US and Global Economic Review & Forecast 2010

Client-tailored solutions for what’s next
Economic Review and
Forecast
Summary presentation of
e-forecasting.com’s outlook for US
and global economic conditions
Friday, October 15th
, 2010

Client-tailored solutions for what’s next 01/30/15
2
Presentation Agenda
 Overview of recession/rebound
 Snapshot of current economic
climate: stagnation?
 Future outlook
 Q&A

3

4
Stagnation Nation?
 European style high unemployment
 Where is US economic dynamism?
 Good, Bad & Ugly Policies?
 Major Risks

5
Personal Income from
Working Declines

6
Policy-Makers, Advisers & the
Economy
 The British Keynesian Recipes
• Business is the problem, Government is the
solution
 The American “School” (Monetarism)
– Government is the problem, private sector is
inherently stable

7
Policy-Makers, Advisers & the
Economy
 Effectiveness of Policies
 Peoples reaction & behavior
 Permanent Policies vs. Transitory
(Las Vegas style) policies
 Income or Wealth (assets) drives
behavior

8
Current Risks
 Ineffectiveness of low interest rates
 Deficits, Debts and Fear – The Greek
experience
 Running out of “others money”
 Free fall of the Dollar, panic, high
interest rates, a “real” depression
 Inflate the economy, fooling workers
and fixing the budget

9

10
Free Falling: US Dollar Decline

11
Fed in a printing mode again

12
Real-Time Look @ Economy NOW
 What is happening RIGHT now with
the economy
– US monthly GDP, current macro
components, policies, etc

13
Real Time Monthly GDP
• e-forecasting estimates US
monthly GDP increased 0.8%
in September to $13,243B,
after going up 2.4% in August
• Annual growth rate in the third
quarter is estimated to be 1%
• Six-month growth rate, which
signals confirmation of turning
points, went up 1.8% in
September, after going up
2.1% in August
$12,900
$13,000
$13,100
$13,200
$13,300
J F M Q1 A M J Q2 J A S Q3
Monthly GDP Up in September
BEA, Quarterly e-forecasting, Monthly

Growth in Monthly GDP
 Looking @ growth
rate, can see depth
of previous
recession, upswing,
and now stalling of
economy
 When negative,
recession; when
positive, expansion
14
-8.0
-4.0
0.0
4.0
8.0
12.0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
%
Growth in U.S. MonthlyGDP
NBER-Defined U.S. Recessions
Six-Month Growth Rate Smoothed, Annualized
Long-Term Growth Rate: 3.3%

Historical View
Taking the current
recession in
context over a
long history, we
can see how deep
the recession was
as well as the
length (solid fill)
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Billions
Monthly GDP & the Business Cycle
NBER-Defined U.S. Recessions
Real GDP, at Seasonally Adjusted Annual Rates (SAAR)

Q3 will be slower than Q2
Looking @ table, we see Q3 has slower growth which will
be the new trend
Chained $2005 annual % change annual % change annual % change MA3
SAAR*, Billions from quarter ago from month ago from 3 months ago**
2009 September $12,860.8 1.6% $12,907.1 ▲ 4.6% 1.6%
2009 October $12,944.0 ▲ 3.5% 3.1%
2009 November $13,040.0 ▲ 9.3% 4.7%
2009 December $13,019.0 5.0% $13,073.0 ▲ 3.1% 5.0%
2010 January $13,138.6 ▲ 6.2% 5.7%
2010 February $13,125.7 ▼ -1.2% 4.7%
2010 March $13,139.0 3.7% $13,152.9 ▲ 2.5% 3.7%
2010 April $13,178.1 ▲ 2.3% 2.1%
2010 May $13,219.0 ▲ 3.8% 2.2%
2010 June $13,194.9 1.7% $13,187.7 ▼ -2.8% 1.7%
2010 July $13,207.6 ▲ 1.8% 1.6%
2010 August $13,233.8 ▲ 2.4% 0.8%
2010 September $13,228.2 1.0% $13,243.0 ▲ 0.8% 1.0%
*SAAR: Seasonally Adjusted Annual Rate.
Year
Quarterly GDP
Table 1: U.S. Monthly GDP, Latest Estimates
**MA3: 3-month moving average monthly GDP. End-month of quarter growth rate is the same as the annual quarterly growth rate.
Monthly GDP
Chained $2005
SAAR*, Billions
Month

17
What’s Ahead?
 Focus on manufacturing, inflation,
other major factors
 Global overview
 Exports/imports outlook

18
Short-Term Outlook: US Lead
 Using leading
indicator helps with
short-term forecast
and turning point
identification
 US leading indicator
has been slowing
down last few
months
 Six month growth
rate was negative
for first time since
May 09 in last report
0
20
40
60
80
100
120
59 63 67 71 75 79 83 87 91 95 99 03 07
© 2010 e-forecasting.com
e-forecastingLeadingEconomicIndex
U.S. Recessions* eLEI, 2000=100

19
Short-Term Outlook: US Lead
 Six month growth
rate was negative
for first time since
May 09 in last
report
-20
-10
0
10
20
59 63 67 71 75 79 83 87 91 95 99 03 07
Expansionand Recession Signalsfrom
Growth in eLEI
Six-Month GrowthRate Smoothed, Annualized, in eLEI
U.S. Long-Term Growth Rate: 3.3%

20
US Leading indicator shows
double dip probabilities
4%
3%
3%
1%
19%
2%
1%
3%
32%
61%
52%
44%
0% 25% 50% 75% 100%
Oct-
09
Nov-
09
Dec-
09
Jan-
10
Feb-
10
Mar-
10
Apr-
10
May-
10
Jun-
10
Jul-
10
Aug-
10
Sep-
10
RecessionProbabilities

21
Short-Term Outlook: US
 Looking at growth
in the US economy,
we see a small
peak then growth
to stabilize
between 2% and
3% through 2013-8
-6
-4
-2
0
2
4
6
8
Annual % change from three months ago1
Forecast of Growth in Monthly GDP
Actual Forecast

22
US Manufacturing
Manufacturing
recovery will slow
then continue, yet
not reach peak of
06
80
85
90
95
100
105
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Index, 2007=100
Manufacturing Production

23
US Consumer Prices
 Look for inflation
due to major
increases in money
supply
160
170
180
190
200
210
220
230
240
Index, 1982-84=100 , SA
Consumer Price Index (CPI)

24
US Durable Goods
 Consumer
expenditures on
durable goods will
continue to recover
nearing $1,300
trillion at 2005
constant prices$700
$800
$900
$1,000
$1,100
$1,200
$1,300
In Billions, SAAR
Consumer Expenditures on Durables

25
Trade Outlook
 Exports have
recovered and will
near peak levels
 Real imports will
continue rebound
and reach new
peak near $1,500
billion
$500
$600
$700
$800
$900
In Billions, SAAR
Real Exports of Manufactures
$800
$1,000
$1,200
$1,400
$1,600
In Billions, SAAR
Real Imports of Manufactures

26
Trade Balance Outlook
 Trade balance of manufactures as percent
of GDP will increase through forecast
horizon
-8
-6
-4
-2
0
2
Forecast
Percent
Percent of Trade Balance of
Manufactures to GDP

27
Monetary Policy on the Horizon
 Look for the Fed
Funds rate held
long at extreme
lows, will now start
to go up; can’t last
forever at near-
zero!
-2
0
2
4
6
8
Percent
Monetary Policy: Federal Funds Rate

28
Global Future Outlook
 Looking @ major economic blocs and
their leading indicators helps give an
idea of turning points, which areas
suffered more than others and which
will come out of recession faster and
stronger…

29
World vs. US
 The US moves with the world economy,
usually the timing of recessions and peaks
are the same
Dynamics of the Global Business Cycle
USA Leading Index Moves Up or Down Ahead of the Rest of the World
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
World, excluding USA United States
Consecutive negative values (below x-axis) predict recessions

30
BRIC Attack
 BRIC HAD been continually outperforming the
world and USED TO move out of recession much
faster
 BRIC is now slowing down at same time and pace
as the rest of the world
Early Warning Signals for Booms and Busts in BRIC Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
World BRIC Area

31
Latin America’s Bumpy Ride
 Latin America’s economy fluctuates much
greater than rest of world, is now starting
to improve before the rest of the world
Early Warning Signals for Booms and Busts in Latin America
-40
-30
-20
-10
0
10
20
30
40
50
00 01 02 03 04 05 06 07 08 09
World Latin America
-30
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators:Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in LatinAmerica
World Latin America

32
Euro Area
Early Warning Signals for Booms and Busts in Euro Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
World Euro Area
 Euro area usually
mirrors global
economy, this time
around slowing
down faster than
rest of world
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10
Early Warning Signals for Booms and Busts in Euro Area
World Euro Area
Consecutive negative values (below x-axis) predictrecessions

33
Non-Euro Area
 Non-Euro area is
faring much better
than Euro area,
still slowing down
but at higher
overall levels
Early Warning Signals for Booms and Busts in Non-Euro Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09
World Non-Euro Area
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10
Early Warning Signals for Booms and Busts in Non-EuroArea
World Non-Euro Area
Consecutivenegative values (belowx-axis) predictrecessions

34
Africa & Middle East
 Africa and Middle East moving along with
world economy and slowing at the same
rates
Early Warning Signals for Booms and Busts in Africa & Middle
East
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09
World Africa & Middle East
Consecutive negative values (below x-axis)
predict recessions
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09 10
Early Warning Signals forBooms and Busts inAfrica & Middle East
World Africa & Middle East

35
Asia Pacific
 Asia Pacific showed a lot of strength
coming out of recession but is also victim
to the recent and upcoming slowdown
Early Warning Signals for Booms and Busts in Asia & Pacific Area
-24
-18
-12
-6
0
6
12
18
24
00 01 02 03 04 05 06 07 08 09
World Asia & Pacific Area
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10
Early Warning Signals for Booms and Busts in Asia & Pacific Area
World Asia & Pacific Area
Consecutivenegative values (belowx-axis) predictrecessions

36
Emerging Asia will carry global
economy
2009 2010 2011 2012 2009 2010 2011 2012
-0.97 0.27 0.36 0.44 -129.7 7.1 10.2 11.3
-0.68 0.17 0.20 0.24 -90.9 4.5 5.8 6.3
-0.29 0.10 0.15 0.19 -38.7 2.6 4.3 5.0
-0.43 0.21 0.22 0.21 -57.2 5.6 6.3 5.6
-0.79 0.48 0.36 0.49 -104.8 12.6 10.1 12.7
-0.58 0.33 0.22 0.34 -77.4 8.6 6.2 8.9
-0.01 0.35 0.25 0.24 -1.6 9.0 7.1 6.2
-0.32 0.35 0.26 0.26 -42.9 9.2 7.3 6.9
1.54 1.96 1.87 1.99 205.5 51.2 53.4 51.8
1.50 1.60 1.57 1.67 199.9 41.7 44.8 43.4
0.05 0.14 0.14 0.16 6.1 3.6 3.9 4.1
-0.7 3.8 3.5 3.8 100.0 100.0 100.0 100.0
ASIA & PACIFIC INDUSTRIAL
EMERGING ASIA
China & India
MIDDLE EAST & AFRICA
WORLD GROWTH
1
1
Sum of Regional Contributions Source: www.e-forecasting.com
Euro Area (euro16)
Non-Euro Members (11)
OTHER EUROPE
NORTH AMERICA
United States
SOUTH AMERICA
TABLE 2
CONTRIBUTION OF REGIONS TO GLOBAL GROWTH
REGION
Percentage Points Contribution Relative Contribution, Percent
EUROPEAN UNION (EU27)

37
Market size

38

39
Long term global forecast

40
Wrap Up
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http://www.e-forecasting.com
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http://www.facebook.com/eforecasting
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http://www.twitter.com/mesimos
 Information taken from our forecast and reports,
for subscription queries, please contact:
Maria mesimos@e-forecasting.com
Thank you!

US and Global Economic Review & Forecast 2010

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