an economic intelligence report for 2009
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SPG Trend Advisors and its affiliate, Sage Policy Group, have made presentations on local and regional economies, the national economy, international and geopolitical issues and capital market events. We offer these presentations for our readers to gain additional information from our commentaries and further explanation of our analyses and forecasts.TRANSCRIPT
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Print Services andDistribution Association January 5th, 2009
Today’s Business Landscape – An Economic Intelligence Report for 2009
To:
Presented by: Morris Segall, President SPG Trend Advisors
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THE ECONOMY
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Gross Domestic Product2001Q1 – 2008Q3
Source: Bureau of Economic Analysis
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Contributions to GDP Growth by Component
2007Q3-2008 Q3
Source: Bureau of Economic Analysis
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Corporate Profits (before tax)2003Q1 - 2008Q3
Source: Bureau of Economic Analysis
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Industrial Production January 2007-November 2008
Source: Federal Reserve
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Net Change in U.S. JobsJune 2005 – November 2008
Source: Bureau of Labor and Statistics
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National Nonfarm Employment by Industry Sector Groups
December 2007 – November 2008
Source: Bureau of Labor Statistics
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Source: (Left) Census Bureau (Right) Federal Reserve
Retail Sales Less Food and Fuel April 2007- November 2008
Consumer CreditQ4 2005 – October 2008
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Existing Home SalesSeptember 2001-November 2008
Source: (Left) National Association of Realtors, (Right) Census Bureau
New Home Sales Units Sold vs. Length on Market
December 2005-November 2008
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S&P/Case-Shiller Home Price Index 2006 – September 2008
Source: Standard and Poors
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Commercial Mortgage Delinquency Rates among Major Investor Groups
2005Q4-2008Q3
Source: Mortgage Bankers Association
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THE GOVERNMENT’S RESPONSE
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Money Supply (M2): August 2007- November 2008
Source: Federal Reserve System
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Source: (Left) Federal Reserve, (Right) British Banker’s Associations
Federal Fund Rates, January 2008- December 22nd, 2008
3-month LIBOR rates lent in US dollars, January 2008-
December 23rd, 2008
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Source: Energy Information Administration
NYMEX Crude Oil Future Prices in U.S. Dollars
January 2001 -December 23th 2008
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How do I get through it?Manage business on cash flow basisIncrease efficiency of asset turnover; increase liquidity Intensify customer service initiativesBecome innovative in controlling costs
Outsource where appropriate
Join Co-ops to spread costs over larger group
Look for new ways to leverage existing employees and infrastructure by investigating new sources of revenue from new products and marketsSecure access to bank credit; firm up bank lines
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How do I get through it? (cont.)Spend to increase productivity and market share
Take advantage of accelerated equipment write offs as part of government’s economic stimulus packageTake advantage of soft demand in economy to build for future by aggressive bargain purchasingIf access to capital and liquidity are not detriments, look to acquire troubled companies and/or strategic assets of other companiesTrain employees to be more productive and increase their value by enabling them to do more tasks
Increase networking and take advantage of trade associations for additional contacts and leadsPartner with other firms
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What’s on the other side? 2009 - Recession Bottoms with Housing and Unemployment
Housing bottoms late this yearBank loan losses peak late this yearUnemployment peaks in second half of this yearLower Energy Prices alleviate pressure on consumer spending – but virtually no economic growth or recovery
New Obama Administration Increased economic “bailout” and middle class spending programs Increased federal budget deficits
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What’s on the other side? (cont.)2009 – Business
Cost of goods declines from current levels as commodity prices decline but business is facing zero consumer and business demand. Corporate profits in decline for most of this year despite easy year/year comparisons.Subdued consumer spending but pent-up demand building
2010 – Economy Makes Gradual Cyclical Recovery
Increased employment = increased consumer spendingIncreased Corporate Sales = increased corporate profits = increased capital spendingIncreased interest rates and rising prices from higher demand and continuing federal budget deficits
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Where are the opportunities?Healthcare – National ProgramEducationAgricultureEnergy ConservationEnvironmental Solutions Electric PowerTransportation – Increase Mass TransitExports
Water Conservation – New Supplies and RecyclingU.S. Government Procurement and Outsourcing – Base Realignment Program (BRAC)Real Estate – Recycle and Rehab Existing Commercial and Residential Property
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ConclusionsWe are in a deep and protracted recession that began in the fourth quarter of 2007. It began in housing and has spread through the entire U.S. and overseas economies. Economic weakness has intensified through 2008 and will worsen through the first half of 2009. Increased near term economic and market pressures include:
stubbornly high inflation in food and basic serviceslower corporate profitsincreased unemploymentcontinued weak levels of corporate capital and consumer spending
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Conclusions continuedSevere reductions in State and Local Government spendingWeak exports as overseas economies fall into recessionContinued credit pressures in residential housing and consumer lending spreading to commercial real estate markets and corporate lending
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Conclusions continued
However, a bottoming of the housing cycle and an abatement in bank credit losses in the second half of this year, could set the stage for cyclical capital markets and economic improvements in 2009 and 2010. After an expected cyclical recovery in 2010-2012, we believe the longer term socio-economic issues facing this country will result in slower future economic growth for the United States. The availability and cost of credit, particularly to consumers, will be more restricted and expensive in the future.
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Thank You
You can always reach me at [email protected], if you need us in a hurry, we are at 410.522.7243 Please contact us when you require economic and capital markets research & policy analysis.Further information available at www.spgtrend.com