icsc economic update - 02082017 [read-only] · february 9, 2017 economic update international...
TRANSCRIPT
Paul Traub
Senior Business Economist
Federal Reserve Bank of Chicago
February 9, 2017
Economic UpdateInternational Council of Shopping Centers
Billions Chained $2009, % Change Q/Q at SAAR
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
12,000
13,000
14,000
15,000
16,000
17,000
18,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
$ Billions
Q4 ‘16
$16,805
1.9%
February 9, 2017 1Federal Reserve Bank of Chicago
U.S. Real GDP
Percent
Source: U.S. Bureau of Economic Analysis
Billions Chained $2009, % Change Q/Q at SAAR
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
7,500
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
12,000
12,500
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
$ Billions
Q4 ‘16
$11,640
2.5%
February 9, 2017 2Federal Reserve Bank of Chicago
Real Personal Consumption Expenditures
Percent
Source: U.S. Bureau of Economic Analysis
February 9, 2017 3Federal Reserve Bank of Chicago
U.S. Real GDP
Source: U.S. Bureau of Economic Analysis, September 2016 Blue Chip Economic Indicators.
Percent
GDP and Contribution to Percent Change, Q/Q at SAAR
-1.2
4.0
5.0
2.32.0
2.62.0
0.9 0.81.4
3.5
1.9
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Q1 '14 Q2 Q3 Q4 Q1 '15 Q2 Q3 Q4 Q1 '16 Q2 Q3 Q4
PCE Private Investment Net Exports Government GDP
Index, Q4 2007 = 100
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Durables Nondurables Services
Index
Q4 ’16
142.5
112.7
112.4
Source: Author’s calculations using data from the BEA
Real Personal Consumption Expenditures
February 9, 2017 Federal Reserve Bank of Chicago 4
February 9, 2017 5Federal 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
SAAR Annual Average
Aug ’0914.6
Jan ‘1717.5
S.A.A.R – Millions of Units
Millions
U.S. Light Vehicle Sales
Cash for Clunkers
Source: Ward’s Automotive and BEA
Note: Total 2016 Light Vehicle Sales: 17,465,020 / Including M/H: 17,866,260.
February 9, 2017 6Federal Reserve Bank of Chicago
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'14 M M J S N '15 M M J S N '16 M M J S N
% Chg Yr/Yr Annnual Average % Change
Real Retail Sales
Excluding Food Services - % Change Yr./Yr.
2016
2.7%
2015
1.6%
2014
3.9%
Dec ‘16
4.3%
Source: Bureau of the Census
Percent
February 9, 2017 7Federal Reserve Bank of Chicago
Real Retail Sales – Non-store Sales
Index 2000 = 100 and Share of Growth
45.3%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Non-store % of Growth (RHA) Total Less Food Services (LHA) Non-Store Sales (LHA)
Source: Bureau of the Census
Index Percent
309.0
162.2
Billions Chained $2009, % Change Q/Q at SAAR
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
3,250
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
$ Billions
Q4 ’16
$2,805
10.7%
February 9, 2017 8Federal Reserve Bank of Chicago
Real Gross Private Domestic Investment
Percent
Source: U.S. Bureau of Economic Analysis
Billions Chained $2009, Index – 2005 = 100
20
40
60
80
100
120
140
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Fixed Investment Nonresidential Residential
Index
Q4 ‘16
128.4
107.5
68.4
February 9, 2017 9Federal Reserve Bank of Chicago
Real Domestic Fixed Investment
Source: U.S. Bureau of Economic Analysis
February 9, 2017 10Federal Reserve Bank of Chicago
Source: U.S. Bureau of Economic Analysis, September 2016 Blue Chip Economic Indicators.
Percent
Contribution to Percent Change, Q/Q at SAAR
-1.1
1.81.5
0.5
1.6
0.20.4
-0.4-0.6
-1.3
0.5
1.7
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Q1 '14 Q2 Q3 Q4 Q1 '15 Q2 Q3 Q4 Q1 '16 Q2 Q3 Q4
Nonresidential Residential Inventories GPDI
Real Gross Private Domestic Investment
February 9, 2017 11Federal Reserve Bank of Chicago
I/S RatiosTotal Business and Light Vehicles - SA
1.00
1.50
2.00
2.50
3.00
3.50
4.00
1.20
1.25
1.30
1.35
1.40
1.45
1.50
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Total Business (LHA) Light Vehicle (RHA)
Percent
Nov ‘16
1.38
Jan ‘17
2.69
Source: U.S. Census Bureau and WardsAuto.
ISM Purchasing Managers IndexManufacturing and Composite, SA - Greater than 50 = Expansion
40.0
45.0
50.0
55.0
60.0
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17
Manufacturing Composite
Source: Institute for Supply Management , Haver Analytics and FRED
Index
February 9, 2017 Federal Reserve Bank of Chicago 12
Jan ’17
56.0 56.4
February 9, 2017 13Federal Reserve Bank of Chicago
U.S. Housing Starts & Household Formation
In Thousands of Units – Averages by Decade
1,407
1,758
1,498
1,372
1,537
837
1,046
1,512 1,550
1,104
1,3311,234
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1960's 1970's 1980's 1990's 2000's 2010's
Starts Formation
Source: U.S. Census Bureau – Single Family Starts and Households by Age
February 9, 2017 14Federal Reserve Bank of Chicago
In Thousands of Units (SAAR) – November Average YTD Data
(000)’s
Source: U.S. Census Bureau
U.S. Housing Starts
2,073
1,812
1,342
900
554 586 612
784
9281,001
1,1081,168
0
400
800
1,200
1,600
2,000
2,400
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Note: The United States averaged 1.5 million housing starts per year 1990 to 2004.
February 9, 2017 15Federal Reserve Bank of Chicago
80.0
90.0
100.0
110.0
120.0
130.0
140.0
'10 '11 '12 '13 '14 '15 '16
The U.S. Dollar & The Trade Deficit
Trade Weighted Dollar- Index 2010 = 100, Trade Deficit – Index 2010 = 100
Source: Federal Reserve Board and Haver Analytics
Jan 25, ‘17
125.1
Index
75.0
85.0
95.0
105.0
115.0
125.0
135.0
'10 '11 '12 '13 '14 '15 '16
Q3 ‘16
130.7
Index
Stronger
Weaker
Trade Weighted Dollar Trade Deficit
February 9, 2017 16Federal Reserve Bank of Chicago
Fiscal Stimulus Remains Uncertain
• President elect’s plan includes large tax cuts and increased spending- Details still lacking in many areas- Final package depends on Administration and Congressional
priorities
• Estimates of fiscal impact range from 0.5 to 1.0 percent on level of GDP by end of 2018, falling to zero by 2020
• Potential offsets to long-run growth from other policies- Trade restrictions- Immigration legislation- Affordable Care Act- Federal Reserves response to stronger demand and higher
inflation
• Some analysts have elected not to change previous projections
February 9, 2017 17Federal Reserve Bank of Chicago
NAFTA Foreign Direct Investment PositionIn Billions of Dollars – 1994 to 2015, Historical Cost Value
$352.9
$269.0
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
U.S. Investment Foreign Investment
$92.8
$16.6
0.0
20.0
40.0
60.0
80.0
100.0
120.0
'94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
U.S. Investment Foreign Investment
$Billions $BillionsCanada Mexico
Source: Bureau of Economic Analysis and Haver Analytics.
2.1% of GDP 17.2% of GDP 0.6% of GDP 1.5% of GDP
February 9, 2017 18Federal Reserve Bank of Chicago
Economic Potential by DecadeReal GDP Percent Change – Annual Average
Percent
Source: U.S. Congressional Budget Office
4.3
3.2 3.23.3
1.71.8
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1960's 1970's 1980's 1990's 2000's 2010's
Dec '15 Projection
February 9, 2017 19Federal Reserve Bank of Chicago
Labor and Productivity Growth
Labor Force and Real Output Per Hour – Average Annual Growth
Source: U.S. Department of Labor: Bureau of Labor Statistics
Percent
2.8 2.8
1.9
1.5
2.1
2.6
0.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
50's 60's 70's 80's 90's 00's 10's
Percent
1.1
1.7
2.7
1.7
1.21.0
0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
50's 60's 70's 80's 90's 00's 10's
Real Output Per HourLabor Force
February 9, 2017 20Federal Reserve Bank of Chicago
Labor Force Participation Rate
Percent of Noninstitutionalized Civilian Population – Annual Average
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
'60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
Jan ‘17
62.9
Source: U.S. Bureau of Labor Statistics
February 9, 2017 21Federal Reserve Bank of Chicago
Working Age Population by Age
Select Age Categories, Percent of Total, Index – 1960 = 100
60.0
80.0
100.0
120.0
140.0
160.0
1960 1970 1980 1990 2000 2010
16 to 24 25 to 39 40 to 64 65 and Over
Index
Index
137.7
100.7
88.888.1
Percent
20.2%
35.9%
16.7%27.2%
2015 Values
Source: U.S. Census Bureau – Table HH-3, Households by Age
February 9, 2017 22Federal Reserve Bank of Chicago
Labor and Productivity Growth
Labor Force and Real Output Per Hour – % Change Yr./Yr.
Source: U.S. Department of Labor: Bureau of Labor Statistics
0.2
0.0
0.3
0.8 0.8
1.0
0.60.7
1.3
1.0
1.6
1.3
0.3
1.0
1.6
0.2
1.4
1.2
0.7
0.4
0.0
-0.3
0.1
1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2014 Q2 Q4 Q4 2015 Q2 Q3 Q4 2016 Q2 Q3 Q4
Labor Force Output Per Hour
Percent
February 9, 2017 23Federal Reserve Bank of Chicago
Business Confidence Surveys
Conference Board, Vistage, and NFIB , Index 2004 = 100
60.0
70.0
80.0
90.0
100.0
110.0
120.0
'14 Q2 Q3 Q4 '15 Q2 Q3 Q4 '16 Q2 Q3 Q4
CB Vistage NFIB
Percent
Source: Author’s calculations using Conference Board CEO Survey, Vistage Mid-size & Small Business Survey, National Federation of
Independent Business Survey data.
Q4 ‘16
110.7
106.6
101.8
February 9, 2017 24Federal Reserve Bank of Chicago
U.S. Real GDP Blue Chip ForecastAnnual Percent Change – Chained $2009
-1.2
5.0
3.5
1.92.4 2.4
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'14 '15 '16 '17 '18
Actual (SAAR) Fcst (SAAR) Actual (Y/Y) Fcst (Y/Y)
Source: BEA and January Blue Chip Economic Indicators
Percent
February 9, 2017 25Federal Reserve Bank of Chicago
Billions Chained $2009 and Percent of Actual
U.S. Real GDP – Actual and Potential
-8
-6
-4
-2
0
2
4
6
8
12,000
13,000
14,000
15,000
16,000
17,000
18,000
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Gap (Right) Actual (Left) Blue Chip (Left) Potential (Left)
Source: Bureau of Economic Analysis and the U.S. Congressional Budget Office
Percent$Billions
Q4 ‘16
$17,026
$16,805
-1.3%
$221
U.S. Consumer
February 9, 2017 Federal Reserve Bank of Chicago 26
Income and Savings Rate
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
'00 '02 '04 '06 '08 '10 '12 '14 '16
Percent
Percent Change and Percent of DPI
Nov ‘16
2.3%
Source: U.S. Bureau of Economic Analysis
February 9, 2017 Federal Reserve Bank of Chicago 27
Post Recession 2.0%
Pre-recession 3.1%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
'00 '02 '04 '06 '08 '10 '12 '14 '16
Percent
Nov ’16
5.5%
Post recession Average 5.9%
Pre-recession average 4.0%
Real DPI - % Chg. Yr./Yr., $2009 Personal Saving Rate - % of DPI
February 9, 2017 28Federal Reserve Bank of Chicago
Real DPI & Personal Savings Rate
As Percent of Personal Income
Source: U.S. Bureau of Economic Analysis
11.111.8
9.3
6.7
4.3
5.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
'60's '70's '80's '90's '00's '10's
Percent
4.6
3.43.3
3.1
2.6
2.1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
'60's '70's '80's '90's '00's '10's
Real Disposable PersonalIncome - $2009
Personal Savings RatePercent of DPI
Percent
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
'59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15
Total Credit Total Less Government Held Student Loans
Consumer Credit
29Federal Reserve Bank of Chicago
Percent
February 9, 2017
Revolving & Non-revolving CreditDec ‘16
26.4%
19.0%
Source: Federal Reserve Bank - Board of Governors
As a Percent of Disposable Personal Income
Interest Payments
30Federal Reserve Bank of ChicagoFebruary 9, 2017
Source: Federal Reserve Bank - Board of Governors
1.0
1.5
2.0
2.5
3.0
3.5
'59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15
As a Percent of Disposable Personal Income
Percent
Dec ’16
2.0%
February 9, 2017 31Federal Reserve Bank of Chicago
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
All Items Core
Source: U.S. Department of Labor: Bureau of Labor Statistics data.
Inflation – PCE & CPI Price Index
Percent Change Yr / Yr
PCE Price Indexes CPI Price Indexes
Nov ‘161.7%
1.4%
Nov ‘162.1%
1.7%
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
All Items Core
February 9, 2017 32Federal Reserve Bank of Chicago
Initial Unemployment ClaimsMonthly Average as Percent of Nonfarm Employment
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
'67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15
Percent
0.45
0.74
0.37
0.50
0.17
0.46
Source: U.S. Bureau of Labor Statistics
0.71
February 9, 2017 33Federal Reserve Bank of Chicago
Real Household Net WorthHome Equity and Financial & Other - Index 2007 = 100, $2009
Index
Source: Author’s calculations using Federal Reserve data.
40.0
60.0
80.0
100.0
120.0
140.0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Home Equity Financial & Other Total
Note: Total Household Net Worth in Current Dollars is $87.0 Trillion.
Index
120.6
117.4
102.1
$Trillions
$66.7
$78.4
$11.7
Q3 ‘16
Consumer Sentiment
34Federal Reserve Bank of ChicagoFebruary 9, 2017
University of Michigan
Index
20
40
60
80
100
120
140
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
January ‘00
112.0
Source: Thomson Reuters / University of Michigan
Jan ’17
98.5
U.S. Auto Industry
February 9, 2017 Federal Reserve Bank of Chicago 35
February 9, 2017 36Federal Reserve Bank of Chicago
U.S. Total Vehicle SalesMillions of Units
17.8 17.4
10.6
15.9
17.8 17.9 17.7 17.6
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Millions
Source: Ward’s Automotive and BEA
Note: Total 2016 Light Vehicle Sales: 17,465,020 / Including M/H: 17,866,260.
February 9, 2017 37Federal Reserve Bank of Chicago
U.S. Light Vehicle Incentives
7.0
8.0
9.0
10.0
11.0
12.0
13.0
'10 '11 '12 '13 '14 '15 '16 '17
As Percent of Transaction Price - SA
Source: Author’s calculation using Ward’s Automotive and J.D Power data.
Jan ’1712.1%
Percent
February 9, 2017 38Federal Reserve Bank of Chicago
Light Vehicle Transaction Price
1.5
0.5
1.51.8
2.4 2.32.8
-3.6
1.5
4.5
2.1
0.9
2.72.4 2.3
1.6
-4.0
-2.0
0.0
2.0
4.0
6.0
$22,000
$24,000
$26,000
$28,000
$30,000
$32,000
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
% Chg. Yr/Yr (Right) Transaction Price (Left)
Annual Average & Percent Change Yr./Yr.
Source: Author’s calculation using J.D Power data.
2016$31,151
PercentDollars
February 9, 2017 39Federal Reserve Bank of Chicago
Finance TermLength of Loan in Months
59.6
61.062.0
62.7
63.8 63.663.1
62.6 62.863.5
64.565.0
65.966.9
67.8
50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
70.0
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Source: J.D Power data.
Buying Conditions for Vehicles
40Federal Reserve Bank of ChicagoFebruary 9, 2017
University of Michigan
Index
80
90
100
110
120
130
140
150
160
'08 '10 '12 '14 '16
Jan ’17
147.0
Source: Thomson Reuters / University of Michigan
February 9, 2017 41Federal Reserve Bank of Chicago
3
1
5
4
5
11
3
16
4
18
8
23
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Poor Selection
Gas Prices
Uncertain Future
Can't Afford
High Interst Rates
Prices High
Fuel Efficiency
Time's good
Rising Interest Rates
Low Interest Rates
Prices Will Increase
Low Prices
Good / Bad Reason: Why do you say so?
Source: University of Michigan Survey of Consumers
Reasons for Buying Conditions for VehiclesUniversity of Michigan
Note: May add to more than a 100 due to multiple mentions.
February 9, 2017 42Federal Reserve Bank of Chicago
North American Auto Production Facilities
1995 2015
U.S. Automation Alley
Source: Thomas Klier, FRB Chicago and Bureau of Economic Analysis
February 9, 2017 Federal Reserve Bank of Chicago 43
Monetary PolicyEmployment & Inflation
February 9, 2017 44Federal Reserve Bank of Chicago
F.O.M.C Statement
1. Information since the F.O.M.C. met in December indicates that the labor
market has continued to strengthened and that economic activity has been
expanding at a moderate pace.
2. Job gains have been solid in recent months and the unemployment rate stayed
near its recent low.
3. Household spending has continued to rise moderately business fixed
investment has remained soft. Measures of consumer and business sentiment
have improved as of late.
4. Inflation increased in recent quarters but is still below the Committee’s 2
percent longer-run objective
5. Market-based measures of inflation compensation remain low; most survey-
based measures of longer-term inflation expectations are little changed, on
balance.
February 1, 2017
February 9, 2017 45Federal Reserve Bank of Chicago
Main Economic IndicatorsYear-over-year Comparison
Source: U.S. Bureau of Economic Analysis, Census Bureau and Bureau of Labor Statistics
2014 2015 2016
GDP – Annual Growth Rate 1 2.4% 2.6% 1.6%
Unemployment Rate 2 6.2% 5.3% 4.9%
Participation Rate 2 62.9% 62.7% 62.8%
Nonfarm Job Growth 3 2,558 2,876 2,493
PCE Core Inflation Yr. / Yr. 5 1.6% 1.4% 1.7%
1. Year-over-year
2. Annual Average
3. Annual Average Employment – Year-over-year change in thousands
4. Annual Average PCE Core – Percent change year-over-year
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
'09 '10 '11 '12 '13 '14 '15 '16 '17
Actual Target
February 9, 2017 46Federal Reserve Bank of Chicago
Unemployment Rate & PCE Inflation
Percent Unemployed, PCE % Change Yr./Yr.
Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve
1.7
2.5
1.9
1.31.5
0.3
1.1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
'09 '10 '11 '12 '13 '14 '15 '16
Annual Actual Target
Unemployment PCE Inflation
2.0%
Dec ‘16
1.6%
Jan ‘17
4.8%
Percent Percent
February 9, 2017 47Federal Reserve Bank of Chicago
0
50
100
150
200
250
300
350
2015 2016 2017
Monthly Actual Annual Average
U.S. Nonfarm Payrolls
Monthly and Annual Average Job Change – In Thousands
Thousands
Source: U.S. Department of Labor: Bureau of Labor Statistics
2015
228.7 2016
186.8
Jan ‘17227
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
'00 '02 '04 '06 '08 '10 '12 '14 '16
February 9, 2017 48Federal Reserve Bank of Chicago
Underutilization of Labor
U6 Unemployment Rate - SA
Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve
Jan ‘17
9.4%
Percent
Includes total unemployed plus marginally attached workers plus employed part-time for economic reasons.
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
'06 '08 '10 '12 '14 '16
5 Year Breakeven 10 Year Breakeven
February 9, 2017 49Federal Reserve Bank of Chicago
Inflation Compensation
5 Year and 10 Year Inflation Expectations
Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve
Feb 3 ‘17
2.06%
1.93%
Percent
Source: Author’s calculation using Federal Reserve System data.
5 & 10 Year TIPS Minus 5 & 10 Year Treasuries- Constant Maturity Rate
February 9, 2017 50Federal Reserve Bank of Chicago
Yield Curve10 Year – 1 Year Treasuries in Basis Points
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
'12 '13 '14 '15 '16
10 Yr - 1 Yr T-Bill Spread 1 Year Treasury 10 Year Treasury
3-Feb-2017
248 bps
165 bps
83 bps
Percent
Source: Board of Governors – Federal Reserve System
February 9, 2017 51Federal Reserve Bank of Chicago
Inflation Expectations
Headline PCE Inflation – Yr./Yr. & Q4/Q4
Source: Bureau of Economic Analysis and FRB Philadelphia Q4 ‘16 Survey
Survey of Professional Forecasters – Q4 ‘16 ForecastPercent
1.4
1.92.0
0.9 1.01.0
1.91.8
1.9 1.92.0
0.0
0.4
0.8
1.2
1.6
2.0
2.4
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 2016 2017 2018
Actual Expectations
February 9, 2017 52Federal Reserve Bank of Chicago
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2016 2017 2018 2019 Long
Run
Appropriate pace of policy firming
Fed Funds Rate – Year End Projections
Thank You!