Economic & Market Overview - sosb-ia.com · estimate of GDP. As depicted in the accompanying table, weaker than expected consumer spending and a wider trade deficit were the primary

Economic & Market OverviewMaking Hay While the Sun Shines

Asset Allocation CommentaryExpectations Exceeded Again, But for How Long?

Equity Commentary Equity Markets Continue Upward Trend

Fixed Income CommentaryInterest Rate Rollercoaster Ride

Quarterly HighlightFirst Quarter GDP: Behind the Revisionary Curtain

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A N A F F I L I AT E O F B A N K E R S T R U S T C O M P A N Y S E C O N D Q U A R T E R 2 0 1 4

Economic & Market

Overview

Making Hay While the Sun Shines Given our Midwestern heritage, it seems appropriate to use a phrase directly related to agriculture when describing the performance of financial assets in the second quarter and first half of 2014. In regard to the investment environment, the sun was shining brightly as monetary policy remained accommodative, thereby keeping interest rates low. Not even the clouds created by a -2.9% decline in first quarter GDP or geopolitical tensions in Ukraine and Iraq could muster the energy necessary to rain on any investor’s parade.

In a rare phenomenon, but a pleasant one for investors, it has been hard to find an investment or asset class that has generated a negative return thus far in 2014. Equities, both domestic and foreign, performed well, as indicated by the 6.9% year-to-date return for the Russell 3000 Index and the 5.6% return for the MSCI All Country ex-US Index. Fixed income also made plenty of hay for the first six months of the year with a return of 3.9% for the Barclays Aggregate Bond Index. The fact that the fixed income markets have performed so well has been the biggest upside surprise, given that the almost universal expectation at the beginning of the year was that bonds would produce negative total returns during this time period. And it’s not just financial assets that have been basking in the sun. Commodities, ranging from metals to energy, and real estate also experienced meaningful first half returns.

Bright Sun, Calm Seas Underlying the widespread rays of positive return sunshine have been extraordinarily low levels of volatility. And not just equity market volatility. Levels have declined across many asset classes, including foreign exchange,

high-yield bonds and oil. One explanation for these lower levels of volatility is that the quantitative easing programs implemented by monetary officials have led to increased stability across economies and corporate profits. Another, more simplistic explanation is the fact that declining levels of volatility are often associated with rising asset prices.

The OutlookAs we transition to the second half of 2014, we evaluate the likely trajectory of economic growth, interest rate movements and corporate profits and prognosticate that investors could have a positive experience over the next six months similar to the past six months. From an economic perspective, the consensus outlook is that investors can expect U.S. quarterly GDP growth of 3.0% for the remainder of the year. Longer-term interest rates are expected to move modestly higher from current levels with the 10-year U.S. Treasury note yield registering 3.1% by year end. To put this in perspective, the yield on the 10-year note was 3.0% at the end of 2013.

Earnings are also expected to be a positive contributor to the investment environment in the second half. Estimate revisions have shown recent improvement, and earnings are expected to show increasing levels of year-over-year growth across the third and fourth quarters.

While the assessment of these three components – economic growth, interest rate movements and corporate profits – would suggest a lack of ominous clouds on the horizon, we know there are always issues that could lead to a stormy, more volatile experience for investors. At this time, however, the probability of such issues occurring in the third quarter does not override the positive nature of our outlook.

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In June, the Bureau of Economic Analysis (BEA) released the final revision of first quarter 2014 GDP. The resulting figure was lowered to -2.9% quarter-over-quarter (QoQ), annualized, from a previously estimated -1.0%. This revised figure was far below the 1.2% originally estimated by economists in April and represented the weakest performance since the first quarter of 2009. What truly caught investor attention was the magnitude of the revision. Since records started being kept in 1976, there had never been as large a revision to the second quarter estimate of GDP.

As depicted in the accompanying table, weaker than expected consumer spending and a wider trade deficit were the primary factors in the downward revision. Expectations of personal consumption were revised aggressively lower, from 3.0% to 1.0%, as early BEA figures overestimated the impact the Affordable Care Act (ACA) would have on health care spending during the period.

The net trade balance, the other primary swing factor, showed a wider trade deficit, with exports revised downward and imports revised upward. Overall, the markets have taken this revision in stride as second quarter economic figures appear on course for a rebound. However, it will take three quarters of 4%-plus growth to reach the Federal Reserve’s current estimate of 2.1% to 2.3% GDP expansion forecast for all of 2014.

QUARTERLY FIRST QUARTER GDP:

Behind the Revisionary Curtaincontributed by:

Jeff Birdsley, CFA, Senior Managing Director & Fixed Income Portfolio Manager

Another key point to remember is that the recently released third estimate of first quarter GDP is not the official “carved in stone” final number. The Commerce Department will be releasing its annual benchmark revisions this month, which could lead to yet another change. With such a huge revision in their most recent report, maybe the wizards behind the curtain are busy sharpening their pencils and refining their inputs.

GDP: FORECAST, REVISIONS AND REALITY

BEA ReleasesPeriod Economist

Initial Est. Initial Second Final2014 1Q 1.2% 0.1% -1.0% -2.9%2013 4Q 3.2% 3.2% 2.4% 2.6%2013 3Q 2.0% 2.8% 3.6% 4.1%2013 2Q 1.0% 1.7% 2.5% 2.5%2013 1Q 3.0% 2.5% 2.4% 1.8%2012 4Q 1.1% -0.1% 0.1% 0.4%2012 3Q 1.8% 2.0% 2.7% 3.1%2012 2Q 1.4% 1.5% 1.7% 1.3%2012 1Q 2.5% 2.2% 1.9% 1.9%2011 4Q 3.0% 2.8% 2.8% 3.0%2011 3Q 2.5% 2.5% 2.0% 1.8%2011 2Q 1.8% 1.3% 1.0% 1.3%2011 1Q 2.0% 1.8% 1.8% 1.9%

* Source: Bloomberg, Bureau of Economic Analysis

Annualized Quarterly Change in GDP2013

1Q 2014

Advance1st

Revision2nd

Revision 4Q 3Q 2Q 1Q

Real GDP 0.1% -1.0% -2.9% 2.6% 4.1% 2.5% 1.1%

Personal Consumption 3.0% 3.1% 1.0% 3.3% 2.0% 1.8% 2.3%Gross Private Investment -6.1% -11.7% -11.7% 2.5% 17.2% 9.2% 4.7%Exports -7.6% -6.0% -8.9% 9.5% 3.9% 8.0% -1.3%Imports -1.4% 0.7% 1.8% 1.5% 2.4% 6.9% 0.6%Government consumption -0.5% -0.8% -0.8% -5.2% 0.4% -0.4% -4.2%

Contribution to Change in GDP2013

1Q 2014

Advance1st

Revision2nd


Real GDP 0.1% -1.0% -2.9% -1.9% -3.0% 2.6% 4.1%

Personal Consumption 2.0% 2.1% 0.7% -1.4% -1.3% 2.2% 1.4%Gross Private Investment -1.0% -2.0% -2.0% 0.1% -1.0% 0.4% 0.3%Exports -1.1% -0.8% -1.3% -0.4% -0.2% 1.2% 0.5%Imports 0.2% -0.1% -0.3% -0.2% -0.5% -0.2% -0.4%Government consumption -0.1% -0.2% -0.1% 0.1% -0.5% -1.0% 0.8%



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Expectations Exceeded Again, But for How Long?The second quarter provided some surprising results, as both stocks and bonds continued to appreciate at a healthy clip. Following the significant, and unexpected, drop in bond yields in the first quarter, many observers expected yields to move back up, regaining some of the loss experienced in that fall. Instead, yields declined further, propelling investment-grade bonds to a 2.0% return in the second quarter. Equity markets’ seemingly relentless march upwards also surprised, particularly given the economy’s disappointing performance and the outstanding returns already booked over the past few years.

No Delight in DefensivenessWe have to count ourselves as being among those surprised by the quarter’s results. As market returns, particularly those of bonds, exceeded our expectations, our asset allocation positioning detracted across all of our five risk-based investment objectives. Exposures to cash and floating rate notes were the primary detractors.

We entered the quarter with a positioning that was defensive with regard to rising bond yields. As such, our allocation targets were underweight fixed income as a broad asset class, and within the fixed income allocation, we were underweight core investment-grade bonds, favoring floating rate and high-yield bonds.

Midway through the quarter, we reduced our slight overweight to equities. This change entailed reducing our U.S. equity exposure to neutral while raising foreign stocks to their benchmark weight. Exposure to the various sub-sets that comprise U.S. and foreign equities remained neutral throughout the quarter. We chose to put these proceeds into cash, given the prospect of higher bond yields. While it gave us no joy to increase the allocation to this “return-free” asset class, it was done to create some “dry powder” that we could use if we saw any material pullback in equities or a sharp uptick in bond yields.

As people charged with producing investment returns relative to benchmarks, we tend to focus on that smaller number consisting of our “active return” – the return above or below benchmark that results from our asset allocation positioning away from the benchmark’s composition. As such, we occasionally lose sight of the overall return, which was quite good. The total return from our asset allocation models this quarter ranged from 3.7% for the Income objective to 7.3% for the Aggressive Growth objective. That overall result, we’ll take any day.

Not Much Left to Be Squeezed From BondsAlthough our allocation positioning hasn’t produced the desired results so far this year, our thesis remains intact. Should yields regain just half of their drop over the past six months, bonds would suffer negative total returns. At the same time, while the outlook for stocks isn’t necessarily bad, they don’t look exceedingly cheap, either. After several years of tremendous performance, equity valuations have been pumped up in the face of earnings growth.

One area of concern could be fixed income instruments, such as high-yield bonds, that trade at a spread to Treasuries. High-yield bonds have returned 14.0%, annualized, over the past five years

Interest Rate Rollercoaster RideUp, then down. Up again, then down again. With this type of movement over the past 12 months, it’s no wonder fixed income investors feel like they have spent a day at the amusement park. With a yield of 2.5% in June 2013, the 10-year U.S. Treasury climbed to nearly 3% before plunging to 2.5% by October, only to climb above 3% by December. Rates plunged again to 2.6% in January as delayed recovery signs in employment and bad weather kept consumers out of shops and employers from seeing a need to hire. Like any rollercoaster ride after all the twist and turns, the yield on Treasury bonds ended right back where it started at 2.5% for the 10-year and 3.4% for the 30-year maturity.

As slower economic growth in the first quarter of 2014 took hold, it sent a signal that the 2013 rate rise was premature and that higher inflation was not yet taking hold. A weakened economic recovery implies a later start date to tightening of the Federal Reserve’s monetary policy, a longer path for rate hikes to be implemented and lower interest rates in the meantime. Investors pushed rates lower during the first quarter, reacting to the Fed’s signal of an extended accommodative monetary path. During the second quarter, an improving outlook for jobs and consumer spending halted the downward spiral of rates, stabilizing the 10-year yield at 2.5%. While economists estimate the benchmark 10-year Treasury yield will finish the year at 3.1%, these estimates continue to move downward as yields remain between 2.4% and 2.7%.

Climbs, Plunges and Positive ReturnsThrough all the ups and downs during the last 12 months, bonds measured by the Barclays US Aggregate Index returned 4.4%, with 3.9% of that return coming in 2014. Markets favored bonds with longer maturities and corporate bonds due to a delicate balance between a lower inflation outlook and just enough economic growth to further compress corporate credit spreads. Representing about 6% of the Aggregate index, overseas government bonds also contributed some of the best performance as monetary easing measures by the European Central Bank pushed foreign rates lower. Safe haven investing also contributed to strong demand for government bonds as turmoil in Ukraine and the Middle East unfolded.

A first half return of 6% was recorded by Barclays Municipal Index as state and local governments continued to exhibit

sustained growth in property tax revenues, stabilized state funding levels and controlled expenditures. After seeing municipal bond yields decline dramatically relative to Treasury securities in the first quarter, the ratio of 10-year municipal bond yield to Treasury yield rose to 93.6%, still well below the 111.0% seen at this time last year. Driving positive returns in the first half was a supply shortage of bonds as municipal bond funds saw net inflows of $5.7 billion over the six-month period. While an additional supply of bonds is expected during the second half, a large percentage of issuance will be refunding bonds, a situation in which state and local governments refinance bonds at lower rates to reduce interest expense. Combining our outlook of ongoing supply limitation and a moderate upward direction of rates, municipal bond yields are expected to stay around the current yield of 2.4% for the benchmark and then climb along with Treasury yields throughout the remainder of 2014.

Equity Markets Continue Upward TrendEquity markets continued to grind higher in the second quarter, with domestic indices closing at nearly all-time highs. The dismal first quarter GDP report was largely ignored as several economic indicators pointed to accelerating growth in the second half of the year. Large-cap stocks advanced 5.1% for the quarter, and small-caps increased 2.1%. International stocks also generated positive returns for the quarter, with developed markets up 4.1% and emerging markets advancing 6.6%.

Within the market, large-caps led the charge higher for the first six months of the year, with a return of 7.3%. International stocks followed, with emerging markets and developed markets up 6.1% and 4.6%, respectively. Small-caps lagged other equity asset classes, yet still managed a positive return of 3.2%.

Looking Ahead: Smooth Air or Signs of Turbulence?In the U.S., improvements in consumer confidence and small business optimism, coupled with increasing mergers and acquisitions (M&A) activity, indicate that equities could continue to advance during the second half of the year. In addition, employment is picking up, while inflation remains in check. On the downside, housing has gone from a market catalyst to a potential impediment as demand has softened and price increases have slowed dramatically.

Equity markets have experienced outstanding returns since bottoming over five years ago. Perhaps equally noteworthy, but not often reported, is the decline in volatility during the same time span. High readings of volatility exhibit investor fear, and low readings correspond to

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Asset Allocation Commentary

Equity Market Total Returns

Asset Class 3 Mo. 12 Mo. 3 Yr. 5 Yr.

Global Equities 5.04 22.95 10.25 14.28

U.S. Large-Cap 5.12 25.35 16.63 19.25

U.S. Small-Cap 2.05 23.64 14.57 20.21

Developed Markets 4.09 23.57 8.10 11.77

Emerging Markets 6.60 14.31 -0.39 9.24

Bond Market Total Returns


U.S. Investment Grade-Bonds 2.04 4.37 3.66 4.85

Treasury 1.35 2.04 3.06 3.60

Government Agency 1.18 2.32 2.00 2.76

Credit 2.71 7.44 5.88 7.65

Mortgage-Backed 2.41 4.66 2.80 3.92

Corporate High-Yield 2.41 11.73 9.48 13.98

Tax-Exempt Municipal 2.69 6.54 5.62 6.13

contributed by | Jonathan Fletcher, Managing Director

Equity Commentarycontributed by | Jason Clevenger, CFA, Managing Director II

Fixed Income Commentarycontributed by | Jeff Birdsley, CFA, Senior Managing Director

MARKET RETURNS (period ending 6/30/14)

Source: Morningstar DirectSource: Morningstar Direct

Disclosures:

The information provided within this document is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Statements in this report are based on the views of BTC Capital Management and on information available at the time this report was prepared.

Information has been obtained from sources deemed reliable, but BTC Capital Management and its affiliates cannot guarantee accuracy. Past performance is not a guarantee of future returns. Performance over periods exceeding 12 months has been annualized.

This commentary contains no investment recommendations, and you should not interpret the statements in this report as investment, tax, legal, and/or financial planning advice. All investments involve risk, including the possible loss of principal. Investments are not FDIC insured and may lose value.

as investors searched for yield beyond traditional investment-grade sectors. The consequence of this is that the additional yield above Treasuries, the “risk spread,” has narrowed to levels not seen since 2007 – just prior to the financial crisis. While this narrow spread could persist for a while, particularly as the economy is expected to resume its growth in coming quarters, it’s not a stretch to opine that the risk profile of high-yield bonds is above historical norms.

Looking to the second half of the year, we expect to maintain a modestly defensive positioning given the potential for rising bond yields. We emphasize “modestly defensive” because it is entirely possible, however unlikely, that yields could tumble downward if economic growth doesn’t resume. Similarly, our equity positioning remains neutral as we enter the third quarter. While stocks are likely to outperform bonds in the last half of the year, we will consider it a victory if they match the returns experienced in this year’s first six months. Clearly, our near-term performance expectations for major asset classes are muted. In this environment, exceeding benchmark performance through asset allocation positioning is a particularly challenging task. Nevertheless, we remain vigilant in seeking out opportunities to enhance portfolios’ return.

more complacency in the market. As the accompanying chart illustrates, the CBOE Volatility Index (VIX) has fallen to a multi-year low, while the price of the Russell 3000 Index has steadily risen, with the two indices exhibiting a strong negative correlation. Amazingly, the VIX has recently declined in the face of geopolitical tensions in Ukraine and Iraq, a report of negative first quarter domestic economic growth, and the continuation of the Federal Reserve program to taper asset purchases. Any increase in volatility may indicate a rocky environment for equities over the near-term.

In addition to volatility, equity valuations paint an interesting picture of where markets may go from current levels. Large-caps appear fairly valued with a price/forward earnings (P/E) ratio of 16.5, near their historical average. Small-caps appear more richly valued at 23.5 times forward earnings. In addition, expectations for small-cap earnings may be overly optimistic. According to Thomson Reuters, analysts expect companies in the Russell 2000 to grow earnings by 32.7% over the next 12 months.

Outside the U.S., valuations appear compelling, with profitability picking up overseas, specifically in emerging markets. Performance within developed markets may diverge as some regions continue to deal with slogging economic growth while others appear better positioned. Particular attention in the European Union has recently focused on the potential steps the European Central Bank (ECB) may take to prevent deflation. The ECB recently announced plans to charge banks for overnight deposits there in an effort to stimulate lending. Thus far, the ECB has refrained from quantitative easing by carrying out large-scale asset purchases, but this tool may be utilized if deflation concerns persist for a long period of time.

We expect the second half of 2014 may produce results similar to the first half, but the path will likely lead to increasing gyrations within equity markets. There is a heightened possibility of a sizeable correction, given our view that volatility will rise from current levels. The mettle of investors may be tested, but corrections often occur in bull markets and result in higher share prices further down the road.

Source: Bloomberg, L.P.

Source: Bloomberg, L.P.Asset Allocation Positioning (as of 6/30/14) Conservative Moderate Aggressive Income Growth Growth Growth Growth

Cash Equivalents Over Over Over Over Over

Total Fixed Income Under Under Under Under N/A

Core Bonds Under Under Under Under N/A

Floating Rate Notes Over Over Over Over N/A

High-Yield Bonds Over Over Over Over N/A

Total U.S. Equities N/A Neutral Neutral Neutral Under

Large-Cap N/A Neutral Neutral Neutral Neutral

Mid-Cap N/A Neutral Neutral Neutral Neutral

Small-Cap N/A Neutral Neutral Neutral Neutral

Total Foreign Equities N/A Neutral Neutral Neutral Under

Developed Market N/A Neutral Neutral Neutral Neutral

Emerging Market N/A Neutral Neutral Neutral Neutral

3

















54




Global Equities 5.04 22.95 10.25 14.28

U.S. Large-Cap 5.12 25.35 16.63 19.25

U.S. Small-Cap 2.05 23.64 14.57 20.21






Treasury 1.35 2.04 3.06 3.60


Credit 2.71 7.44 5.88 7.65









Disclosures:
























3

















54




Global Equities 5.04 22.95 10.25 14.28

U.S. Large-Cap 5.12 25.35 16.63 19.25

U.S. Small-Cap 2.05 23.64 14.57 20.21






Treasury 1.35 2.04 3.06 3.60


Credit 2.71 7.44 5.88 7.65









Disclosures:
























Economic & Market OverviewMaking Hay While the Sun Shines

Asset Allocation CommentaryExpectations Exceeded Again, But for How Long?

Equity Commentary Equity Markets Continue Upward Trend

Fixed Income CommentaryInterest Rate Rollercoaster Ride

Quarterly HighlightFirst Quarter GDP: Behind the Revisionary Curtain

ISSU

E TO

PIC

SC

ON

TAC

T U

S

INVESTMENT

A N A F F I L I AT E O F B A N K E R S T R U S T C O M P A N Y S E C O N D Q U A R T E R 2 0 1 4

Economic & Market

Overview

Making Hay While the Sun Shines Given our Midwestern heritage, it seems appropriate to use a phrase directly related to agriculture when describing the performance of financial assets in the second quarter and first half of 2014. In regard to the investment environment, the sun was shining brightly as monetary policy remained accommodative, thereby keeping interest rates low. Not even the clouds created by a -2.9% decline in first quarter GDP or geopolitical tensions in Ukraine and Iraq could muster the energy necessary to rain on any investor’s parade.

In a rare phenomenon, but a pleasant one for investors, it has been hard to find an investment or asset class that has generated a negative return thus far in 2014. Equities, both domestic and foreign, performed well, as indicated by the 6.9% year-to-date return for the Russell 3000 Index and the 5.6% return for the MSCI All Country ex-US Index. Fixed income also made plenty of hay for the first six months of the year with a return of 3.9% for the Barclays Aggregate Bond Index. The fact that the fixed income markets have performed so well has been the biggest upside surprise, given that the almost universal expectation at the beginning of the year was that bonds would produce negative total returns during this time period. And it’s not just financial assets that have been basking in the sun. Commodities, ranging from metals to energy, and real estate also experienced meaningful first half returns.

Bright Sun, Calm Seas Underlying the widespread rays of positive return sunshine have been extraordinarily low levels of volatility. And not just equity market volatility. Levels have declined across many asset classes, including foreign exchange,

high-yield bonds and oil. One explanation for these lower levels of volatility is that the quantitative easing programs implemented by monetary officials have led to increased stability across economies and corporate profits. Another, more simplistic explanation is the fact that declining levels of volatility are often associated with rising asset prices.

The OutlookAs we transition to the second half of 2014, we evaluate the likely trajectory of economic growth, interest rate movements and corporate profits and prognosticate that investors could have a positive experience over the next six months similar to the past six months. From an economic perspective, the consensus outlook is that investors can expect U.S. quarterly GDP growth of 3.0% for the remainder of the year. Longer-term interest rates are expected to move modestly higher from current levels with the 10-year U.S. Treasury note yield registering 3.1% by year end. To put this in perspective, the yield on the 10-year note was 3.0% at the end of 2013.

Earnings are also expected to be a positive contributor to the investment environment in the second half. Estimate revisions have shown recent improvement, and earnings are expected to show increasing levels of year-over-year growth across the third and fourth quarters.

While the assessment of these three components – economic growth, interest rate movements and corporate profits – would suggest a lack of ominous clouds on the horizon, we know there are always issues that could lead to a stormy, more volatile experience for investors. At this time, however, the probability of such issues occurring in the third quarter does not override the positive nature of our outlook.

453 7th Street Des Moines, IA 50309-3702BTCCapitalMgmt.com

INVESTMENT

Bringing the Investment Expertise of BTC Capital Management Directly to You

Scott Eltjes | CFA, FLMICEO and President(515) 245-2415

Brian Rolland | CPA, CMA, CTPSenior Managing Director(319) 541-2713

Dave JacksonManaging Director(515) 245-5655

BTCCapitalMgmt.com

contributed by | Jon Augustine, CFA, Chief Investment Officer

May lose value

No bank guarantee

2

In June, the Bureau of Economic Analysis (BEA) released the final revision of first quarter 2014 GDP. The resulting figure was lowered to -2.9% quarter-over-quarter (QoQ), annualized, from a previously estimated -1.0%. This revised figure was far below the 1.2% originally estimated by economists in April and represented the weakest performance since the first quarter of 2009. What truly caught investor attention was the magnitude of the revision. Since records started being kept in 1976, there had never been as large a revision to the second quarter estimate of GDP.

As depicted in the accompanying table, weaker than expected consumer spending and a wider trade deficit were the primary factors in the downward revision. Expectations of personal consumption were revised aggressively lower, from 3.0% to 1.0%, as early BEA figures overestimated the impact the Affordable Care Act (ACA) would have on health care spending during the period.

The net trade balance, the other primary swing factor, showed a wider trade deficit, with exports revised downward and imports revised upward. Overall, the markets have taken this revision in stride as second quarter economic figures appear on course for a rebound. However, it will take three quarters of 4%-plus growth to reach the Federal Reserve’s current estimate of 2.1% to 2.3% GDP expansion forecast for all of 2014.

QUARTERLY FIRST QUARTER GDP:

Behind the Revisionary Curtaincontributed by:

Jeff Birdsley, CFA, Senior Managing Director & Fixed Income Portfolio Manager

Another key point to remember is that the recently released third estimate of first quarter GDP is not the official “carved in stone” final number. The Commerce Department will be releasing its annual benchmark revisions this month, which could lead to yet another change. With such a huge revision in their most recent report, maybe the wizards behind the curtain are busy sharpening their pencils and refining their inputs.

GDP: FORECAST, REVISIONS AND REALITY

BEA ReleasesPeriod Economist

Initial Est. Initial Second Final2014 1Q 1.2% 0.1% -1.0% -2.9%2013 4Q 3.2% 3.2% 2.4% 2.6%2013 3Q 2.0% 2.8% 3.6% 4.1%2013 2Q 1.0% 1.7% 2.5% 2.5%2013 1Q 3.0% 2.5% 2.4% 1.8%2012 4Q 1.1% -0.1% 0.1% 0.4%2012 3Q 1.8% 2.0% 2.7% 3.1%2012 2Q 1.4% 1.5% 1.7% 1.3%2012 1Q 2.5% 2.2% 1.9% 1.9%2011 4Q 3.0% 2.8% 2.8% 3.0%2011 3Q 2.5% 2.5% 2.0% 1.8%2011 2Q 1.8% 1.3% 1.0% 1.3%2011 1Q 2.0% 1.8% 1.8% 1.9%


Annualized Quarterly Change in GDP2013

1Q 2014

Advance1st

Revision2nd


Real GDP 0.1% -1.0% -2.9% 2.6% 4.1% 2.5% 1.1%

Personal Consumption 3.0% 3.1% 1.0% 3.3% 2.0% 1.8% 2.3%Gross Private Investment -6.1% -11.7% -11.7% 2.5% 17.2% 9.2% 4.7%Exports -7.6% -6.0% -8.9% 9.5% 3.9% 8.0% -1.3%Imports -1.4% 0.7% 1.8% 1.5% 2.4% 6.9% 0.6%Government consumption -0.5% -0.8% -0.8% -5.2% 0.4% -0.4% -4.2%

Contribution to Change in GDP2013

1Q 2014

Advance1st

Revision2nd


Real GDP 0.1% -1.0% -2.9% -1.9% -3.0% 2.6% 4.1%

Personal Consumption 2.0% 2.1% 0.7% -1.4% -1.3% 2.2% 1.4%Gross Private Investment -1.0% -2.0% -2.0% 0.1% -1.0% 0.4% 0.3%Exports -1.1% -0.8% -1.3% -0.4% -0.2% 1.2% 0.5%Imports 0.2% -0.1% -0.3% -0.2% -0.5% -0.2% -0.4%Government consumption -0.1% -0.2% -0.1% 0.1% -0.5% -1.0% 0.8%



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Economic & Market Overview - sosb-ia.com · estimate of GDP. As depicted in the accompanying table, weaker than expected consumer spending and a wider trade deficit were the primary