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Economic Conditions and Outlook. Eric Robbins, Regional Manager FDIC Division of Insurance and Research Chicago Region. - PowerPoint PPT Presentation
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Economic Conditions and Outlook
Eric Robbins, Regional ManagerFDIC Division of Insurance and ResearchChicago Region
1
The views expressed are those of the presenter and do not necessarily reflect official positions of the Federal Deposit Insurance Corporation. Some of the information used in the preparation of this presentation was obtained from publicly available sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation.
2
Outline
• National Economic Outlook
• Regional Economic Outlook– Labor Markets– Manufacturing– Real Estate Markets
• Residential and Commercial
3Source: Bureau of Economic Analysis , Blue Chip Consensus Forecast October 2013.
GDP growth continues along its moderate path: Real GDP increased 2.8 percent in 2012 and is projected to be 1.6 percent in 2013.
Consumer spending and a rebound in inventory accumulation led third quarter growth.
4Source: Bureau of Economic Analysis, advance estimate.
5
Residential investment has been a positive contributor to growth since mid-2011...
6Source: Census Bureau/Haver Analytics. Chicago Region totals.
…but has yet to contribute to job growth.
7
REGIONAL ECONOMIC OUTLOOK
WISCONSIN LABOR MARKETS
8
Wisconsin state employment levels remain below national employment levels.
Source: Bureau of Labor Statistics.
9
But Wisconsin is third among Midwestern states in regained jobs.
10
Unemployment rates remain elevated and much higher than the seven-year low.
11
The size of the labor force has declined in most metros, contributing to improving unemployment rates.
Source: Bureau of Labor Statistics.
Appl
eton
Eau
Clai
re
Fond
du
Lac
Gree
n Ba
y
Jane
svill
e
La C
ross
e
Mad
ison
Milw
auke
e
Oshk
osh-
Neen
ahRa
cine
Sheb
oyga
n
Wau
sau
Min
neap
olis
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
-2.70%
-1.90%
-3.20%-2.60%
-5.40%
-2.10% -1.80%-2.60%
-2.00%-2.60%
-3.80%
-3.10%
8.1%
Percentage Point Decline in Unemployment Percent Decline in Labor Force
Recession era peak to current decline in unemployment rates and labor forcePeak Unemployment rate listed below
Note: The labor force in Eau Claire, Green Bay, and LaCrosse has exceeded the prior peak at 1.2%, 0.57% and 0.13%, respectively.
12
Unemployment rates have fallen considerably but remain high.
Source: Bureau of Labor Statistics.
13
Year-over-year job growth varies by metro…
Source: Bureau of Labor Statistics, August 2013.
Year-over-year percent change
Milwaukee (42%)
Madison (18%)
Green Bay (9%)
Appleton (6%)
Oshkosh-Neenah (5%)
Eau Claire (4%)
Racine (4%)
Wausau (3%)
Janesville (3%)
Sheboygan (3%)
Fond du Lac (2%)
Minneapolis
-2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00%
1.31%
1.17%
2.30%
2.46%
1.96%
2.71%
-0.79%
0.15%
1.94%
0.00%
3.06%
1.17%
14Source: Bureau of Labor Statistics, August 2013.Sector jobs as a share of total metro jobs is listed after each sector (Milwaukee, Madison)
…And by industry sector, with strong gains in the professional/business services and leisure/hospitality sectors.
Year-over-year percent change in jobs, by sector
Education & Health (18%, 11%)
Transportation/Utilities (17%, 16%)
Manufacturing (14%, 8%)
Prof. & Business Services (14%, 13%)
Leisure & Hospitality (9%, 10%)
Local Government (8%, 7%)
Financial Activities (7%, 8%)
Logging/Mining/Construction (4%, 4%)
Information (2%, 4%)
State Government (1%, 13%)
Federal Government (1%, 1%)
-10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00%
0.73%
2.16%
-1.16%
1.63%
1.34%
-2.28%
1.09%
17.58%
0.00%
14.71%
-0.95%
0.00%
-3.49%
-0.34%
9.09%
5.76%
0.38%
-1.37%
0.00%
1.63%
2.14%
-5.56%
Madison
Milwaukee
15
MANUFACTURING
16Source: ISM Manufacturing Index, Index values above 50 indicate expansion.
Manufacturing growth has slowed, after being a driver of job growth early in the recovery.
17Source: ISM Manufacturing Index, Index values above 50 indicate expansion
Despite a slowdown, manufacturing production and employment is still in expansionary territory.
18
Automotive sales are approaching pre-recession levels.
Source: Bureau of Economic Analysis and Bureau of Labor Statistics. Notes: Data through September 2013. Data are seasonally adjusted.
19
RESIDENTIAL REAL ESTATE MARKETS
20
Nationally, foreclosure inventory peaked in early 2012.
21Source: Moody’s Analytics Case-Shiller Home Price Index SA; 2000Q1=100.
Home price index value
Housing markets are likely stabilizing, with home values finally rising in most markets.
22
On a statewide basis, prices are increasing, according to multiple indexes.
Sources: Federal Housing Finance Agency, Moody's Analytics 2nd quarter 2013.
23
Many Wisconsin metros remain well below peak levels.
Source: Federal Housing Finance Agency all transactions index Q2-2005 through Q2 2013, Q1 2000=100.
8 year high-low house price index value
Appleton
Eau Clai
re
Fond du La
c
Green Bay
Janesv
ille
Madiso
n
Milwau
kee
Oshkosh-N
eenah
Racine
Sheb
oygan
Wausau
Non-Metr
o Areas
Minneapolis
110
120
130
140
150
160
170
24
COMMERCIAL REAL ESTATE MARKETS
CMBS delinquency rates indicate CRE stress in many states.
25
26
27
Madison and Milwaukee CRE sales have rebounded.
Commercial Property Sales ($ millions)
Note: Sales totals are 4 quarter moving sums from Costar/PPR.
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q30
100
200
300
400
500
0
300
600
900
1200
1500Madison (left) Milwaukee (right)
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Rents improve for a number of Midwest markets.
MarketPercent Change in Rents from 3Q-12 to 3Q-13
Apartment Industrial Office Retail
Chicago 2.9 3.4 1.0 0.5
Cincinnati 2.0 0.0 1.5 2.1
Cleveland 3.1 4.2 1.6 -0.1
Columbus OH 2.8 3.0 1.9 -1.1
Detroit 2.8 3.2 -1.1 0.7
Indianapolis 1.9 3.5 0.1 2.8
Louisville 4.6 -1.8 0.8 2.3
Madison 3.4 -1.8 -0.4 -1.9
Milwaukee 1.0 -1.2 0.4 -3.6
Nation 3.0 3.9 2.5 0.7
Source: Costar/PPR.
National Banking Conditions
29
30
The three-year trend in year-over-year earnings improvement continues.
31
Failures have fallen to the lowest level since 2008.
32
The number of institutions on the FDIC’s “Problem List” fell for the ninth consecutive quarter in 2Q 2013.
33
The Deposit Insurance Fund increased by $2.1 billion during the second quarter to $37.9 billion
34
Earnings are nearing pre-recession levels for some Midwest banks.
Pre-Tax Return on Assets (%)
Source: FDIC Call Report Data.Note: Median annual ratios among insured institutions by state. H-1 figures are 6-month annualized values.
IL OH KY IN MI WI0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.19
1.23
1.49
1.17
1.38
1.48
0.51
0.59
0.87
0.59
0.25
0.60
0.85
0.88
1.00
1.03
1.03
1.14
2005 2006 2007 2008 2009 2010 2011 2012 H1-12 H1-13
35
Past-due ratios have declined among Midwest banks.
IN OH WI KY MI IL0
1
2
3
4
5
6
7
4.38
4.83
5.58
3.78
6.18
6.38
2.56
2.76
3.14
3.17
3.45
3.99
2Q-102Q-13
Loan Past-Due Ratio (%)
Source: FDIC Call Report Data.Note: Aggregate quarterly data among insured institutions with under $10 Billion in assets by state.
36
Distressed assets remain elevated among Midwest banks…
IN OH KY MI WI IL0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2.56
2.74
2.37
4.20
3.76
4.02
1.59
1.67
2.17
2.30
2.46
2.71
J-10 S-10 D-10 M-11 J-11 S-11 D-11 M-12 J-12 S-12 D-12 M-13 J-13
Noncurrent Loans and ORE to Assets (%)
Source: FDIC Call Report Data.Note: Aggregate quarterly data among insured institutions with under $10 Billion in assets by state.
37
Summary: Economic Outlook
Factors to consider…
Positive contributors? Uncertain
- Employment growth continues, albeit slowly
- Housing markets are stabilizing
- Manufacturing led recovery, now slowing growth
- Energy prices moderating / U.S. energy independence?
- Income growth is weakly positive
- Federal fiscal debate continues- Sequestration continues- Unfunded pension / healthcare liabilities- Eurozone slowdown / recovery- Future of Fannie / Freddie uncertain- Long-term unemployed find their footing?- China growth stabilizing- Demographic challenges are persistent
38
Consensus forecasts call for continued growth below trend in 2014.
2012 Actual
2013 Forecast
2014 Forecast
Real GDP Growth 2.8% 1.6% 2.6%
Unemployment Rate (Avg.) 8.1% 7.5% 7.0%
Real Disposable Personal Income 2.0% 0.6% 2.5%
Consumer Price Index 2.1% 1.5% 1.9%
Yield on 10-Year UST (Avg.) 1.8% 2.4% 3.1%
Corporate Profits (Nominal) 6.8% 3.5% 4.9%
Source: Blue Chip Economic Indicators, October 2013.
ContactsEric Robbins, Regional Manager, DIR [email protected]
Stefan Spong, Economic [email protected]
Miguel Hasty, Senior Financial Analyst (IL,KY,WI)[email protected]
Rob Vilim, Senior Financial Analyst (IN,MI,OH)[email protected]
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