economic watch for the retail industry (march 30, 2009)
TRANSCRIPT
Economic Watch for the Retail Industry
March 30, 2009
Walter S. BialasVice President – Market Research
Madison Marquette
Home Prices Still in Decline…
• The widely quoted Case-Shiller Index is a lagging indicator because it reflects a 3-month moving average.
• Currently the Index reflects a 27% decline from the peak home prices.
• Some recently released data show new home sales have increased slightly.
• While this is a positive step, a pricing bottom or meaningful rebound is not yet evident for the national housing market.
• Until this trend begins to take a firm hold, the economy will remain in flux.
CASE-SHILLER NATIONAL HOUSE PRICE INDEX (Composite for 20 Markets - January 2000 = 100)
100
120
140
160
180
200
220
Source: Standard & Poor's - Case-Shiller; Economy.com; Madison Marquette Market Research.
Recession Begins - December 2007
27% Decline - Thus Far
Distress Continues as Initial Claims Remain Elevated…
• From a typical weekly pace of 350,000, initial
unemployment claims rose quickly into the 500,000-range by the end of 2008.
• Although the last 2 weeks have shown a slight decrease, the pace remains significantly elevated at above 640,000.
• The economy will not see any positive momentum until this weekly pace of erosion slows well below 500,000.
• Large employers, however, continue to shed jobs, suggesting stability will not be evident for some time.
INITIAL UNEMPLOYMENT CLAIMS (4-Week Moving Average)
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
Source: U.S. Department of Labor; Economy.com; Madison Marquette Market Research.
Recession - March to
November 2001
Recession Begins - December 2007
Confidence Continues to be Rocked by Ongoing Economic Losses…• Consumer Confidence slipped further in February
– hitting a 40-year low of “25”.
• While confidence can improve quickly, the ongoing global economic recession and continued domestic job losses suggest it will be a at least a few quarters before any material improvement can be expected.
• Until this level increases to around “85”, consumers will remain “hunkered-down” and on the sidelines.
CONSUMER CONFIDENCE INDEX (1985 = 100)
0
20
40
60
80
100
120
140
160
Source: The Conference Board; Economy.com; Madison Marquette Market Research.
Recession - March to
November 2001
Recession Begins - December 2007
TED Spread Declines Appear to Have Stalled….
• The TED Spread is a measure of risk & investor confidence in the US.
• Since its 450-basis point high of last fall, it has improved significantly.
• By January the spread declined to around 90 basis points and looked as though it might move back to its long-term average.
• The hope for continued decline appears to have stalled, even as the new administration has expanded the economic stimulus programs.
"TED SPREAD": DIFFERENCE BETWEEN 3-MONTH LIBOR & TREASURY BILL YIELDS
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Source: Economy.com; Federal Reserve Board of Governors; Thompson ONE; British Bankers Association; Madison Marquette Market Research.
Bear Hedge Funds
Liquidate
TAF Established Bear
Sterns Collapse
Lehman Failure
TARP Fails to Pass Congress
Bank Funding Problems Develop
GSE Takeover
TARP Abandoned
Avg. Long-Term TED Spread = 40 - 50 bps
Stimulus Passed / Obama
Addresses Congress
About Madison Marquette
Madison Marquette is a Washington, D.C.-based investor, developer and operator of retail and retail mixed-use real estate throughout the United States. The company specializes in creating unique retail destinations that respond best to consumer preferences. With regional offices in Philadelphia, New York, Charlotte, Fort Lauderdale, San Francisco, Los Angeles, San Diego, and Seattle, Madison Marquette seeks investment opportunities in growing markets. The company maintains a sophisticated in-house operating capability and oversees 23 million square feet of retail real estate. This diverse national portfolio includes many properties that Madison Marquette manages and leases on behalf of third-party owners. For more information about Madison Marquette, please visit http://www.madisonmarquette.comWalter Bialas is responsible for overseeing Madison Marquette’s research needs. He has over 25 years of real estate research experience. Walt also currently serves as chair of ICSC’s North American Research Task Force. He can be reached at 202-741-3800 or by e-mail at [email protected]
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