September 2012 - 10 Yrs P3MA 2012:09 2012:12 2013:03 2013:06 2013:09 2013:12 2014:03 2014:06...

download September 2012 - 10 Yrs P3MA 2012:09 2012:12 2013:03 2013:06 2013:09 2013:12 2014:03 2014:06 Exchange

of 18

  • date post

    18-Oct-2020
  • Category

    Documents

  • view

    0
  • download

    0

Embed Size (px)

Transcript of September 2012 - 10 Yrs P3MA 2012:09 2012:12 2013:03 2013:06 2013:09 2013:12 2014:03 2014:06...

  • Confidential — Not For Reproduction Copyright 2012 Forest2Market®

    A monthly publication of Forest2Market®, 14045 Ballantyne Corporate Place, Suite 150, Charlotte, NC 28277

    The Economic Outlook and macroeconomic forecasts are developed by Delphi Advisors ΤΜ LLC (www.delphiadvisors.com), and used by Forest2Market with their permission. While the information cited and data used are deemed to be from reliable sources, and the quantitative methods utilized conform to industry standards, any projections are sub- ject to risk and uncertainty and are not guaranteed. Opinions expressed in the commentary are solely those of Delphi Advisors, and may not reflect Forest2Market’s viewpoints.

    Executive Summary*

    The fragile U.S. economy appears to be increasingly susceptible to the ongo- ing, synchronized global slowdown. Several classes of negative shocks, hav- ing the potential to throw the economy back into recession, are set to arrive by year’s end; they span the gamut of fiscal, monetary and regulatory poli- cies. Moreover, the polarized political climate seems to be pushing solutions further out of reach. There is little reason to expect a substantial pick-up in employment growth during the next 24 months, as slumping new orders for core capital goods suggest firms are “pulling in their horns” on hiring. Also, because most jobs being created are temporary and/or low-paying, domestic retail spending appears to have tipped over and is heading lower. Housing is one of the economy’s bright spots, although progress is excruciatingly slow. Congress and the Federal Reserve are both faced with unappealing choices that have low probabilities of averting a seemingly inevitable contraction and high likelihood of pushing tangible-asset prices higher. Oil will continue to be buffeted by competing effects of recession, declining supply and geopo- litical strife. ■

    Economic Outlook

    U.S. gross domestic product. The modest upward revision to the Bureau of Economic Analysis’ estimate of 2Q2012 growth in real gross domestic prod- uct (GDP) – from 1.5 to 1.7 percent (Figures 2 and 3, next page)1 – has done nothing to change our assessment that the U.S. economy remains stuck in low gear. The Federal Reserve’s August Beige Book – which presented eco- nomic anecdotes from around the country – reinforced that assessment by containing 43 instances of some variant of the word “weak,” the highest number since the end of last year.2 In addition, although the Chicago Federal Reserve’s National Activity Index improved in July relative to June, the three-month moving average – generally considered a more accurate indica- tor than the volatile monthly series – registered a small decline between the two months.3

    “All in all, it’s still an anemic 2 percent economy,” wrote economic com- mentator Larry Kudlow, “the worst recovery…dating back to 1947.”4 The Council on Foreign Relations’ (CFR) latest quarterly update, which includes a number of excellent charts, compared the current recovery to its post-

    A P U B L I C A T I O N O F F O R E S T 2 M A R K E TA P U B L I C A T I O N O F F O R E S T 2 M A R K E TA P U B L I C A T I O N O F F O R E S T 2 M A R K E T ®®®

    0.00

    0.25

    0.50

    0.75

    1.00

    E c o n o m ic A c ti v it y

    Real GDP H. Starts Ind. Prod.

    Hist 4cast

    0.00

    0.25

    0.50

    0.75

    1.00

    C o s ts

    Prime Rate Oil Price PPI

    Hist 4cast

    © Delphi Advisors

    0.00

    0.25

    0.50

    0.75

    1.00 1 0 Y

    rs

    P 3 M

    A

    2 0 1 2 :0

    9

    2 0 1 2 :1

    2

    2 0 1 3 :0

    3

    2 0 1 3 :0

    6

    2 0 1 3 :0

    9

    2 0 1 3 :1

    2

    2 0 1 4 :0

    3

    2 0 1 4 :0

    6

    E x c h a n g e R a te s

    Canadian $ Yen Euro

    Hist 4cast Strong U.S.$↑

    Weak U.S.$↓

    Figure 1. Indexed forecasts of macroeco- nomic variables relative to their historical 10-year min, max and average (lower and upper ends of the blue bars, and black dots, respectively), and prior three-month averages (“P3MA”); see Table 1, p. 2., for full variable labels. Source: Delphi Advi- sors

    September 2012

    * Context for this forecast can be found in articles relating recent economic developments to the U.S. forest products sector, posted on Delphi Advi- sors’ website (http://delphiadvisorsmacropulse.blogspot.com/).

  • 2

    Table 1. Key economic 4cast statistics

    Real

    GDP

    Housing

    Starts

    Industrial

    Production

    Prime

    Rate

    Oil

    Price

    CDN$ /

    US$

    Euro /

    US$

    Yen /

    US$

    PPI, Inter-

    med Materials

    2012:06 1.73 0.754 3.06 3.25 82.41 1.028 0.797 79.3 -0.64

    2012:07 1.77 0.746 -1.97 3.25 87.93 1.015 0.815 79.0 -0.95

    Estimated 2012:08 1.57 0.786 0.53 3.25 94.16 0.992 0.806 78.7 1.01

    2012:09 -0.09 0.760 -0.66 3.25 92.17 0.988 0.810 78.8 -0.20

    2012:10 -1.13 0.754 -1.17 3.25 99.16 0.991 0.807 79.9 -0.81

    2012:11 -1.18 0.772 -0.58 3.25 100.91 0.993 0.816 81.5 0.90 2012:12 -1.17 0.732 0.18 3.25 97.07 0.998 0.814 81.6 1.20

    2013:01 -2.40 0.717 -1.84 3.25 94.19 1.000 0.801 81.7 0.10

    2013:02 -2.38 0.746 -1.43 3.25 95.67 1.006 0.783 82.7 0.14

    2013:03 -2.37 0.693 0.49 3.25 103.11 0.996 0.782 82.0 -0.03 2013:04 -0.08 0.757 -2.36 3.25 102.37 0.982 0.786 81.2 0.76

    2013:05 -0.08 0.726 0.06 3.25 101.97 0.971 0.811 79.2 0.74

    2013:06 -0.13 0.779 2.32 3.25 96.26 0.983 0.805 81.3 0.17 2013:07 -1.00 0.787 -2.83 3.45 100.70 0.995 0.798 82.9 0.75

    2013:08 -1.32 0.807 1.23 3.45 97.38 1.006 0.790 84.7 0.10

    2013:09 -1.55 0.785 -0.32 3.45 96.08 1.005 0.797 84.1 -0.07

    2013:10 -1.09 0.878 -0.72 3.65 94.57 1.005 0.784 83.2 -0.16 2013:11 -0.95 0.897 0.63 3.65 96.06 1.006 0.784 82.3 -0.02

    2013:12 -0.94 0.850 0.24 3.65 95.39 0.998 0.794 82.6 0.53

    2014:01 -0.38 0.841 -1.13 3.85 100.44 0.987 0.794 82.5 0.42 2014:02 -0.56 0.807 -0.38 3.85 95.43 0.982 0.792 83.1 0.08

    2014:03 -0.56 0.852 0.84 3.85 99.39 0.987 0.779 84.6 0.01

    2014:04 -0.89 0.866 -1.86 4.35 98.14 0.990 0.768 85.9 1.38

    2014:05 -0.72 0.935 0.87 4.35 94.10 0.995 0.776 86.4 0.42 2014:06 -0.79 0.918 2.93 4.35 92.97 0.985 0.779 86.5 -0.19

    2014:07 4.74 0.942 -1.92 4.75 93.18 0.977 0.774 86.2 0.93

    2014:08 4.65 0.935 2.79 4.75 94.38 0.972 0.774 86.6 -0.05

    Notes: All actual data from St Louis Federal Reserve Board's FRED database unless otherwise indicated:

    Real GDP is annualized percentage change (chained 2000 US dollars)

    Housing Starts are millions of units (seasonally adjusted, annualized rate) as reported by U.S. Census Bureau

    Prime lending rate is monthly average of daily figures

    Oil price is West Texas Intermediate crude, monthly average of daily $/barrel

    Canadian dollar, euro and yen exchange rates are monthly averages of daily figures

    Monthly percentage change in Producer Price Index, intermediate materials, as reported by Bureau of Labor Statistics

    Projections developed by Delphi Advisors

    Industrial Production is monthly percentage change in index (index not seasonally adjusted) as reported by the Federal Reserve's G-17 report

    Actual

    Projected

    -3

    -2

    -1

    0

    1

    2

    3

    4

    5

    2 0 0 9 Q

    3

    2 0 1 0 Q

    1

    2 0 1 0 Q

    3

    2 0 1 1 Q

    1

    2 0 1 1 Q

    3

    2 0 1 2 Q

    1

    P e rc e n t

    PCE PDI NetX GCE GDP

    © Delphi Advisors

    Figure 2. Contributions -- from personal consumption ex- penditures (PCE), gross private domestic investment (PDI), net exports (NetX), and government consumption expenditures and gross investment (GCE) -- to percentage change in historical real GDP; data are seasonally ad- justed at annual rates. Source: Bureau of Economic Analysis

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    Advance Preliminary Final

    Estimate

    P e rc e n t

    PCE PDI NetX GCE GDP

    © Delphi Advisors

    2Q2012

    Figure 3. Percentage change in most recent quarter’s real GDP, by estimate and component -- personal consump- tion expenditures (PCE), gross private domestic invest- ment (PDI), net exports (NetX), and government consump- tion expenditures and gross investment (GCE). Source: Bureau of Economic Analysis

  • 3

    World War II counterparts and concurred with Kud- low’s observation. “The current recovery remains an outlier among postwar recoveries,” the CFR said. More- over, “the global economic slowdown is beginning to manifest itself in world trade. After staging the strongest recovery of the post–World War II era, growth in world trade has begun to decelerate.”5

    Looking forward, however, Kudlow is convinced “there is no recession in sight for now.” His view squares with a MarketWatch survey indicating the United States is projected to grow 2.0 percent in 3Q and 1.9 percent in 4Q2012.6 But there are a number of other gauges sup- porting analyst Gary Shilling’s contention that the world (including the United States) is either already in reces- sion or entering one.7 For example, the correlation be- tween global industrial production and Société Gé- nérale’s Global Economic Newsflow Indicator (or GENI, which captures sentiment regarding trends in t