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Purpose. Passion. Performance.Purpose. Passion. Performance.
Trusco Capital Management, Inc.
Economic Update and Outlook
M...
FGFOA May 23, 2007FGFOA May 23, 200722 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Outline
♦ Economy...
FGFOA May 23, 2007FGFOA May 23, 200733 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Composite Index o...
FGFOA May 23, 2007FGFOA May 23, 200744 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Real GDP - 3.4% T...
FGFOA May 23, 2007FGFOA May 23, 200755 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Real Personal Con...
FGFOA May 23, 2007FGFOA May 23, 200766 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
All Employees: To...
FGFOA May 23, 2007FGFOA May 23, 200777 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Retail Sales & Fo...
FGFOA May 23, 2007FGFOA May 23, 200788 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Domestic Light Ve...
FGFOA May 23, 2007FGFOA May 23, 200799 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Real Private Nonr...
FGFOA May 23, 2007FGFOA May 23, 20071010 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Real Private Re...
FGFOA May 23, 2007FGFOA May 23, 20071111 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Housing Starts:...
FGFOA May 23, 2007FGFOA May 23, 20071212 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
NAR Median Sale...
FGFOA May 23, 2007FGFOA May 23, 20071313 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
New 1-Family Ho...
FGFOA May 23, 2007FGFOA May 23, 20071414 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Real Gross Priv...
FGFOA May 23, 2007FGFOA May 23, 20071515 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Corporate Profi...
FGFOA May 23, 2007FGFOA May 23, 20071616 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
ISM Mfg: Produc...
FGFOA May 23, 2007FGFOA May 23, 20071717 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
ISM Mfg: New Or...
FGFOA May 23, 2007FGFOA May 23, 20071818 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Inventories: To...
FGFOA May 23, 2007FGFOA May 23, 20071919 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Mfrs' New Order...
FGFOA May 23, 2007FGFOA May 23, 20072020 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
MH + XH
1970=10...
FGFOA May 23, 2007FGFOA May 23, 20072121 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Exports: Goods ...
FGFOA May 23, 2007FGFOA May 23, 20072222 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Imports: Goods ...
FGFOA May 23, 2007FGFOA May 23, 20072323 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Foreign Exchang...
FGFOA May 23, 2007FGFOA May 23, 20072424 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
TMMCCMA / TMMCN...
FGFOA May 23, 2007FGFOA May 23, 20072525 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Real Government...
FGFOA May 23, 2007FGFOA May 23, 20072626 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Federal Surplus...
FGFOA May 23, 2007FGFOA May 23, 20072727 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
PCE less Food &...
FGFOA May 23, 2007FGFOA May 23, 20072828 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
U.S. Retail Gas...
FGFOA May 23, 2007FGFOA May 23, 20072929 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Composite Index...
FGFOA May 23, 2007FGFOA May 23, 20073030 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Composite Index...
FGFOA May 23, 2007FGFOA May 23, 20073131 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Federal Funds [...
FGFOA May 23, 2007FGFOA May 23, 20073232 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Total Employmen...
FGFOA May 23, 2007FGFOA May 23, 20073333 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Total Unemploym...
FGFOA May 23, 2007FGFOA May 23, 20073434 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Total Building ...
FGFOA May 23, 2007FGFOA May 23, 20073535 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Florida Economi...
FGFOA May 23, 2007FGFOA May 23, 20073636 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Florida Economi...
FGFOA May 23, 2007FGFOA May 23, 20073737 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Florida Economi...
FGFOA May 23, 2007FGFOA May 23, 20073838 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Florida Economi...
FGFOA May 23, 2007FGFOA May 23, 20073939 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Florida Economi...
FGFOA May 23, 2007FGFOA May 23, 20074040 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
2007: Slower Gr...
FGFOA May 23, 2007FGFOA May 23, 20074141 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
-30%
-20%
-10%
...
FGFOA May 23, 2007FGFOA May 23, 20074242 || Trusco Capital Management, Inc.Trusco Capital Management, Inc.
Outlook
♦ Econo...
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  • Transcript of "Purpose. Passion. Performance. Trusco Capital Management, Inc."

    1. 1. Purpose. Passion. Performance.Purpose. Passion. Performance. Trusco Capital Management, Inc. Economic Update and Outlook May 23, 2007 Alan M. Gayle Senior Investment Strategist Director of Asset Allocation 804-782-5273 alan.gayle@truscocapital.com This perspective was prepared for clients and prospective clients of Trusco Capital Management, Inc. Neither Trusco Capital or any affiliates make any representation or warranties as to the accuracy or merit of this analysis for individual use. Past returns are not indicative of future results. Comments and general market related projections were based on information available at the time of writing, are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm, and may not be relied upon for future investing. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions.
    2. 2. FGFOA May 23, 2007FGFOA May 23, 200722 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Outline ♦ Economy losing momentum. ♦ How fast can the consumer grow? ♦ Housing market blues. ♦ Businesses are profitable but slowing as well. ♦ The importance of trade. ♦ Federal deficit. ♦ What’s up / down with inflation? ♦ Fed policy perspectives. ♦ Comments on the Florida economy. ♦ The outlook.
    3. 3. FGFOA May 23, 2007FGFOA May 23, 200733 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Composite Index of 10 Leading Indicators % Change - Year to Year 1996=100 Composite Index of 10 Leading Indicators 1996=100 0706050403020100 Source: The Conference Board /Haver Analytics 10.0 7.5 5.0 2.5 0.0 -2.5 -5.0 140 135 130 125 120 115 110 Economy losing momentum Leading Indicators Index Leading Indicators (YOY %)
    4. 4. FGFOA May 23, 2007FGFOA May 23, 200744 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Real GDP - 3.4% Trend Since 1961 Real Gross Domestic Product % Change - Year to Year SAAR, Bil.Chn.2000$ Real GDP - 3.4% Trend Since 1961 YOY% Change 05009590858075 Source: Bureau of Economic Analysis /Haver Analytics 10.0 7.5 5.0 2.5 0.0 -2.5 -5.0 10.0 7.5 5.0 2.5 0.0 -2.5 -5.0 Real GDP (YOY%)
    5. 5. FGFOA May 23, 2007FGFOA May 23, 200755 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Real Personal Consumption Expenditures % Change - Year to Year SAAR, Bil.Chn.2000$ Real PCE - 3.6% Trend Since 1961 Proportion of Real GDP (Line) & YOY% Rel. to 61-05 Trend (Bar) 05009590858075 8 6 4 2 0 -2 0.72 0.70 0.68 0.66 0.64 Real PCE - 3.6% Trend Since 1961 Real Personal Consumption Expenditures as Proportion of GDP Real Personal Consumption Expenditures (YOY%) Sources: BEA, Trusco Capital
    6. 6. FGFOA May 23, 2007FGFOA May 23, 200766 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. All Employees: Total Nonfarm Difference - Period to Period SA, Thous Average Hourly Earnings: Total Private Industries % Change - Year to Year SA, $/Hour 0706050403020100 Source: Bureau of Labor Statistics /Haver Analytics 600 400 200 0 -200 -400 4.5 4.0 3.5 3.0 2.5 2.0 1.5 Job Creation Positive but Weaker Average Hourly Earnings (YOY%) All Employees: Total Nonfarm (Monthly Change 000s)
    7. 7. FGFOA May 23, 2007FGFOA May 23, 200777 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Retail Sales & Food Services % Change - Year to Year SA, Mil.$ University of Michigan: Consumer Sentiment NSA, Q1-66=100 0706050403020100 Sources: Census Bureau/Haver Analytics, University of Michigan 10 8 6 4 2 0 -2 112.5 105.0 97.5 90.0 82.5 75.0 67.5 Post-Easter Sales & Sentiment Weaker Retail Sales & Food Services (YOY%) University of Michigan: Consumer Sentiment
    8. 8. FGFOA May 23, 2007FGFOA May 23, 200788 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Domestic Light Vehicle Sales 12-month MovingAverage SAAR, Mil.Units Light Weight Vehicle Sales {Autos+Light Trucks} 12-month MovingAverage SAAR, Mil.Units 0500959085807570 Source: Bureau of Economic Analysis/Haver Analytics 18 16 14 12 10 8 6 18 16 14 12 10 8 6 Auto Sales Softening Domestic Light Vehicle Sales (SAAR, Mil.) Domestic Light Vehicle Sales (SAAR, Mil.)
    9. 9. FGFOA May 23, 2007FGFOA May 23, 200799 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Real Private Nonresidential Investment: Structures % Change - Year to Year SAAR, Bil.Chn.2000$ Structures: 1.6% Trend Since 1961 Proportion of GPDI (Line) & YOY% Rel. to 61-05 Trend (Bar) 05009590858075 22.5 15.0 7.5 0.0 -7.5 -15.0 -22.5 0.5 0.4 0.3 0.2 0.1 Real Structures Investment – 1.6% Trend Since 1961 Real Structures Investment as a Proportion of GDP Real Structures Investment (YOY%) Sources: BEA, Trusco Capital
    10. 10. FGFOA May 23, 2007FGFOA May 23, 20071010 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Real Private Residential Investment % Change - Year to Year SAAR, Bil.Chn.2000$ Residential - 3.0% Trend Since 1961 Proportion of GPDI (Line) & YOY% Rel. to 61-05 Trend (Bar) 05009590858075 60 40 20 0 -20 -40 0.50 0.45 0.40 0.35 0.30 0.25 Real Residential – 3.0% Trend Since 1961 Real Residential Investment as a Proportion of GDP Real Residential Investment (YOY%) Sources: BEA, Trusco Capital
    11. 11. FGFOA May 23, 2007FGFOA May 23, 20071111 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Housing Starts: 1 Unit SAAR, Thous.Units HX1US + HN1US thous 0706050403020100999897 2000 1800 1600 1400 1200 1000 8250 7500 6750 6000 5250 4500 Housing Market Soft New + Existing Home Sales (000s) Housing Starts (000s) Sources: NAR, Census
    12. 12. FGFOA May 23, 2007FGFOA May 23, 20071212 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. NAR Median Sales Price: Existing 1-Family Homes, United States % Change - Year to Year $ New 1-Family Houses For Sale: Months Supply SA, Ratio 05009590858075 Sources: National Association of Realtors, Census Bureau /Haver Analytics 20 15 10 5 0 -5 12 10 8 6 4 2 Excess Supply Caused Weak Pricing New 1-Family Houses For Sale: Months Supply Existing 1-Family Home Median Sales Price (YOY %)
    13. 13. FGFOA May 23, 2007FGFOA May 23, 20071313 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. New 1-Family Houses For Sale: Months Supply SA, Ratio Composite Housing Affordability Index Median Inc=Qualifying Inc=100 0706050403020100999897 Sources: Census Bureau, National Association of Realtors /Haver Analytics 9 8 7 6 5 4 3 142.5 135.0 127.5 120.0 112.5 105.0 97.5 Excess Supply / Softer Prices / Greater Affordability Housing Affordability Index New 1-Family Houses for Sale (Months Supply)
    14. 14. FGFOA May 23, 2007FGFOA May 23, 20071414 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Real Gross Private Domestic Investment % Change - Year to Year SAAR, Bil.Chn.2000$ Real GPDI - 4.8% Trend Since 1961 Proportion of Real GDP (Line) & YOY% Rel. to 61-05 Trend (Bar) 05009590858075 60 40 20 0 -20 -40 0.20 0.18 0.16 0.14 0.12 0.10 Real GPDI - 4.8% Trend Since 1961 Real Gross Private Domestic Investment as a Proportion of GDP Real Gross Private Domestic Investment (YOY%) Sources: BEA, Trusco Capital
    15. 15. FGFOA May 23, 2007FGFOA May 23, 20071515 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Corporate Profits with IVA and CCAdj % Change - Year to Year SAAR, Bil.$ Corporate Profits Growth and Willingness to Hire ISM Employ. Index (Line) & Corp. Profits w/IVA & CCA (YOY%-Bar) 0500959085 Sources: BEA, ISM /Haver 40 30 20 10 0 -10 -20 67.5 60.0 52.5 45.0 37.5 30.0 22.5 Company Profits Growth Suggests Strength ISM Employ. Index Corporate Profits with IVA and CCAdj (YOY%)
    16. 16. FGFOA May 23, 2007FGFOA May 23, 20071616 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. ISM Mfg: Production Index SA, 50+ = Econ Expand Production Firmed Post-Hurricanes but Off Highs Ind. Prod. (YOY%-Line) ISM Production (Bar) 0500959085 Sources: ISM, FRB /Haver 90 80 70 60 50 40 30 16 12 8 4 0 -4 -8 Production Growing More Slowly Industrial Production (YOY%) ISM Mfg: Production Index
    17. 17. FGFOA May 23, 2007FGFOA May 23, 20071717 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. ISM Mfg: New Orders Index SA, 50+ = Econ Expand Orders Firm but Off Highs N-D Capital Gds X-Aircraft (YOY%-Line) ISM Orders Survey (Bar) 0706050403020100999897969594 Sources: Institute for Supply Management, Census Bureau /Haver Analytics 75.0 67.5 60.0 52.5 45.0 37.5 30 20 10 0 -10 -20 -30 New Orders Picking Up Slightly N-D Capital Gds X- Aircraft (YOY%-Line) ISM Mfg: New Orders Index
    18. 18. FGFOA May 23, 2007FGFOA May 23, 20071818 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Inventories: Total Business % Change - Year to Year EOP, SA, Mil.$ Inventory Growth Off Highs and I/S Ratio at Lows Inventories (YOY%-Light) & Inventory/Sales Ratio (Dark) 0500959085 Source: Census Bureau/Haver Analytics 16 12 8 4 0 -4 -8 1.8 1.7 1.6 1.5 1.4 1.3 1.2 Inventories Low, but Additional Trimming Likely Inventory/Sales Ratio Inventories: Total Business (YOY%)
    19. 19. FGFOA May 23, 2007FGFOA May 23, 20071919 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Mfrs' New Orders: Nondefense Capital Goods ex Aircraft % Change - Year to Year SA, Mil.$ Mfrs' Inventory/Sales Ratio: All Manufacturing Industries SA 0706050403020100999897 Sources: Census Bureau, Census Bureau/Haver Analytics 30 20 10 0 -10 -20 -30 1.45 1.40 1.35 1.30 1.25 1.20 1.15 New Orders Slowing / Inventories Higher Inventory / Sales Ratio Orders for Nondefense Capital Goods ex Aircraft (YOY%)
    20. 20. FGFOA May 23, 2007FGFOA May 23, 20072020 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. MH + XH 1970=100 Real Gross Domestic Product 1970=100 0500959085807570 1000 800 600 400 200 0 1000 800 600 400 200 0 Trade Expanded from 10% to 30% of GDP! Real GDP (1970=100) Real Imports + Real Exports (1970=100) Source: BEA
    21. 21. FGFOA May 23, 2007FGFOA May 23, 20072121 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Exports: Goods and Services, BOP Basis % Change - Year to Year SA, Mil.$ Trade Deficit Wider but Export Growth Healthy Deficit (Mo. $Bil.-Dark) and Export Growth (YOY%-Light) 070605040302010099989796 Source: Census Bureau /Haver Analytics 20 10 0 -10 -20 0 -20000 -40000 -60000 -80000 Trade Deficit Wider but Export Growth Healthy Deficit (Mo. $Bil.) Exports: Goods and Services, BOP Basis (YOY%)
    22. 22. FGFOA May 23, 2007FGFOA May 23, 20072222 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Imports: Goods and Services, BOP Basis % Change - Year to Year SA, Mil.$ Exports Growing Faster in Percentage Terms YOY%: Exports (Dark) Imports (Light) 070605040302010099989796 Source: Census Bureau /Haver Analytics 30 20 10 0 -10 -20 30 20 10 0 -10 -20 Exports Growing Faster in Percentage Terms Exports (YOY%) Imports (YOY%)
    23. 23. FGFOA May 23, 2007FGFOA May 23, 20072323 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Foreign Exchange Rate: People's Republic of China EOP, Yuan/US$ Nominal Trade-Weighted Exch Value of US$ vs Major Currencies Mar-73=100 05009590858075 Source: Federal Reserve Board /Haver Analytics 10 8 6 4 2 0 160 140 120 100 80 60 Dollar Weaker but Not Against Yuan Nominal Trade-Weighted Exchange Value of US$ vs. Major Currencies People's Republic of China Yuan/US$
    24. 24. FGFOA May 23, 2007FGFOA May 23, 20072424 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. TMMCCMA / TMMCN 12-month MovingAverage China Imports Now Nearly 15% of Total China Imports % Total Imports (12-month Moving Avg.) 0500959085 0.20 0.16 0.12 0.08 0.04 0.00 0.20 0.16 0.12 0.08 0.04 0.00 China Imports Now 16% of Total China Imports / Total Imports (12-month Moving Avg.) Source: BEA
    25. 25. FGFOA May 23, 2007FGFOA May 23, 20072525 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Real Government Consumption Expenditures & Gross Investment % Change - Year to Year SAAR, Bil.Chn.2000$ Real Gov't. Spending - 2.3% Trend Since 1961 Proportion of Real GDP (Line) & YOY% Rel. to 61-05 Trend (Bar) 05009590858075 10 8 6 4 2 0 -2 0.250 0.225 0.200 0.175 0.150 Real Gov't. Spending - 2.3% Trend Since 1961 Real Government Consumption Expenditures & Gross Investment as Proportion of GDP Real Government Consumption Expenditures & Gross Investment (YOY%) Sources: BEA, Trusco Capital
    26. 26. FGFOA May 23, 2007FGFOA May 23, 20072626 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Federal Surplus {+} or Deficit {-} 12-month MovingTotal-ann Mil.$ Increased Reciepts Helping to Trim a Large Federal Deficit 12-mo. Mov. Total: Receipts (Line) and Deficit (Bar) 070605040302010099989796959493 Source: U.S. Treasury /Haver Analytics 400000 200000 0 -200000 -400000 -600000 2800000 2400000 2000000 1600000 1200000 800000 Increased Receipts Trimming a Large Federal Deficit Receipts: 12-mo. Mov. Total Federal Surplus {+} or Deficit {-} (12-month Moving Total Mil.$)
    27. 27. FGFOA May 23, 2007FGFOA May 23, 20072727 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. PCE less Food & Energy: Chain Price Index % Change - Year to Year SA, 2000=100 CPI-U: All Items % Change - Year to Year NSA, 1982-84=100 0706050403020100999897 Sources: BEA, BLS /Haver 5.25 4.50 3.75 3.00 2.25 1.50 0.75 5.25 4.50 3.75 3.00 2.25 1.50 0.75 Inflation Too High but Moderating CPI (YOY%) Core PCE (YOY%)
    28. 28. FGFOA May 23, 2007FGFOA May 23, 20072828 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. U.S. Retail Gasoline Price: All Formulations EOP, Cents/Gallon Spot Oil Price: West Texas Intermediate [Prior'82=Posted Price] $/Barrel 0706050403020100999897 Sources: Department of Energy, Wall Street Journal /Haver Analytics 320 280 240 200 160 120 80 80 60 40 20 0 Energy Prices: Inflationary or Restraining Force? WTI Oil ($/Barrel) Retail Gasoline Price (Cents/Gallon)
    29. 29. FGFOA May 23, 2007FGFOA May 23, 20072929 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Composite Index of 4 Coincident Indicators % Change - Year to Year 1996=100 FCM10 - FFED 05009590858075 7.5 5.0 2.5 0.0 -2.5 -5.0 -7.5 7.5 5.0 2.5 0.0 -2.5 -5.0 -7.5 Behind the Math: A Closer Look at the Yield Curve 10-Yr. Treasury Yield – Federal Funds Rate (%) Composite Index of 4 Coincident Indicators (YOY%) Sources: Conference Board, FRB
    30. 30. FGFOA May 23, 2007FGFOA May 23, 20073030 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Composite Index of 4 Coincident Indicators % Change - Year to Year 1996=100 FBAA - FAAA 05009590858075 7.5 5.0 2.5 0.0 -2.5 -5.0 2.8 2.4 2.0 1.6 1.2 0.8 0.4 Credit Still Ample: Private Equity “Put” Corporate BAA Yield – Corporate AAA Yield (Inverted Scale) Composite Index of 4 Coincident Indicators (YOY%) Sources: Conference Board, FRB
    31. 31. FGFOA May 23, 2007FGFOA May 23, 20073131 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Federal Funds [effective] Rate % p.a. 05009590858075 Source: Federal Reserve Board /Haver Analytics 20 16 12 8 4 0 20 16 12 8 4 0 Absolute Rate Levels Remain Historically Low Federal Fund Rate (%)
    32. 32. FGFOA May 23, 2007FGFOA May 23, 20073232 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Total Employment Growth -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0US FloridaCapeCoralOrlandoFt.W alton Naples Jacksonville Ocala Ft.LauderdaleLakelandSarasota PanamaCityGainesville W estPalm Beach TampaTallahasee PuntaGorda MiamiSebastian PortSt.LuciePalm BayPensacola National Average 1.4
    33. 33. FGFOA May 23, 2007FGFOA May 23, 20073333 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Total Unemployment Rate 0 1 2 3 4 5 US FloridaSebastian PortSt.Lucie PuntaGordaLakeland OcalaPalm Bay WestPalm Beach PanamaCityCapeCoralTampa Miami JacksonvillePensacola NaplesSarasotaOrlando Ft.Lauderdale TallahasseeGainesvilleFt.Walton National Average 4.4
    34. 34. FGFOA May 23, 2007FGFOA May 23, 20073434 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Total Building Permits -100 -80 -60 -40 -20 0 U SFlorida W estPalm Beach Lakeland Sarasota Punta G orda C ape Coral PortSt.Lucie Palm Bay SebastianN aplesM iam iTam pa Panam a C ityO cala JacksonvilleO rlando G ainesville Tallahassee Pensacola Ft.W alton Ft.Lauderdale National Average -25.2
    35. 35. FGFOA May 23, 2007FGFOA May 23, 20073535 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Florida Economic Update - 1 U. S. Florida Cape Coral Ft. Lauderdale Ft. Walton Gainesville Establishment Employment (Ths, SA) Total Employment 1.4 1.7 3.4 2.2 2.7 1.8 Natural Resources & Mining 6.9 -1.5 na 2.2 -4.5 na Construction 0.0 0.5 na -0.1 na na Manufacturing -0.8 -1.6 -3.1 2.2 na 4.7 Trade, Transportation, & Utilities 0.8 1.0 3.9 1.3 2.4 1.6 Retail Trade 0.1 0.8 3.5 1.3 0.4 1.2 Wholesale Trade 1.6 2.3 6.8 1.7 -0.6 0.1 Transportation & Utilities 1.9 -0.3 2.6 3.4 0.1 7.6 Information Services 0.8 -0.5 -0.3 -4.3 11.4 -4.9 Financial Services 1.6 1.3 0.3 -0.5 0.2 4.2 Professional & Business Services 2.4 2.8 6.6 1.3 1.0 5.9 Education & Health Services 2.7 3.0 2.5 0.1 4.5 0.9 Leisure & Hospitality Services 3.3 1.9 7.5 1.6 2.1 2.6 Other Services 0.8 4.4 5.3 2.1 4.2 3.5 Government 1.3 1.8 3.7 3.7 1.6 0.4 Unemployment Rate (%, SA) 4.4 3.3 3.3 3.0 2.4 2.6 Total Residential Permits (# of units YTD, NSA) -25.2 -52.7 -65.0 2.5 3.0 -30.9 Single-family, (# of units YTD, NSA) -27.1 -57.0 -66.6 -48.6 -52.2 -46.3 Multifamily, (# of units YTD, NSA) -13.3 -40.2 -61.1 -43.5 -54.3 56.1 5 +, (# of units YTD, NSA) -21 -41.4 -60.5 -52.7 -45.9 56.1
    36. 36. FGFOA May 23, 2007FGFOA May 23, 20073636 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Florida Economic Update - 2 U. S. Florida Jacksonville Lakeland Miami Naples Establishment Employment (Ths, SA) Total Employment 1.4 1.7 2.4 2.1 1.2 2.7 Natural Resources & Mining 6.9 -1.5 -25.1 na 9.2 na Construction 0.0 0.5 3.2 na 6.1 na Manufacturing -0.8 -1.6 -2.9 -4.2 -3.5 1.0 Trade, Transportation, & Utilities 0.8 1.0 1.8 0.9 1.1 0.4 Retail Trade 0.1 0.8 1.5 1.5 1.4 1.5 Wholesale Trade 1.6 2.3 0.0 1.0 1.9 0.0 Transportation & Utilities 1.9 -0.3 4.4 -0.5 -0.3 -11.0 Information Services 0.8 -0.5 -1.1 0.4 -3.0 1.6 Financial Services 1.6 1.3 0.5 1.1 3.2 1.6 Professional & Business Services 2.4 2.8 4.2 4.4 2.2 0.3 Education & Health Services 2.7 3.0 4.8 4.0 0.8 1.1 Leisure & Hospitality Services 3.3 1.9 4.6 3.2 1.0 4.5 Other Services 0.8 4.4 2.7 2.0 2.0 -0.5 Government 1.3 1.8 1.3 4.3 0.4 6.5 Unemployment Rate (%, SA) 4.4 3.3 3.3 3.7 3.3 3.1 Total Residential Permits (# of units YTD, NSA) -25.2 -52.7 -37.1 -77.2 -54.7 -58.1 Single-family, (# of units YTD, NSA) -27.1 -57.0 -51.8 -70.4 -61.3 -66.6 Multifamily, (# of units YTD, NSA) -13.3 -40.2 12.0 -97.6 -48.5 -42.2 5 +, (# of units YTD, NSA) -21 -41.4 6.2 -98.7 -49.1 -27.7
    37. 37. FGFOA May 23, 2007FGFOA May 23, 20073737 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Florida Economic Update - 3 U. S. Florida Ocala Orlando Palm Bay Panama City Establishment Employment (Ths, SA) Total Employment 1.4 1.7 2.4 3.1 0.1 1.9 Natural Resources & Mining 6.9 -1.5 na 0.0 na na Construction 0.0 0.5 na 2.6 na na Manufacturing -0.8 -1.6 -1.6 3.3 -1.8 7.4 Trade, Transportation, & Utilities 0.8 1.0 1.0 1.6 0.2 2.9 Retail Trade 0.1 0.8 0.6 1.6 0.0 1.6 Wholesale Trade 1.6 2.3 4.1 1.0 3.2 5.4 Transportation & Utilities 1.9 -0.3 -1.3 2.6 -2.6 8.0 Information Services 0.8 -0.5 3.0 2.6 -0.8 0.5 Financial Services 1.6 1.3 -0.7 1.0 -0.2 1.2 Professional & Business Services 2.4 2.8 6.5 5.3 -2.1 -3.5 Education & Health Services 2.7 3.0 4.3 4.0 3.9 3.0 Leisure & Hospitality Services 3.3 1.9 -0.3 3.1 3.0 7.9 Other Services 0.8 4.4 5.0 3.8 1.0 1.9 Government 1.3 1.8 3.3 3.5 2.5 1.7 Unemployment Rate (%, SA) 4.4 3.3 3.6 3.1 3.6 3.4 Total Residential Permits (# of units YTD, NSA) -25.2 -52.7 -38.3 -33.9 -61.3 -46.2 Single-family, (# of units YTD, NSA) -27.1 -57.0 -54.0 -48.9 -54.8 -41.2 Multifamily, (# of units YTD, NSA) -13.3 -40.2 127.1 51.3 -78.2 -48.2 5 +, (# of units YTD, NSA) -21 -41.4 103.6 78.6 -80.2 -44.9
    38. 38. FGFOA May 23, 2007FGFOA May 23, 20073838 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Florida Economic Update - 4 U. S. Florida Pensacola Port St. Lucie Punta Gorda Sarasota Establishment Employment (Ths, SA) Total Employment 1.4 1.7 -0.1 0.4 1.2 2.0 Natural Resources & Mining 6.9 -1.5 na na na na Construction 0.0 0.5 na na na na Manufacturing -0.8 -1.6 -1.5 0.0 0.2 -1.1 Trade, Transportation, & Utilities 0.8 1.0 -1.0 -1.4 4.0 0.0 Retail Trade 0.1 0.8 -2.5 -2.2 4.5 0.2 Wholesale Trade 1.6 2.3 3.9 -1.0 0.0 2.2 Transportation & Utilities 1.9 -0.3 0.0 1.8 0.7 -6.2 Information Services 0.8 -0.5 -5.2 -3.7 -0.2 6.2 Financial Services 1.6 1.3 4.2 1.2 0.1 1.7 Professional & Business Services 2.4 2.8 -3.0 -2.9 -2.0 3.6 Education & Health Services 2.7 3.0 3.7 3.2 2.2 3.2 Leisure & Hospitality Services 3.3 1.9 -0.5 -3.4 -1.3 0.2 Other Services 0.8 4.4 2.5 0.1 3.5 6.6 Government 1.3 1.8 0.5 4.4 2.5 3.3 Unemployment Rate (%, SA) 4.4 3.3 3.3 4.4 3.9 3.1 Total Residential Permits (# of units YTD, NSA) -25.2 -52.7 13.2 -64.7 -65.5 -72.5 Single-family, (# of units YTD, NSA) -27.1 -57.0 -20.5 -70.9 -62.3 -73.8 Multifamily, (# of units YTD, NSA) -13.3 -40.2 387.7 14.6 -74.8 -68.9 5 +, (# of units YTD, NSA) -21 -41.4 631.4 71.3 -81.4 -73.7
    39. 39. FGFOA May 23, 2007FGFOA May 23, 20073939 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Florida Economic Update - 5 U. S. Florida Sebastian Tallahassee Tampa West Palm Beach Establishment Employment (Ths, SA) Total Employment 1.4 1.7 1.1 1.3 1.5 1.8 Natural Resources & Mining 6.9 -1.5 na na -33.5 1.3 Construction 0.0 0.5 na na 0.3 3.3 Manufacturing -0.8 -1.6 2.9 -0.1 -2.1 -0.9 Trade, Transportation, & Utilities 0.8 1.0 3.1 4.0 0.2 1.8 Retail Trade 0.1 0.8 3.6 4.7 0.6 1.7 Wholesale Trade 1.6 2.3 -0.1 0.9 1.1 3.8 Transportation & Utilities 1.9 -0.3 0.5 2.9 -3.0 -1.5 Information Services 0.8 -0.5 -14.5 -7.6 1.1 2.2 Financial Services 1.6 1.3 4.9 1.6 1.2 1.5 Professional & Business Services 2.4 2.8 -1.9 -4.1 2.7 1.4 Education & Health Services 2.7 3.0 2.6 1.6 2.0 1.4 Leisure & Hospitality Services 3.3 1.9 2.3 1.6 2.4 2.8 Other Services 0.8 4.4 0.2 8.7 7.1 3.5 Government 1.3 1.8 4.6 1.4 1.2 0.9 Unemployment Rate (%, SA) 4.4 3.3 4.9 2.8 3.3 3.6 Total Residential Permits (# of units YTD, NSA) -25.2 -52.7 -60.0 -29.1 -51.0 -81.4 Single-family, (# of units YTD, NSA) -27.1 -57.0 -58.1 -29.6 -63.7 -72.6 Multifamily, (# of units YTD, NSA) -13.3 -40.2 -76.1 -27.9 1.7 -90.6 5 +, (# of units YTD, NSA) -21 -41.4 -91.9 -37.2 0.2 -92.4
    40. 40. FGFOA May 23, 2007FGFOA May 23, 20074040 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. 2007: Slower Growth with Moderating Inflation Economic momentum slowing due to weak housing and slowing profits growth. Moderate job gains are the key driver at present. Fed policy currently steady due to uncomfortable inflation levels, but ease is possible if slower growth persists. The dollar is expected to remain under downward pressure over the near-term. 5/18/07 Cycle Position Short Trend Intermediate Trend Comments Consumer Fading Fading At Risk Weak housing and recent energy price rise dampening spending and consumer sentiment. Job growth is key driver of consumer strength. Capital Spending High Fading Neutral Slower profits growth after extended period of above-average gains likely to curb pace of future investment despite high cash positions. Dollar Low Weaker Weaker / Neutral Weaker domestic growth and the possibility of Fed ease contrasts with firm growth and more restrictive monetary policies overseas. Inflation Stable / Slightly Lower Core Peaking Core Moderately Lower Core inflation above 2% remains a policy concern, driven by tighter capacity and higher unit labor costs. Slower growth expected to curb core inflation later this year. Monetary Policy Moderately Restrictive Moderately Restrictive Restrictive / Neutral Fed on hold at 5 ¼% following 17 rate hikes since 6/30/04. Anti-inflation rhetoric continuing and “data- dependent” policy approach likely to keep markets volatile near term. Fed focus may have to shift to sustaining growth if recent softness persists. Ease possible later in 2007. Fiscal Policy Neutral Neutral Neutral / Stimulative Tax revenues enjoying strong cyclical growth, offset in part by addition to war costs. 2008 presidential race likely to generate new spending proposals. This perspective was prepared for clients and prospective clients of Trusco Capital Management, Inc. Neither Trusco or any affiliations make any representation or warranties as to the accuracy or merit of this analysis for individual use. Past returns are not indicative of future results. Comments and projections were based on information available at the time of writing, are for informational purposes only, are not intended as individual or specific advice, and may not be relied upon for future investing. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions.
    41. 41. FGFOA May 23, 2007FGFOA May 23, 20074141 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. -30% -20% -10% 0% 10% 20% 30% 40% 90 92 94 96 98 00 02 04 06 0 5 10 15 20 25 30 35 Actual Forecast 0 2 4 6 8 10 90 92 94 96 98 00 02 04 06 08 Actual Forecast -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 90 92 94 96 98 00 02 04 06 08 Actual Forecast Perspectives on Growth, Inflation, Profits, & Rates Real GDP (YOY%) S&P 500 Op. EPS (YOY%) Fed Funds (%) CPI (YOY%) Trailing P/E Ratio 10-Yr. Treas. (%) Sources: Trusco, BEA, FRB, S&P, Blue Chip Financial Forecasts
    42. 42. FGFOA May 23, 2007FGFOA May 23, 20074242 || Trusco Capital Management, Inc.Trusco Capital Management, Inc. Outlook ♦ Economic growth expected to continue at a sub-average pace. Recession probability higher but less than 50/50. Job growth is the key economic driver currently. ♦ We expect housing will remain soft into 2008 and we are monitoring the potential for contagion into other areas of the economy. Overall, we believe the pace of consumer spending will soften a bit further. ♦ CAPEX growth is likely to slow as well due to slower profits growth. Lower, more realistic corporate earnings forecasts have reduced some valuation risks. Fed policy is on hold, but could shift toward ease if economic momentum continues to slide. ♦ Core inflation remains a focus for policymakers, but is likely to trend somewhat lower this year. ♦ “Data-dependent” / “Forecast-dependent” - Economic volatility around slower growth rates will help generate market volatility. ♦ Florida has enjoyed above average growth, but the current housing stress is likely to negatively impact revenue growth.
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