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Keith W. Maxwell of Spark Energy, joins McCombs Finance Professor Jay Hartzell, Craig Cordola, CEO of Memorial Hermann Hospital -Texas Medical Center in Houston, and Greg Peters, CEO of Zillant, to take a look ahead at not just the national economy as a whole, but also at the state of Texas. The U.S. is now the world's largest producer of hydrocarbons, because technology has enabled us to produce “tight” oil, or shale oil, Maxwell said.
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Keith Maxwell2014 Economic Forecast
CEOSparks Energy
October 17, 2013Federal Reserve Bank-Houston Branch
Economic Outlook 2014
Jay C. HartzellChair, Department of Finance, McCombs School of Business
The University of Texas at Austin
Economic Forecasts Research Department, Federal Reserve
Bank of Philadelphia “Survey of Professional Forecasters” First quarter (August 16, 2013) Doing this since 1968
42 “Professional Forecasters” Provide advice used by large commercial
institutions Members of National Association for Business
Economics (NABE) Use a variety of techniques and assumptions to
arrive at forecasts
Real Gross Domestic Product Definition Historic average annual rate of growth
~ 3.0% Median forecasts (annual rate of growth)
2013 2.2%2014 2.3%2015 2.7%2016 2.9%
Risk of negative quarter (probability)2013: Q3 10.5%2013: Q4 11.2%2014: Q1 11.7%2014: Q2 11.5%2014: Q3 11.8%
Unemployment & Workforce Participation Unemployment (natural rate ~ 6.0%)
2013 7.5% (~12.5 million)2014 7.1%2015 6.6%2016 6.1%
Under-employed (BLS “Alternatives”)~ 12%-18%
Workforce Participation Rate2000 67.3% (143 million)2008 66.3% (154 million)2013 63.2% (155 million)
Okun’s Law~ 3.0% Real GDP Growth to reduce unemployment
Foundations of Low Growth Consumer spending and households
Stagnant incomes High or under employment Deleveraging Uncertainty
Business investment In aggregate, slim profit prospects
Contraction in household and government sectors Uncertainty, particularly in government policy
Government spending AAAAGGGGHHH! (debt-to-GDP ratio)
Net Export Slowing global growth
Inflation (Consumer Price Index) Definition Historical average (annual rate)
~ 4.0% Median forecasts (annual rate)
Long-term forecasts (annual rate)
Comments of Fed on controlling inflation Managing liquidity (e.g., bank and non-bank reserves) Commitment to inflation
Headline CPI Core CPI
2013 1.4% 1.8%
2014 2.0% 2.0%
2015 2.3% 2.1%
Headline CPI
2012-2016 2.0%
2012-2021 2.0%
View from 30,000 Feet (2013-2016)
Slow growth Improving private sector balance sheets Deteriorating (dramatically) public sector balance
sheets High unemployment High under-employment Lower workforce participation Low interest rates Low-ish inflation More wealth re-distribution than creation
Energy Health care Education
Latest Fed Forecasts
US Economic Policy Uncertainty Index
US Economic Policy Uncertainty Index
Fed Policy: Growth and Inflation Forecasts
Texas Job Growth
Texas Leading Index
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