6
Source: Bloomberg, Standard Chartered Research 8
GDP growth,% y/y (RHS
-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13
-6
-4
-2
0
US manufacturing ‘renaissance’: data is inconclusive, so far
US manufacturing employment, mn (LHS)
16
17
18
19
Unemployment rate, %
10
11
12
13
14
15
Oct-93 Feb-95 Jun-96 Oct-97 Feb-99 Jun-00 Oct-01 Feb-03
US manufacturing ‘renaissance’: data is inconclusive, so far
US manufacturing production, index RHS
90
95
100
105
y/y gain: 2.6%
60
65
70
75
80
85
Jun-04 Oct-05 Feb-07 Jun-08 Oct-09 Feb-11 Jun-12 Oct-13
Source: Bloomberg, Standard Chartered Research 9
y/y gain: 0.5%
Still no signs that earnings growth is taking off
Earnings growth (private sector), % y/y
3.0
3.5
4.0
1.5
2.0
2.5
3.0
Mar-07 Mar-08 Mar-09 Mar-10
Still no signs that earnings growth is taking off
Source: Bloomberg, Standard Chartered Research 10
Mar-11 Mar-12 Mar-13
US growth: still-high headwinds in the near term
Growth expectations are being lowered (again)
Evolution of the Bloomberg consensus forecast for
annual GDP growth
2014
2.6
3.0
3.5
2013
1.6
2.6
1.0
1.5
2.0
2.5
Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Time forecast was made
N.B.:Our 2014
forecast is 2.4%
high headwinds in the near term
The Fed’s growth forecasts are too optimistic
Current Fed forecasts (mid-point of central tendency)
Q4-2014 Q4-2015 Q4-2016
GDP growth, % y/y 3.00 3.25 2.90
Unemployment rate, % 6.60 6.05 5.65
Source: Bloomberg, Standard Chartered Research 11
PCE inflation, y/y % 1.55 1.80 1.85
Core PCE, y/y % 1.60 1.85 1.95
2.4%
US export growth is plateauing
Top 3 partners: recent trends
US exports, USD bn
Canada
Mexico250
300
350
Other main trade partners: recent trends
Exports, USD
50
60
70
80
China
0
50
100
150
200
Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
10
20
30
40
50
Other main trade partners: recent trends
Exports, USD bn
Japan
Germany50
60
70
80
Source: Bloomberg, Standard Chartered Research 12
Germany
Korea
Brazil
Netherlands
HK
Australia
10
20
30
40
50
Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
US imports: less reliance on energy suppliers
Top 3 partners: recent trends
US imports, USD bn
China
Canada
Mexico 300
350
400
450
500
Other main trade partners: recent trends
Imports, USD
110
130
150
170
Mexico
0
50
100
150
200
250
300
Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
US imports: less reliance on energy suppliers
Other main trade partners: recent trends
Imports, USD bn
Japan
Germany
110
130
150
170
Source: Bloomberg, Standard Chartered Research 13
KoreaSaudi Arabia
UK
France
India
10
30
50
70
90
Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
October payrolls: revisions helped push up moving averages
3-month avg.
6-month avg.
250
300
350
Non-farm payrolls and averages (3 and 6 months), ‘000s
0
50
100
150
200
Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep
October payrolls: revisions helped push up moving averages
NFP
farm payrolls and averages (3 and 6 months), ‘000s
Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13
Source: Bloomberg, Standard Chartered Research 14
The household survey posts a big drop due to a different methodology for furloughed federal staff
Employment gains (‘000s) according to the two surveys
400
600
800
1,000
-800
-600
-400
-200
0
200
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
The household survey posts a big drop due to a different methodology for furloughed federal staff
Employment gains (‘000s) according to the two surveys
Payroll survey
Source: Bloomberg, Standard Chartered Research 15
12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Household survey
A continued fall in the US participaadvanced countries’ situation
Labour-force participation rate, % (seasonally adjusted)
66
67
68
UK
62
63
64
65
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08
ipation rate, contrasting with other
force participation rate, % (seasonally adjusted)
Canada
Source: Bloomberg, Standard Chartered Research 16
US
Feb-09 Feb-10 Feb-11 Feb-12 Feb-13
Services jobs continue to lead the job recovery, while the decline in federal jobs has decelerated
Employment by sector, rebased 2005=100
110
120
130
70
80
90
100
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Services jobs continue to lead the job recovery, while the decline
Other services
Health and education
Government (federal and local)
Note: Oil & mining jobs are not shown (c. 890,000 jobs).Source: Bloomberg, Standard Chartered Research
17
Construction
Manufacturing
Jan-10 Jan-11 Jan-12 Jan-13
Finance & real estate
Part-time employment has moderated recently after strong gains in the spring
Part-time vs. full-time split (rebased Dec 2006=100)
105
110
115
90
95
100
105
Dec-06 Dec-07 Dec-08 Dec-09
time employment has moderated recently after strong gains
Part-time jobs
Source: Bloomberg, Standard Chartered Research 18
Dec-10 Dec-11 Dec-12
Full-time jobs
Hours worked have been stagnating
Weekly hours worked (private sector)
Manufacturing (LHS)
40.0
40.5
41.0
41.5
Hours worked (RHS)
37.0
37.5
38.0
38.5
39.0
39.5
Dec-06 Dec-07 Dec-08 Dec-09
Other assets
Hours worked have been stagnating
Manufacturing (LHS)
34.4
34.6
34.8
Source: Bloomberg, Standard Chartered Research 19
Hours worked (RHS)
33.6
33.8
34.0
34.2
Dec-10 Dec-11 Dec-12
The increase in mortgage rates over the summer has cooled the housing market, but fundamentals remain supportive
Builders are still enthusiastic, despite higher rates
NAHB survey (home builders) and new home
sales, ‘000s
New home sales, LHS
NAHB survey, RHS
60
80
2,000
2,500
RHS
0
20
40
0
500
1,000
1,500
Oct-04 Oct-07 Oct-10 Oct-13
The increase in mortgage rates over the summer has cooled the housing market, but fundamentals remain supportive
House prices are recovering from low levels
FHFA and Case-Shiller house price indices
FHFA index (purchase),
RHS
220
230
200
220
Source: Bloomberg, Standard Chartered Research 20
Case-Shiller 20, LHS
180
190
200
210
120
140
160
180
Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
Low inflation moving higher on the Fed’s worry list
Selected core inflation measures, % y/y
2.0
2.5
3.0
0.0
0.5
1.0
1.5
Oct-07 Oct-08 Oct-09 Oct-
Low inflation moving higher on the Fed’s worry list
Core CPI index
Source: Bloomberg, Standard Chartered Research 21
Core PCE index
-10 Oct-11 Oct-12 Oct-13
US economic dashboardLow inflation and still-moderate growth: no rush to reduce the Fed’s bond
US Economic Dashboard
Unemployment rate10.04.0
4.5
5.0
5.5
6.0
6.57.0
7.5
8.0
8.5
9.0
9.5
7.3
0.0
0.5
1.0
1.52.0
Real GDP growth, y/y
(1) Illustration inspired by a Dallas Fed 2013 presentation; (2) spread of the FINRA US high
payrolls, as of the latest data, compared to trough versus peak;
High-yield bond spread (2)
Unemployment rate
10.03.0
3.5
4.0
4.5
5.0
5.56.0 6.5 7.0
7.5
8.0
8.5
9.0
9.5
4.6-2.0
-1.5
-1.0
-0.5
1.6
moderate growth: no rush to reduce the Fed’s bond-buying programme
US Economic Dashboard (1)
Core PCE inflation, % y/y5.0-1.0
-0.5
0.0
0.5
1.0
1.52.0 2.5
3.0
3.5
4.0
4.5
1.2
2.0 2.53.0
3.5
4.0
22
75.9 (3 months ago)
Legend
Current levels
3 months ago
Percent of jobs recovered (3)
Real GDP growth, y/y
igh-yield corporate index (yield to maturity) to the UST 5Y yield, in percent; (3) total non-farm
payrolls, as of the latest data, compared to trough versus peak; Sources: Bloomberg, Standard Chartered Research
8.28
Core PCE inflation, % y/y
6.0
4.5
5.0
5.5
1.6
The current FOMC on a dovish-hawkish scale
Ben BernankeChairman
Jerome PowellFed Board
Daniel Fed Board
Eric Rosengren
Janet YellenFed Vice Chair
James BullardSt Louis Fed
Narayana KocherlakotaMinneapolis Fed
William DudleyNew York Fed
Dennis Lockhart
Note: Federal Reserve Board Member Elizabeth Duke left in August (vacant seat); Sarah Bloom
Treasury. Sandra
Dove
Eric RosengrenBoston Fed
Dennis LockhartAtlanta Fed
John WilliamsSan Francisco Fed
Charles EvansChicago Fed
Permanent vote – dark blue | Voters in 2013 – dark green
Many doves were
voting this year
hawkish scale
Ben BernankeChairman
Jerome PowellFed Board
Daniel TarulloFed Board
Sandra PianaltoCleveland Fed
Jeremy SteinFed Board
Esther GeorgeKansas City Fed
Charles PlosserPhiladelphia Fed
Richard FisherDallas Fed
Jeffrey LackerDennis Lockhart
Two vocal hawks are
voting next year
Note: Federal Reserve Board Member Elizabeth Duke left in August (vacant seat); Sarah Bloom Raskin was appointed to the
Treasury. Sandra Pianalto indicated she will be leaving the Cleveland Fed in early 2014.
Source: Fed, Standard Chartered Research 23
Hawk
Jeffrey LackerRichmond Fed
Dennis LockhartAtlanta Fed
John WilliamsSan Francisco Fed
dark green | Voters in 2014 – green | Voters in 2015 – blue
voting next year
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