While some manufacturers have had record years, and in some respects, helped to jump start the economic recovery, the outlook may be cloudy. Manufacturing is weakening in Minnesota, and across the nation, according to a closely watched Creighton University Index. Presented at the Minnesota Chamber Manufacturers Summit on October 23, 2012
Opportunities at our Doorstep - doing business in Canada and Mexico
The Economic Outlook for Manufacturers - Dr. Ernie Goss, economist, Creighton University
1. Mid-America and the Global Economy:
Short and Long Term Challenges & Opportunities
Minnesota Manufacturers
Summit
Ernie Goss Ph.D.
Professor of Economics
MacAllister Chairholder
Creighton University
Web: www.ernestgoss.com
Twitter.com/erniegoss
Web: www.outlook-economic.com
2. 2008-12
Never has so much been done to achieve so little?
• Two stimulus bills ($1 trillion)
• Bailouts—GM, Bear Stearns, AIG, Fannie Mae,
Freddie Mac, Chrysler, 19 Large Banks
• Interest rates: QE1, QE2, QE3,Operation
Twist, Funds Rate = 0% - ¼%
• Cash for clunkers, appliances, caulking,
windows, Green vehicles,
• Tax credit for first time home buyers
• Mortgage forgiveness & writedowns
4. Opportunities
• Opportunities
– Record low interest rates (bond
market looking for quality issues)
– International opportunities
– Great bargains in real estate market
– Cash is king
– How can you take advantage of
uncertainty?
7. Case-Shiller home price index 2001- July 2012
20.0%
15.0%
End of federal tax credit
10.0% E
5.0%
0.0%
-5.0%
-10.0%
-15.0%
Year over year price change
-20.0%
12. Monthly Survey of Rural Bank CEOs
• 10 states, 210 bank executives
• Released 3rd Thursday of each month
• Average community size = 1,300
• CO, IA, IL, KS, MN, MO, ND, NE, SD,
WY
14. Bullish on Agriculture/food: Long term
• Fast growth for emerging economies (China,
India): Food & energy demand income elastic
(e.g. income up 8%, food demand up 12%)
• Cheap value of dollar (makes U.S. food &
energy more competitive abroad): U.S. trade
deficit, budget deficit, higher inflation.
• Biofuels & alternative fuel production: wind
farms, ethanol, solar.
15. Manufacturing
The Regional Economy:
Survey of Purchasing Managers
A Partnership Among Creighton and State Supply
Managers Associations
18. Indicators to Watch (next month)
• Case-Shiller home index for August
• Trade weighted value of dollar
• Sovereign bond default (PIIGS)
• Yield on the 10-Year U.S. Treasury
Bond
• Retail sales (Nov. 14)
• GDP (Oct. 26)
• PMIs (Nov. 1)
• Employment report (Nov. 2)
19. Economic Medicine
• Look internationally for sales & investment
• Need fundamental tax reform—flatter & fairer
• Simpson/Bowles tax/spending plan
• Shorten period of UI benefits
• Commitment to reducing federal spending
• Keep 2001 & 2003 tax cuts for all until
spending cuts
• Reduce barriers to trade
• Must convert pensions to defined contribution
plans for public employees
• Encourage repatriation of U.S. earnings