Economic Outlook Oil, the Fed, and Housing

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Economic OutlookOil, the Fed, and Housing Oh
My!
National Marine Bankers Association September 13,
2005
Gina Martin Wachovia Economics 704.383.6805 gina.m
artin_at_wachovia.com
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Economic Growth Slowing Down
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Whats Behind Slower Growth in 2006?

• Business Cycle Expansion Sets In
• Oil Prices - 65 and 2.50 (or more!)
• Housing ATM Starting to Run Low
• Autos Borrowing from Future Sales
• Rates 250 bps in 14 months, More to Come
• Long Rates Where Do Rates Go From Here?

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Income Keeps Consumers Spending Personal Income
and Spending
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Income Keeps Consumers Spending Part II
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Consumers Indeed Better Off Household Net Worth,
Billions of Dollars
2000 Peak 43.5 Trillion Current 48.8 Trillion
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Homeowners Equity and Mortgage Debt
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Past Declines in Housing Prices
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Past Declines in Housing Prices
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Past Declines in Housing Prices
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Corporate Profits Revive Business Sector (In
Billions of Dollars, SAAR)
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Low Rates Have Helped Clean Up Balance Sheets
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Businesses Have Cash To Burn
Both Series Are Year over Year Change Corporate
is Net Cash Flow with Inventory Valuation and
Capital Consumption Adjustments, 12 quarter
moving average
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Steady Employment Gains Boost Income Nonfarm
Employment Growth
August _at_ 169,000
Monthly Change, In Thousands, Seasonally Adjusted
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Longer Term Challenges Remain U.S. Unemployment
Rate by Education Level
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Short Rates Still Accommodative, But the Gap is
Closing
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Fighting Future Inflation Productivity and Unit
Labor Costs
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Oil Will Energy Inflation Pass Through?
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Refined Product Prices Continue to Trend Higher
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What About Long Term Rates?
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A Little Help Net Purchases of U.S. Treasuries by
the Rest of the World
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Twin Deficits Remain a Weight
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Government Expenditures Seasonally Adjusted
Annual Rates, Billions of
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Social Security, Medicare, and Medicaid Spending
as a Percent of GDP
Medicare
Percent of GDP
Entitlements A Major Threat Going Forward
Medicaid
Social Security
Note Social Security and Medicare projections
based on the intermediate assumptions of the 2004
Trustees Reports. Medicaid projections based on
CBOs January 2004 short-term Medicaid estimates
and CBOs December 2003 long-term Medicaid
projections under mid-range assumptions. Source
GAO analysis based on data from the Office of the
Chief Actuary, Social Security Administration,
Office of the Actuary, Centers for Medicare and
Medicaid Services, and the Congressional Budget
Office.
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