Update May 2019 Mike Schenk Chief Economist CUNA Economic Update - - PowerPoint PPT Presentation

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Update May 2019 Mike Schenk Chief Economist CUNA Economic Update - - PowerPoint PPT Presentation

Mar 23, 2024 311 likes •483 views

CUNA Economic Update May 2019 Mike Schenk Chief Economist CUNA Economic Update is sponsored by Abbreviated China Trade War Chronology January 22 nd 2018: U.S. imposes 30% tariff on foreign solar panels (China is the world leader in

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CUNA Economic Update

May 2019 Mike Schenk Chief Economist

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CUNA Economic Update is sponsored by

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  • January 22nd 2018: U.S. imposes 30% tariff on foreign solar panels (China is the world

leader in solar panel manufacture) and 20% tariff on washing machines (in 2016 China exported $425 million worth of washers to U.S.)

  • July 6th 2018: U.S. imposes 25% tariff on $34 billion in Chinese goods
  • China retaliates with tariffs on U.S. goods of similar value
  • August 23rd 2018: U.S. imposes 25% tariff on additional $16 billion in Chinese goods
  • China retaliates with tariffs on U.S. goods of similar value
  • September 17th 2018: U.S. announces beginning September 24th, an additional $200

billion of Chinese goods would be subject to 10% tariff - increasing to 25% by year-end. Threatens tariffs on an additional $267 billion worth of imports if China retaliates

  • September 18th 2018: China retaliates, imposing a 10% tariff on $60 billion in

U.S. goods

  • December 1st 2018: Planned increase in U.S. tariffs (from 10% to 25%) is delayed
  • May 5th, 2019: China reportedly backtracks on previously negotiated trade concessions

causing President Trump to announce that the previous 10% tariffs levied on $200 billion in Chinese goods would be raised to 25% on Friday, May 10th.

Abbreviated China Trade War Chronology

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20 40 60 80 100 120 140 160 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Consumer Confidence: Close to a 20-Year High

Source: Conference Board

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1.04 2.08 2.17 2.30 3.01 2.73 2.32 2.15 2.68 2.62 2010 2011 2012 2013 2014 2015 2016 2017 2018 YOY 4/19

Annual Increases in Non-Farm Employment

Millions of Employees. Source: BLS

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3.8 4.4 10.0 3.6 2 3 4 5 6 7 8 9 10 11 12

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

U.S. Unemployment Rate (%)

(Source: BLS and CUNA)

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500 1000 1500 2000 2500 3000 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

S&P 500 Monthly Average

(Source: S&P)

Recession Nominal Real

5/8/19 = 2,879.4

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124.2 90.8 50 60 70 80 90 100 110 120 130 Jan-80 Jan-86 Jan-92 Jan-98 Jan-04 Jan-10 Jan-16

Household Consumer & Mortgage Debt

As a % of Disposable Household Income // Source: Federal Reserve

Actually a bit lower than 95% and trending down!

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  • 4.2
  • 4.7
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028

Total Deficits & Surpluses

Percent of GDP. Source: CBO.

32 78 93 10 20 30 40 50 60 70 80 90 100 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028

Total Debt Held by the Public

Percent of GDP. Source: CBO.

More spending and lower taxes will present more obvious challenges

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15.6 10.8 5 10 15 20 25 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028

Discretionary Non-Defense Spending

Percent of Total Outlays. Source: CBO.

7.9 13.2 2 4 6 8 10 12 14 16 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028

Net Interest Outlays

Percent of Total Outlays. Source: CBO.

Yikes!

  • Education/retraining
  • Infrastructure/transportation
  • Veterans benefits
  • Income security
  • Medical research/health
  • International affairs
  • Agriculture
  • Science/space/technology
  • Community/regional development
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  • Current Fiscal Policy:
  • Fueling economic activity at a time the Fed is trying to slow.
  • Limiting options for fiscal intervention in a down economy.
  • Contributing to a massive debt build-up.
  • Increasing the government’s interest costs and limiting future funding for infrastructure spending, education spending.
  • Reducing national saving and income in the long term.
  • It Gets Worse: Next Decade’s Deficits:
  • Rising from 4% to nearly 5% of GDP
  • Annual Deficit Consistent with Stable or Falling Debt to GDP Ratio: ~2% of GDP
  • So must reduce future deficits by ~3% of GDP
  • 3% of GDP is about equal to:
  • All defense spending
  • All discretionary-non-defense spending
  • What to do? Decrease spending? Increase taxes?
  • Failure to act shifts more spending to debt service and limits choices/ policy options in the future

The Long-Term Deficit Problem

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$29,952 $1,800 $2,340 $257 $83

US Banks US CUs- JCT Est. US CUs - OMB Est. FL Banks FL CUs

Foregone Federal Income Tax Revenue

Arising from Tax Status & 2017 Tax Reform

Millions of Dollars. Source: FDIC, JCT, NCUA, CUNA.

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$3 $3 $22 $44 $46 $65 $32 $31 $11 $3

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q1

Total U.S. Fines & Settlements for the 18 Largest Domestic and European Banks

Billions of Dollars. Source: Barclays and Capital Performance Group. Totals include only fines of $50 Million+ $260.4 Billion since 2009!

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CUNA Economic Update is sponsored by