economic update - center for automotive research...economic update 2020 automotive outlook webinar...
TRANSCRIPT
The views expressed here are our own and do not necessarily reflect the views of the Federal Reserve
Bank of Chicago, the Federal Open Market Committee (FOMC) or the Federal Reserve System.
Paul Traub
Senior Business Economist
Federal Reserve Bank of Chicago/Detroit Branch
April 30, 2020
Economic Update2020 Automotive Outlook Webinar
April 30, 2020 1Federal Reserve Bank of Chicago
• Real GDP for the U.S. fell 4.8% in Q1 2020 and a SAAR Basis, the largest
quarterly decline since Q4 2018 with declines in Personal Consumption
Expenditures and Private Domestic Investment being somewhat offset by
contributions from Net Exports and Government Consumption and
Investment.
• University of Michigan’s April release of its Index of Consumer Sentiment
had it largest single month decline since October 2008 falling to its lowest
level since November 2011 on fears of a worsening economy.
• Business fixed investment declined 5.6% in Q1 2020 with nonresidential
investment falling 8.6%, it largest decline since Q2 2009, while residential
investment increased 21.0% on a SAAR basis.
• The U.S. trade deficit fell by $83 billion as imports declined 15.3% while
exports declined just 8.7%
• Labor markets suffer their largest declines in history as over 26 million
workers filed unemployment claims in just five weeks and inflation
remains below the Fed’s target of 2.0%.
Overview
April 30, 2020 2Federal Reserve Bank of Chicago
U.S. Real GDP
Source: U.S. Bureau of Economic Analysis.
Percent
Contribution to Percent Change - Q/Q at SAAR, $2012
1.52.3 1.9 1.8 1.8
3.0 2.8 2.3 2.2
4.23.4
2.23.1
2.0 2.1 2.1
-4.8
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
2016 Q2 Q3 Q4 2017 Q2 Q3 Q4 2018 Q2 Q3 Q4 2019 Q2 Q3 Q4 2020
PCE Private Investment Net Exports Government GDP
Contributions Q1 2020
-5.26% -0.96% 1.30% 0.13% -4.8%
Note: Contributions by sector may not sum to total due to rounding errors.
Consumer Sentiment
3Federal Reserve Bank of ChicagoApril 30, 2020
University of Michigan
Index
40
50
60
70
80
90
100
110
120
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 2020
Source: Thomson Reuters / University of Michigan
Apr ’20
71.8
April 30, 2020 4Federal Reserve Bank of Chicago
Real Disposable Personal IncomeIn Billions of Chained 2012 Dollars - Percent Change Yr./Yr.
Percent
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'14 '15 '16 '17 '18 '19 2020
Feb ‘20
2.2%
Source: Bureau of Economic Analysis.
April 30, 2020 5Federal Reserve Bank of Chicago
Stock Market
NYSE Stock Price Index, Daily Close - January 2020 = 100
Source: Haver Analytics data taken from the Wall Street Journal and Coindesk.
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
2020 F M A
Composite Energy Health Care Financial Last Act
Index
4/28/2020
96.8
78.9
70.1
59.1
Restoring Consumer Confidence
6Federal Reserve Bank of ChicagoApril 30, 2020
University of Michigan
Percent
Source: Thomson Reuters / University of Michigan
61.0
53.0
67.062.0
13.0
25.0
13.011.0
23.0
28.0
16.0
27.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
All Households Bottom Third Middle Third Top Third
Health Isolation Finances
Household Income
April 30, 2020 7Federal Reserve Bank of Chicago
30
35
40
45
50
55
60
65
70
'07 '09 '11 '13 '15 '17 '19
Manufacturing Composite
Index
Mar ’20
57.0
49.1
ISM Manufacturing and Composite Index value greater than 50 means expansion. Note:
Source: Institute for Supply Management, Richmond Federal Reserve, and Haver Analytics.
Purchasing Managers Index
ISM Manufacturing and Composite Indexes
April 30, 2020 8Federal Reserve Bank of Chicago
Real Gross Private Domestic Investment
Contribution to Percent Change to GDP - Q/Q at SAAR, $2012
2.2
0.1-0.1
-1.1
-0.3 -0.30.1
1.5
0.6 0.6
1.3
0.81.1
-0.3
2.3
0.5
1.1
-1.2
-0.2
-1.1 -1.0
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2015 2016 2017 2018 2019 2020
Nonresidential Residential Change in Inventories Total
Percent
Source: U.S. Bureau of Economic Analysis
Contributions Q2 2019
-1.17% 0.74% -0.53% -0.96%
April 30, 2020 9Federal Reserve Bank of Chicago
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
98.0
100.0
102.0
104.0
106.0
108.0
110.0
112.0
2017 2018 2019 2020
Y/Y % Chg (RHA) Index (LHA)
Industrial Production - Total
Index 2012 = 100 & Percent Change M/M
Source: Federal Reserve Board
Index Percent
Mar 2020
103.7
-5.4%
April 30, 2020 10Federal Reserve Bank of Chicago
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2017 2018 2019 2020
Y/Y % Chg (RHA) Production (LHA)
Industrial Production - Automotive
Millions of Units – SAAR & Percent Change M/M
Source: Federal Reserve Board
Millions Percent
Mar 2020
7.2
-36.1%
April 30, 2020 11Federal Reserve Bank of Chicago
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2017 2018 2019 2020
Y/Y % Chg (RHA) Production (LHA)
Housing Starts
Thousands of Units – SAAR & Percent Change M/M
Source: U.S. Census Bureau
Millions Percent
Mar 2020
1,216
-22.3%
Percent Change Q/Q – SAAR
-0.8
5.3 4.9
2.6
12.3
2.60.8
-2.4
1.4
-4.1
-12.6-16.0
-12.0
-8.0
-4.0
0.0
4.0
8.0
12.0
16.0
2016 2017 2018 2019 2020
Total Trade Pre-Tariffs Average 2.8% Post-Tariffs & Pre-COVID-19 Average 0.5%
April 30, 2020 12Federal Reserve Bank of Chicago
Total Real Trade - Imports and Exports
Source: U.S. Bureau of Economic Analysis
Percent
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
-800
-600
-400
-200
0
200
400
2014 2015 2016 2017 2018 2019 2020
Monthly Change (LHA) Percent Change Y/Y (RHA)
April 30, 2020 13Federal Reserve Bank of Chicago
U.S. Nonfarm Payrolls
Monthly Change (000)’s and Percent Change M/M
Thousands
Source: U.S. Department of Labor: Bureau of Labor Statistics
Mar ’20
-0.5%
-701
Percent
April 30, 2020 14Federal Reserve Bank of Chicago
U.S. Unemployment
In percent of Labor Force
Sources: U.S. Department of Labor and Chicago Fed Staff calculations.
Percent
0.00
2.00
4.00
6.00
8.00
10.00
12.00
'05 '07 '09 '11 '13 '15 '17 '19
Unemployment Rate NAIRU
Mar ’20
4.6%
4.4%
April 30, 2020 15Federal Reserve Bank of Chicago
Initial Unemployment Claims
Weekly Claims and Continued Claims, In Thousands
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2020 Feb Mar Apr
Initial Claims Continued Claims
Source: U.S. Labor and Training Administration
Thousands4/18/2020
17,992
Note: In the three weeks since March 14, 2020, 30,307,000 workers have filed for unemployment.
4/18/2020
3,839
April 30, 2020 16Federal Reserve Bank of Chicago
Labor Force Participation Rate
In Thousands
63.4
62.7
62.2
62.4
62.6
62.8
63.0
63.2
63.4
63.6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 2002
Source: U.S. Bureau of Labor Statistics
Percent
Note: Since January 2020 the labor forces has declined by 380,000 workers.
April 30, 2020 17Federal Reserve Bank of Chicago
Inflation Expectations
TIPS 5-10 Year Inflation Compensation
Source: Survey of Consumers – University of Michigan and Federal Reserve Board
Percent
0.0
1.0
2.0
3.0
4.0
'12 '13 '14 '15 '16 '17 '18 '19 '20
5 - 10 Year Rate
4/24/20
1.49
-40.00
-20.00
0.00
20.00
40.00
60.00
80.00
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2020 Feb Mar Apr
Gasoline (LHA) Oil (RHA)
April 30, 2020 18Federal Reserve Bank of Chicago
U.S. Gasoline and Crude Oil Prices
Unleaded Regular & WTI Spot Price – In Current Dollars
Source: Energy Information Administration and Haver Analytics
$/barrel$/gal
4/28/2020
$12.40
4/27/2020
$0.598
New York Harbor Conventional Gasoline Regular Spot Price FOB (US$/Gal)
Cushing OK WTI Spot Price FOB (US$ per Barrel)
April 30, 2020 19Federal Reserve Bank of Chicago
$12.34
$17.60
$21.17
$23.77
$26.48
$30.77
$34.81
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
1st Expiring 2-month 3-month 4-month 6month 1-year 2-year
Light Sweet Crude Oil Futures
WTI, Cushing, OK - 1st Expiring to 2-year Contract Settlement
Source: Chicago Mercantile Exchange
$/barrel
Note: On April 20, 2020 the 1st expiring futures fell to -$37.63.
April 30, 2020 20Federal Reserve Bank of Chicago
17.3
11.7
6.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 2020
U.S. Light Vehicle Sales
In Millions of Units - SAAR
Source: Standard & Poor’s and Haver Analytics
Millions
April 30, 2020 21Federal Reserve Bank of Chicago
90.0
94.0
98.0
102.0
106.0
110.0
105.0
115.0
125.0
135.0
145.0
155.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 (LHA) 2020 (LHA) Seasonal Pattern (RHA)
Real Incentive Spend
Index – 2012 = 100* & Seasonal Pattern
Source: Author’s Calculations using J.D. Power and FOMC data.
IndexSeasonal
Factor
* Incentive spend inflation adjusted using average new vehicle price.
Incentive spending started 2020 well above the normal seasonal pattern.
April 30, 2020 22Federal Reserve Bank of Chicago
-400
-300
-200
-100
0
100
200
300
M A M J J A S O N D J F M
2019 2020
Stock Market Volatility
S&P 500 Daily Change – Mar 1, 2019 to Apr 20, 2020
Source: Standard & Poor’s and Haver Analytics
Points
April 30, 2020 23Federal Reserve Bank of Chicago
0.0000
0.5000
1.0000
1.5000
2.0000
2.5000
3.0000
3.5000
M A M J J A S O N D J F M A
Prime Credit Rate Federal Funds Rate
2019 2020
Federal Funds & Prime Credit Rates
Mar 6, 2019 to Apr 15, 2020
Source: Federal Reserve and Haver Analytics
April 30, 2020 24Federal Reserve Bank of Chicago
Unclogging the Treasury and MBS Markets
Source: Federal Reserve Bank of Chicago, Sam Schulhofer-Wohl, Senior Vice President and Director of Financial Policy
April 30, 2020 25Federal Reserve Bank of Chicago
$66.8 $74.8
$176.5 $165.0
$354.6
$610.9
$826.9
$241.8
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
Sep 3 Sep 10 Sep 17 Sep 24 Mar 4 Mar 11 Mar 18 Mar 25
Temporary Open Market Operations
In Billions of Dollars, Weekly Operations
Source: Federal Reserve Bank of New York and Haver Analytics
September 2008
$ Billions
March 2020
April 30, 2020 26Federal Reserve Bank of Chicago
Unclogging the Treasury and MBS Markets
Source: Federal Reserve Bank of Chicago, Sam Schulhofer-Wohl, Senior Vice President and Director of Financial Policy
April 30, 2020 27Federal Reserve Bank of Chicago
Yield Curve
10 Year Minus 1 Yr. and 3 Mo. Treasuries in Basis Points
4/28/2020
51 bps
46 bps
Basis
Points
Source: Board of Governors – Federal Reserve System
-80
-60
-40
-20
0
20
40
60
80
100
120
140
J F M A M J J A S O N D J F M A
10yr - 3mo 10yr - 1yr Zero
Daily Market Bid Yield at Constant Maturity January 2, 2019 to Most Current
April 30, 2020 28Federal Reserve Bank of Chicago
National Financial Conditions Index
Federal Reserve Bank of Chicago, Positive = Tighter
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2007 '08 '09 2010 '11 '12 '13 '14 '15 '16 '17 '18 '19 2020
Source: Federal Reserve Bank of Chicago
Index
4/24/2020
-0.23
April 30, 2020 29Federal Reserve Bank of Chicago
1.9
-24.5
7.4 7.9
3.3
-30.0
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
Q4 '19 2020 Q2 Q3 Q4 2021 Q2 Q3 Q4 2022 Q2 Q3 Q4
Jan 10, 2020 Apr 10, 2020
U.S. Real GDP – Blue Chip Forecast
Percent Change Q/Q - SAAR
Source: January 10, 2020 and April 10, 2020 Blue Chip Forecast
Real GDP, Index Q4 ‘19 = 100
Q1 ‘20: 99.0
Q2 ‘20: 92.3
Q3 ‘20: 94.0
Q4 ’20: 95.8
Q1 ’21: 97.4
Q2 ’21: 98.6
Q3 ‘21: 99.6
Q4 ’21: 100.4
Percent
Center for Disease Control
April 30, 2020 30Federal Reserve Bank of Chicago
U.S. COVID-19 Cases
Source: Institute for Health Metrics and Evaluation (IHME), April 23, 2020.
Earliest date social distancing may be relaxed with containment strategies that include testing,
contact tracing, isolation, and limiting gathering size. Threshold of 1 infection per million residents.
CDC Death Projections
31Federal Reserve Bank of ChicagoApril 30, 2020
Contact Reduction Scenarios
Thousands
Source: Center for Disease Control (CDC), Institute for Health Metrics and Evaluation (IHME), and Columbia University
51.359.9
63.6 65.0
55.2
74.5
88.598.0
55.2
74.6
89.5
101.9
55.2
74.9
92.0
112.2
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
4/25/2020 5/2/2020 5/9/2020 5/16/2020
Thousands
IHME CU 40% Reduction CU 30% Redustion CU 20% Reduction
April 30, 2020 32Federal Reserve Bank of Chicago
Summary
• U.S. economic activity has suffered an unprecedented decline since the
start of the COVID-19 pandemic.
• Labor markets are showing sighs of extreme stress as companies cut
workers and prepare for and extended period of lost revenue.
• The Federal Reserve has taken extreme actions, using its full range of tools
to support the U.S. economy in an effort to promote maximum
employment and price stability.
• With some states still experiencing day-to-day increases in COVID-19
cases, others are looking for ways to re-open their economies.
• However, concerns of a resurgence of the virus remain high, especially if
states open their economies too soon without the appropriate amount of
testing, contact tracing, isolation, and contact reduction.
Source: Federal Reserve
Thank You!
Appendix
April 30, 2020 35Federal Reserve Bank of Chicago
Billions Chained $2012 and Percent Change Q/Q at SAAR
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
14,000
15,000
16,000
17,000
18,000
19,000
20,000
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
$ Billions
Q1 ‘20
$18,988
-4.8%
U.S. Real GDP
Percent
Source: U.S. Bureau of Economic Analysis
Q1 ‘19
$18,927
April 30, 2020 36Federal Reserve Bank of Chicago
Chicago Fed National Activity Index
Federal Reserve Bank of Chicago
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2007 2011 2015 2020
CFNAI CFNAI_MA3
Source: Federal Reserve Bank of Chicago
Index
4/20/2020
-0.32
-1.47
April 30, 2020 37Federal Reserve Bank of Chicago
-9.0
-6.0
-3.0
0.0
3.0
6.0
9.0
180
185
190
195
200
205
210
2017 2018 2019 2020
Thousands
% Chg Y/Y (RHA) Retail Sales (LHA)
Real Advanced Retail Sales
In Millions of Dollars and Percent Change M/M
Source: FRB St. Louis
Millions Percent
Mar 2020
$187.3
-8.3%
April 30, 2020 38Federal Reserve Bank of Chicago
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Annual Sales Annual Forecast
Millions of Units
Millions
U.S. Light Vehicle Sales
Source: WardsAuto Intelligence, BEA, and April 10, 2020 Blue Chip Consensus Forecast
16.516.1
13.2
10.4
11.6
12.7
14.4
15.516.4
17.4 17.5 17.1 17.217.0
15.4
13.1
Blue Chip Consensus