Wichita 2011 Review

2012 Forecast

Jeremy Hill, directorCenter for Economic Development and Business

ResearchW. Frank Barton School of Business

Wichita State UniversityOctober 2011

Debt Ceiling GDP debt ratio Federal Reserve – Twisty European debt crisis Political uncertainty Corporate profits Employment number Consumer confidence China – inflationary pressures Standard & Poor’s credit downgrade of the U.S. Stock market volatility GDP

National/Global Influencing Factors

U.S. Gross Domestic Product

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Recession Series2 Gross domestic product

Sources: Bureau of Economic Analysis, National Bureau of Economic Research

Agriculture prices Energy Investment Defense cuts/ Super Committee General Aviation – fast recovery Commercial Aviation – orders Wichita Exports

Kansas/Wichita Influencing factors

Top 5 Exports from Kansas

Jan-

02

Oct-0

2

Jul-0

3

Apr-0

4

Jan-

05

Oct-0

5

Jul-0

6

Apr-0

7

Jan-

08

Oct-0

8

Jul-0

9

Apr-1

0

Jan-

11 $-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

Food & Agri Chemicals Machinery Aerospace

Sources: USA Trade Online

Wichita Business Concerns

GLOBALLY NATIONALLY LOCALLY

Eu

ro.

deb

t cri

sis

Com

peti

tive

posit

ion

Glo

bal d

em

an

d

Tax s

tru

ctu

re

Fed

era

l d

eb

t

Bu

sin

ess

reg

ula

tion

En

vir

on

men

tal

reg

.D

efl

ati

on

Sta

te a

nd

local

gov.

Real esta

te

mark

et

Tig

ht

cre

dit

con

dit

ion

s

Extremely Concerned

Very Concerned

Moderate Concern

Little Concern

No Concern

Sources: CEDBR

Rising Staying the same

Falling0%

10%

20%

30%

40%

50%

60%

70%

80%

Prices Charged

2009 2010 2011

Rising Staying the same

Falling0%

10%

20%

30%

40%

50%

60%

70%

80%

Costs: Price of Inputs

2009 2010 2011

Existing Conditions

Sources: CEDBR

Rising Staying the same

Falling0%

10%

20%

30%

40%

50%

Volume of Demand

2009 2010 2011

Existing Conditions

Sources: CEDBR

Rising Staying the same

Falling0%

10%

20%

30%

40%

50%

Profit Margins

2009 2010 2011

Costs

37% - costs will increase Prices Charged -

64% - prices will stay the same Employment –

29% expect increases 50% expect no changes

Factors that are holding us back Uncertainty about future economic policies Low consumer and business confidence Sustained high unemployment The burden of new regulations

Overall Business Expectations Next 3 to 6 Months

Sources: CEDBR

Kansas Employment

2005

2006

2007

2008

2009

2010

2011

2012

-20%

-15%

-10%

-5%

0%

5%

Goods Producing

Trade, Trans. & Utili-ties

Services

Rolling Annual Average

Sources: Bureau of Labor Statistics, CEDBR

Wichita Employment

2005

2006

2007

2008

2009

2010

2011

2012

-20%

-15%

-10%

-5%

0%

5%

Goods Producing

Trade, Trans. & Utili-ties

Services

Rolling Annual Average

Sources: Bureau of Labor Statistics, CEDBR

Goods Production• Aviation• Commercial - strong• General – “top half” should be good – excess

demand will go to back logs• Military - mixed

• Chemicals - strong• Construction – will remain fragile

Non-Durable

DurableNat. Res. & Const.

Production Sectors

1.8%

1.4%

2.0%

1.1%

Trade, Transportation & Utilities

• Retail/Consumption- • Upper middle and high end consumer –

strong demand• Middle income consumer – will remain cash

strapped

• Wholesale – will be down due to excess slack

Trans. & Utilities

RetailWholesaleTrade, Trans. &Util. Sectors

-0.5%

2.3%

0.5%

0.3%

Services• Information – following the national trend

• Financial Services – following the national trend

• Healthcare – following national trend

• Temporary agencies – continued demand

• Education – slowing as employment opportunities becomes available

Services

-5.0%

2.1%

-1.5%

6.1% 0.9% 2.1% 1.6%

Information

Fin. Act.

Pro. & Bus.

Edu. & Health

Leisure & Hosp.

Other

General Expectations - Wichita

Global and National “uncertainties” within the market need to be alleviated before business confidence returns.

Global business profits have to remain high before local moderate GDP growth.

Acceleration in manufacturing (EMP 1.2%) will spill over to the service and retail sectors.

Input costs will continue to rise in 2012, putting pressure on businesses that sell locally.

Upper middle and high income households will increase consumption, but the slightest negative news will cause an abrupt decline in purchases.

Wichita’s labor market will continue to heal, but it will remain fragmented with a portion of the labor market underemployed in 2012.

Employment is expected to increase by 1.3% (3,800) in 2012. This is a welcomed relief, but minimal growth.