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On November 10, 2011, the chapter hosted Dr. Dick Stevie, Chief Economist for Duke Energy, and Dr. George Vredeveld, Alpaugh Professor of Economics at the University of Cincinnati and founder and Director of its Economics Center.
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NATIONAL INVESTOR RELATIONS INSTITUTE
R I C H A R D S T E V I E
N OV E M B E R 2 0 1 1
2011 Economic Outlook
Outline2
National Outlook Review current indicators Discuss trends National economic forecast
Local Outlook Comparison to national trends Local economic outlook
Current Status3
• Shows depth of the decline and how far back we have come.• And how much further we need to go to get back to pre-recession levels.
Current Status6
GDP estimated to be up 3.0% in 2010, but up only 0.8% through the first half of 2011 and 2.5% in the 3rd quarter of 2011
High oil prices affected consumer spendingHousing market still struggling to recoverEmployment growth is slowCommercial activity slowly improvingManufacturing has been the sector to observePolitical dysfunction raised uncertainty and increased
market volatility / S&P downgrade
Volatility in the Dow Jones5
Who Said This?
“Anyone who isn’t confused really doesn’t understand the situation.”
a. Bill Cosbyb. Edward R. Murrowc. Will Rogers
Consumer Debt Obligations
7
Who Said This?
“Credit is a system whereby a person who can not pay gets another person who can not pay to guarantee that he can pay.”
a. Charles Dickensb. Jimmy Buffetc. Oscar Wilde
Retail Sales Net of Gasoline9
Retail Sales: Net of Inflation10
Vehicle Sales11
New Homes for Sale12
Who Said This?
“Catch a man a fish, and you can sell it to him. Teach a man to fish, and you ruin a wonderful business opportunity.”
a. Warren Buffettb. Karl Marxc. Al Capone
Total Employment14
Initial Claims for Unemployment Insurance
15
Manufacturing Activity16
Manufacturing Employment
17
Industrial Production18
Industrial Production19
Industrial Production20
Who Said This?
“Today, there are three kinds of people: the have’s, the have-not’s, and the have-not-paid-for-what-they-have’s.”
a. Alan Greenspanb. Jay Lenoc. Columnist, Earl Wilson
Money Supply22
Interest Rates23
TED Spread24
European Debt Crisis25
Borrowing running above 100% of GDP in Portugal, Italy, Greece, Spain, and Ireland.
Issues include balancing budgets and the ability to roll-over debt at rates that are sustainable.
Why do we care? Banks in the U.S. have loans to PIIGS of about $150
B – about 1% of U.S. GDP. Integration of loans across European banks is
massive. Loans by banks in the U.S. to organizations in
Europe represents roughly 10% of U.S. GDP.
European Debt Crisis26
Greece’s debt is about 400 B Euros. Current interest rate is over 25%. Even still, this one appears to be solvable.
Italy’s debt is about 2 Trillion Euros or roughly $2.6 Trillion. Current interest rate is approaching 7.5%. Concern is Italy’s debt is not too big to fail, but too
big to save. France has a major exposure equivalent to about
15% of France’s GDP.Major concern is write-downs of debt and
impact on bondholders and interest rates.
European Debt Crisis27
Midwest Exposure to Europe Exports to Europe runs about 4% of regional GDP
(Ohio, Ky, Indiana). By comparison, exports to Asia are about 3% of
regional GDP. And exports to Canada are just above 4% of
regional GDP. Europe has to find a way to grow faster.European Central Bank needs to take a
more proactive role in the debt issue as well as restructuring of the financial positions in these countries.
International Balance28
Exchange Rate29
Price of Gold30
Federal Deficit31
Who Said This?
“Blessed are the young, for they shall inherit the national debt.”
a. Michelle Bachmanb. Herbert Hooverc. Jon Stewart
Five Long-Term Themes33
MercantilismDysfunctional politicsEducation / Skill DevelopmentOil Price VolatilityDemographics
Oil Price Volatility34
Demographics35
Monetary and Fiscal Policy36
Monetary policy is very looseFed funds target 0% to 0.25%Printing money and Buying Bonds
Quantitative Easing II Operation “Twist”
Fiscal policy is expansionaryFederal deficit is HUGE!Running at about $1.5T annual
rate
What Does It All Mean?
37
Economy is still struggling to recover from the Great Recession. Housing is still weak, though making
progressInflation remains lowInterest rates will remain low unless
inflation acceleratesEuropean debt is a global economic
risk Key positives are consumer spending,
business investment, and manufacturing; but there are signs of weakness
National Outlook38
Outlook Summary
2011 2012
Real GDP 1.7% 2.4%
Retail Sales 8.0% 5.5%
Employment 0.9% 1.2%
Mfg. Employment1.5% 0.8%
Unemployment Rate 9.0% 8.8%
Inflation 2.8% 2.0%
3 Mo T-Bill 0.07% 0.2%
10 Year Treasury 2.9% 3.0%
ECRI39
National Outlook Summary40
Downside / Headwinds– Unwinding of government stimulus slows economy / payroll tax– Cuts in state and local government spending– Consumer spending affected by higher oil prices– Dollar decline causes interest rates to rise– Political / regulatory climate / international turmoil
Upside– Employment growth accelerates providing support for growth
in consumer spending– Energy prices stabilize– Financial markets calm down– Manufacturing activity continues to improve– Political climate improves leading to budget solutions
Local Economic OutlookNational GDP vs. Regional Product
41
Total EmploymentNational vs. Regional
42
Manufacturing EmploymentNational vs. Regional
43
Local Outlook Drivers44
Key Drivers Affecting the Local Economy– Strong linkage to the national economy– Greater Cincinnati airport– Slow growth in population & labor force– Revitalization of downtown– Major construction projects
– Banks and Casino– ISM for Cincinnati very strong indicating
continued expansion:– October 2011 at 56.9
Housing Prices45
Local Outlook46
Outlook Summary
2011 2012
Regional GDP 1.5% 2.3%
Employment 1.1% 2.2%
Mfg. Employment 4.0% 2.3%
Unemployment Rate 9.1% 8.8%
Residential Dwelling Units 4,000 5,000
Non-residential Construction 7,000 8,000
(Thousand square feet)
Local Outlook: Negatives47
Manufacturing Employment has taken a significant reduction this business cycle Down approximately 14%
Environmental constraints to plant location
Shortage of population in young entrepreneurial age group (Ages 22-34)
Slow population growth Erosion of urban core
Loss of population and jobs Airport activity has dramatically
declined
Local Outlook: Positives48
Low cost of businessAirport as potential future
focus for economic development
Downtown & Fountain SquareStrong core businessesDiversity of industryConsumer research center
Who Said This?
“A word to the wise ain’t necessary – it’s the stupid ones that need the advice.”
a. Bill Cosbyb. Oscar Wildec. Noel Coward
