View
361
Download
0
Category
Preview:
Citation preview
2016ECONOMIC OUTLOOK
1
AGENDA
• INTRODUCTIONS
• GLOBAL ECONOMY
• UNITED STATES ECONOMY
• Q&A
2
SPEAKERS
GEOFFREY ALLEN PIGMAN, D.Phil.
• Consultant to public and private entities in Europe, N.A., Africa
• Political economist
• Research Associate, University of Pretoria and Research Associate at the Institute for Global Dialogue
• Published author
• D.Phil (Oxford), MA (Johns Hopkins SAIS), BA (Swarthmore)
CHRISTOPHER W. YOUNG, Ph.D.
• Managing Director, Economist at Sobel & Co. [Valuation]
• Prof. Rutgers Business School
• Ph.D. (Rutgers), MBA (Rutgers), Mathematics, [CUNY]
3
“The only function of economic forecasting is to make astrology
look respectable.”
John Kenneth Galbraith
4
“The most reliable way to forecast the future is to try to understand the
present.”
John Naisbitt
5
APPROACH
• Comprehensive – not inclusive of all endogenous variables
• Normative based upon historical economic data
• Inclusive of opinions of other economists and financial service firms
• Includes discussion about exogenous market threats and opportunities
• END RESULT: Mosaic to consider when addressing future market and economic conditions
6
GLOBAL CONSIDERATIONS
• Long-Term Growth in Trade• The Dollar Impact• Foreign Direct Investment• Trade Policy• Geopolitical Risk
7
End of gold standard1st IT revolution –EFT begins
End of Cold WarGerman reunification
2008 financial crisis
GLOBAL TRADE % OF U.S. GDP1950-2011
Brazil China Germany India Japan U.K. USA
U.S. TRADE DEPENDENCE: growing, but still a ‘continental’ economy
Sum of exports and imports as share of US GDP 1950-2011
8
US TOP TEN TRADING PARTNERS:Jan-Nov 2015
Rank Country Exports ($ B)
% Total Exports
1 Canada 259.0 18.7%
2 Mexico 217.8 15.7
3 China 106.1 7.7
4 Japan 57.7 4.2
5 UK 52.0 3.8
6 Germany 45.9 3.3
7 S Korea 40.1 2.9
8 Netherlands 37.2 2.7
9 Hong Kong 33.8 2.4
10 Belgium 31.6 2.3
Rank Country Imports ($ B)
% Total Imports
1 China 443.9 21.5%
2 Canada 271.6 13.2
3 Mexico 271.6 13.2
4 Japan 119.8 5.8
5 Germany 113.4 5.5
6 S Korea 66.4 3.2
7 UK 53.7 2.6
8 France 43.7 2.1
9 India 41.7 2.0
10 Italy 40.2 2.0
9
~48% of US Goods imports were intra-firm and ~30% of US Goods exports were intra-firm
10
U.S. GOODS / SERVICE TRADE BALANCE:1992-2015
Total Net Trade Deficit
increasing at 12.0% per annum
Goods Net Trade Deficit increasing at
9.4% per annum
Services Net Trade Surplus increasing at
6.1% per annum
Net Exporter of Services
Millio
ns
U.S. DOLLAR APPRECIATION 1992-2016
11
US FDI FLOW 2013-2013
12
GLOBALIZING THE SUPPLY CHAIN: intra-firm trade vs. outsourcing
13
Global market size of outsourced services 2000-2014 ($ Billions)
THREE CATEGORIES OF OUTSOURCING:
1. Logistics, sourcing & distribution
• contract manufacturing
2. IT services: software creation, computer center management
3. business process outsourcing (BPO)
• call centers• financial transaction
processing• HR management
TRADE AGREEMENTS
14
US implementation: Trade Promotion Authority (TPA) (formerly ‘Fast Track’) –agreements get an up-or-down vote in Congress
Treaty principles: most favored nation (MFN), non-discrimination,
national treatment, reciprocity
Bilateral/Regional – NAFTA, FTAs with Israel, Australia, South Korea, Morocco, Jordan, etc.
Multilateral – World Trade Organization (WTO)
– GATT, GATS, Agreement on Subsidies & Countervailing Measures, Agreement on Agriculture
LOOKING AHEAD
15
New considerations for prospective trade agreements
Plurilateral
– Trade in Services Agreement (TiSA)
Mega-regional
– Trans-Pacific Partnership (TPP)
– Transatlantic Trade and Investment Partnership (TTIP)
– Regional Comprehensive Economic Partnership (RCEP) – China, India, Japan, SE Asia (not USA)
GEOPOLITICAL RISK:China in transition
* Supply-demand imbalance
from exports to services and consumption
* equities
* markets
16
* Military: maritime expansionism, SCO
* New Silk Road, energy sourcing
* Regional Comprehensive Economic Partnership (RCEP)
* Anti-corruption drive = Xi power push
* Rivalries: PLA, provinces, etc.
POLITICS ECONOMY SECURITY
ASSESSING GEOPOLITICAL RISK
THREATS
• Migration/refugee flows• War in the Levant/terrorism• Putin• Integrity of the European Union:
‘Brexit’, integrity of UK, Spain• Hotspots: North Korea, Venezuela• Domestic: shadow of 2016 election
• Trade agreements
• Cuba
• Iran
• African Union
• Domestic: post-election
17
OPPORTUNITIES
SUMMARY: IMPACT OF GLOBAL ECONOMY ON U.S. BUSINESS
4. Focus on sustaining sources of US power
entrepreneurship, innovation, capital markets, regulatory leadership, transparency, rule of law, security umbrella
18
3. China rising and changing
2. US hegemony persistent
1. US dependence on cross-border flows of goods, services, capital and labor growing
19
U.S. ECONOMIC THEMES
• CONSUMER – slowing tailwinds in the forecast
• CORPORATE – headwinds strengthening
• GOVERNMENT – stand still, for now
• MARKET VOLATILITY
U.S. GDP
20
GS Forecast
Real US GDP, per capita [to Q3 2015]
21
CONSUMERslowing tailwinds forecasted
22
U.S. Unemployment Trend
23
4.9%
U.S. CONSUMER SENTIMENTUniversity of Michigan
24
92.0 January 201698.1 January 2015
Consumer expectations (not included here)
82.7 January 201691.0 January 2015
U.S. CONSUMER SPENDING
25
INFLATION: U.S. Long Term
26
U.S. Weekly Gasoline Prices
27
2016 prices are expected to increase to $2.20 by 2017
U.S. Rates (Mortgage)
28
U.S. Housing Market (Starts)
29
Number as of December 31, 2015Represents the number of new homes starts (beginning of construction on new residential housing)
U.S. Housing Market (Permits)
30
Number as of December 31, 2015Represents the number of building permits granted
U.S. Housing Market (Price)
31
Number as of December 31, 2015Based on CaseShiller Index (tracks the prices of repeated residential home sales over time]
U.S. DOLLAR APPRECIATION 1992-2016
32
Average Hourly Earnings (non-management)
33
Average Hourly Earnings (non-management)
34
monthly change in wage ticking down
Hours are ticking up
U.S. HH PERSONAL SAVINGS
35
1960-2010
2011-2016
U.S. CONSUMER CREDIT
36
US Student Loan Debt
37
$27k UG avg.$200k GRAD avg.
DELINQUENCY RATE ~ 17%-30%
U.S. CONSUMER DELINQUENCIES
38
CORPORATEstrengthening headwinds OR
storm ahead?39
U.S. Corporate Profits
40
U.S Inventory to Sales Ratio
41
Manufacturing numbers are down in Dec and Jan.
U.S. Rates (20 Year Treasury)
42
U.S. High Yield Spreads
43
MARKETS
44
U.S. Markets
45
VOLATILITY – CANNOT SEE A FUTURE
U.S. Venture Capital Funding
46
U.S. IPO Outlook
47
Volatility - RISK
48
GOVERNMENT
49
GOV’T SPENDING AS % OF OUTPUT
50
World War II
Korean WarCold War
Vietnam WarGreat Society
‘Second’ Cold War
Dot.com boom
TARPAuto, bank nationalizations
FDRNew Deal
U.S. FED. DEBT RELATIVE TO OUTPUT
51
‘Second’ Cold War defense buildupReagan tax cuts’
‘Peace dividend’Dot.com revenues
TARPAuto, bank nationalizations
FEDERAL TAX DOLLARS
52
THE BATTLE OF PENNSYLVANIA AVENUE: The White House v. Congress
53
3. Budget Control Act of 2011
2. National debt ceiling debate
1. Annual Fed. Budget appropriation process
RECAP
54
1. Expect to see a solid performance from the consumer in the first half of 2016 – yet tailing off in back half of the year.
2. Corporates expected to see challenging year –profits squeezed, margins decreasing and exports decreasing.
3. Exogenous international factors unknown but can have an impact on the global economy.
Recommended