THE ECONOMY IN 2020: THE AUDACITY OF SLOPE Presented by: Elliot F. - - PowerPoint PPT Presentation

THE ECONOMY IN 2020: THE AUDACITY OF SLOPE

Presented by:

Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC

June 1, 2020

The Economy Is Bottoming GDP = C+I+G+(X-M)

Univ of Michigan Indices Bottoms

Index collapsed sharply but bottoms in the low 70s

Retail Sales Activity Collapses

Sales growth had been excellent and then…

Credit Card Transaction Activity

Volume is deteriorating but less badly

Non-Revolving Credit Skyrockets

Revolving credit growth is OK

Non-Revolving Credit Credit Card Balances

Total Delinquencies Rates Bottom

All types of delinquencies will worsen. The key is to shorten the downturn.

Percent of Balance 90+ Days Delinquent

Credit card rates keep rising along with auto loans

Used Cars Are Not Holding Their Values

Since 2014 used car prices have been falling

Used Car Values Sink

How long will this last? It Hertz

Auto Loan Lending Dramatically Slows

It almost completely stopped, picked up and is now it is close to bottoming

US Light Vehicle Sales Collapse

March and April sales were terrible, in May things will start to improve

Economics Conditions Collapse

Ten daily and weekly high-frequency relevant variables

Annual Y-o-Y Percent Change in PCE

A very solid growth rate of about 2.5%, but now a huge collapse

Small Business Conditions & Confidence

It bottoms and hopefully starts improving

Small Business Has Little in Cash Reserves

This will become a tragedy unless Congress does more

US Rig Counts Tumble

Lower prices and no demand are key

US Rig Counts Tumble

Lower prices and no demand are key

Rail Traffic Slows

2019 was weaker for both carloads and intermodal activity

Rail Traffic Slows

2019 was weaker than 2018 and 2020 is a disaster

ISM Manufacturing Numbers Sink

Manufacturing is less important than in decades past, but……

2020 Corporate Profits Look Dismal

Firms halt or reduce dividends

Factory Utilization Rates are Declining

Combination of trade wars, weak oil prices, a strong dollar and Coronavirus

Bank Net Interest Margins

Rising interest rates had helped, but

Canadian Loan Loss Provisions Jump

A meaningful rise but not as big as in the US

CARES Package Will Largely Protect the Economy

But, only in the short run. We need more help!

CARES Package #2 Helps the Economy

Prevented the worst from happening

HEROES ACT Is A Must

Prevents us from going backwards

?

Budget Deficit Will Explode

The recent CARES act and other coronavirus spending will vastly increase the deficit

The Dollar Is Surprisingly Strong

Approaching highest level in a long time!

Strong Stronger

Duration of All Recorded US Recessions

Since the Depression they tend to be quite short

Labor Markets:

They Were Tight but Are No Longer

State and Local Gov’t Employment

Employment rose slowly, surpassed the pre-recession peak and then collapsed

Involuntary Separation in 2020

Trend is improving, 38.6 million lost jobs in 9 weeks!

Continuing Unemployment Claims

They continue to rise. We need to see them plateau soon!

Unemployment Benefits vs. Normal Salary

In many states, workers are better of not working!

Unemployment Benefits vs. Normal Salary

In many industries workers are better of not working!

Inflation? It’s MIA!

Core PCE Price Index

Inflation is not rising, that is for sure

Federal Reserve Behavior

As For Rates: They Can’t Fall More!

Federal Reserve Behavior

Best Case Scenario

• Fed funds is currently 0.125%
• 12/31/20: 0.125% 10-yr Treasury @ 1.10%
• 12/31/21: 0.375% 10-yr Treasury @ 1.30%
• 12/31/22: 0.625% 10-yr Treasury @ 1.40%

Now For Housing & Real Estate

Mortgage Purchase Applications Bottom!

1st time applications are up 9% Y-o-Y, at level of the late 1990s. 2020 purchase volume should be about $1 trillion, down from $1.20 trillion in 2019

Mortgage Purchase Applications Collapse

2020 purchase volume should be about $1 trillion, well down from 2019

Existing Home Sales are Down But Not Out?

They will worsen in May as that looks at March and April contracts

Inventory Is Low and Keeps Shrinking

Inventory is regularly reaching new lows

Inventory Is Low and Keeps Shrinking

Inventory is disappearing!

Single-Family and Multifamily Starts: 2005 to Present

MF Both SF an MF make a huge U-Turn

New Home Sales Are Levelling Off

They were rising till recently but levelling off is good given the situation

Builder Misery Has Bottomed

High unemployment, costly money, building material shortages remain

New Home Inventories Fell Fast, Now Are Stable and low

Builders are being careful

Prices May Fall Slightly!

Prices in ‘90 and ‘00 didn’t collapse. Y-o-Y prices are up 3.3%, 3.9% or 4.4%

Refinance Activity Remains High

2020 refi activity probably jumps to $1.2 trillion, from $900 in 2019

Construction Activity Declines Slightly

Non-Residential, Residential & Non-Building all perform the same

Future Activity Looked Pretty Good

Measures non-residential projects in the planning phase & is a 12-month leading economic indicator

Changing Values of REITs

Industrial properties have improved the most

What About Things Here?

Things Are Not So Good

Food for Thought

Hello Forbearance My Old Friend

At 8.16%, or 4.25 million loans, up from 0.25% on 3/2/20!

US Coronavirus Cases Steadily Decline

Will this continue now that we are opening?

People Are Venturing Out More

It will still take a while

ANY QUESTIONS?

Elliot F. Eisenberg, Ph.D.

Cell: 202.306.2731 elliot@graphsandlaughs.net www.econ70.com @ECON70 Do you want to get my daily 70-word economics email? Please give me your business card or text “bowtie” to 22828 Thank YOU all very very much!

@ECON70 Questions or comments about the webcast, contact: events@origence.com