2014 Economic Forecast: Year of the Rebound? McCombs School of Business
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Economic Outlook 2014
Jay C. Hartzell Chair, Department of Finance, McCombs School of Business
The University of Texas at Austin
Economic Forecasts § Research Department, Federal Reserve Bank of
Philadelphia § “Survey of Professional Forecasters” § First quarter (August 16, 2013) § Doing this since 1968
§ 42 “Professional Forecasters” § Provide advice used by large commercial institutions § Members of National Association for Business
Economics (NABE) § Use a variety of techniques and assumptions to arrive
at forecasts
Real Gross Domestic Product § Definition § Historic average annual rate of growth
§ ~ 3.0%
§ Median forecasts (annual rate of growth) 2013 2.2% 2014 2.3% 2015 2.7% 2016 2.9%
§ Risk of negative quarter (probability) 2013: Q3 10.5% 2013: Q4 11.2% 2014: Q1 11.7% 2014: Q2 11.5% 2014: Q3 11.8%
Unemployment & Workforce Participation § Unemployment (natural rate ~ 6.0%)
2013 7.5% (~12.5 million) 2014 7.1% 2015 6.6% 2016 6.1%
§ Under-employed (BLS “Alternatives”) § ~ 12%-18%
§ Workforce Participation Rate 2000 67.3% (143 million) 2008 66.3% (154 million) 2013 63.2% (155 million)
§ Okun’s Law § ~ 3.0% Real GDP Growth to reduce unemployment
Foundations of Low Growth § Consumer spending and households
§ Stagnant incomes § High or under employment § Deleveraging § Uncertainty
§ Business investment § In aggregate, slim profit prospects
§ Contraction in household and government sectors
§ Uncertainty, particularly in government policy
§ Government spending § AAAAGGGGHHH! (debt-to-GDP ratio)
§ Net Export § Slowing global growth
Inflation (Consumer Price Index) § Definition § Historical average (annual rate)
§ ~ 4.0%
§ Median forecasts (annual rate)
§ Long-term forecasts (annual rate)
§ Comments of Fed on controlling inflation § Managing liquidity (e.g., bank and non-bank reserves) § Commitment to inflation
Headline CPI Core CPI 2013 1.4% 1.8%
2014 2.0% 2.0%
2015 2.3% 2.1%
Headline CPI 2012-2016 2.0%
2012-2021 2.0%
View from 30,000 Feet (2013-2016)
§ Slow growth § Improving private sector balance sheets § Deteriorating (dramatically) public sector balance
sheets § High unemployment § High under-employment § Lower workforce participation § Low interest rates § Low-ish inflation § More wealth re-distribution than creation
§ Energy § Health care § Education
Latest Fed Forecasts
Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, September 2013
Embargoed for release at 2:00 p.m., EDT, September 18, 2013
Advance release of table 1 of the Summary of Economic Projections to be released with the FOMC minutes
Percent
VariableCentral tendency1 Range2
2013 2014 2015 2016 Longer run 2013 2014 2015 2016 Longer run
Change in real GDP . . . . . 2.0 to 2.3 2.9 to 3.1 3.0 to 3.5 2.5 to 3.3 2.2 to 2.5 1.8 to 2.4 2.2 to 3.3 2.2 to 3.7 2.2 to 3.5 2.1 to 2.5June projection . . . . . . 2.3 to 2.6 3.0 to 3.5 2.9 to 3.6 n.a. 2.3 to 2.5 2.0 to 2.6 2.2 to 3.6 2.3 to 3.8 n.a. 2.0 to 3.0
Unemployment rate. . . . . . 7.1 to 7.3 6.4 to 6.8 5.9 to 6.2 5.4 to 5.9 5.2 to 5.8 6.9 to 7.3 6.2 to 6.9 5.3 to 6.3 5.2 to 6.0 5.2 to 6.0
June projection . . . . . . 7.2 to 7.3 6.5 to 6.8 5.8 to 6.2 n.a. 5.2 to 6.0 6.9 to 7.5 6.2 to 6.9 5.7 to 6.4 n.a. 5.0 to 6.0
PCE inflation. . . . . . . . . . . . 1.1 to 1.2 1.3 to 1.8 1.6 to 2.0 1.7 to 2.0 2.0 1.0 to 1.3 1.2 to 2.0 1.4 to 2.3 1.5 to 2.3 2.0
June projection . . . . . . 0.8 to 1.2 1.4 to 2.0 1.6 to 2.0 n.a. 2.0 0.8 to 1.5 1.4 to 2.0 1.6 to 2.3 n.a. 2.0
Core PCE inflation3 . . . . . 1.2 to 1.3 1.5 to 1.7 1.7 to 2.0 1.9 to 2.0 1.2 to 1.4 1.4 to 2.0 1.6 to 2.3 1.7 to 2.3
June projection . . . . . . 1.2 to 1.3 1.5 to 1.8 1.7 to 2.0 n.a. 1.1 to 1.5 1.5 to 2.0 1.7 to 2.3 n.a.
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are from the fourth quarter of the previous year tothe fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumptionexpenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in thefourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent eachparticipant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to theeconomy. The June projections were made in conjunction with the meeting of the Federal Open Market Committee on June 18–19, 2013.1. The central tendency excludes the three highest and three lowest projections for each variable in each year.2. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year.3. Longer-run projections for core PCE inflation are not collected.
US Economic Policy Uncertainty Index
US Economic Policy Uncertainty Index 9/20/13 11:09 AMEconomic Policy Uncertainty Index
Page 1 of 1http://www.policyuncertainty.com/index.html
Zoom
Monthly US Economic Policy Uncertainty Index
Sep '12 Nov '12 Jan '13 Mar '13 May '13 Jul '13
100
150
200
75
125
175
1990 2000 2010
1m 3m 6m YTD 1y All
Highcharts.com
Fed Policy: Growth and Inflation Forecasts Figure 1. Central tendencies and ranges of economic projections, 2013–16 and over the longer run
Change in real GDP
Percent
3
2
1
0
1
2
3
4
5
-
+
2008 2009 2010 2011 2012 2013 2014 2015 2016 Longerrun
Central tendency of projectionsRange of projections
Actual
Unemployment rate
Percent
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 Longerrun
PCE inflation
Percent
0
1
2
3
4
5
-
+
2008 2009 2010 2011 2012 2013 2014 2015 2016 Longerrun
Note: Definitions of variables are in the general note to the projections table. The data for the actual values ofthe variables are annual.
Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy
3
12
2
Appropriate timing of policy firming
Number of participants
1
2
3
4
5
6
7
8
9
10
11
12
2014 2015 2016
Appropriate pace of policy firming Percent
Target federal funds rate at year-end
0
1
2
3
4
5
6
2013 2014 2015 2016 Longer run
Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, underappropriate monetary policy, the first increase in the target federal funds rate from its current range of 0 to 1/4 percentwill occur in the specified calendar year. In June 2013, the numbers of FOMC participants who judged that the firstincrease in the target federal funds rate would occur in 2013, 2014, 2015, and 2016 were, respectively, 1, 3, 14, and 1.In the lower panel, each shaded circle indicates the value (rounded to the nearest 1/4 percentage point) of an individualparticipant’s judgment of the appropriate level of the target federal funds rate at the end of the specified calendar yearor over the longer run.
www.silabs.com
How the Internet of Things Is Transforming Our Economy
Tyson Tuttle, CEO, Silicon Labs October 3, 2013
14
Silicon Labs Background
Ø Austin’s largest home-grown semiconductor company § Founded in 1996; Public since 2000 (NASDAQ: SLAB) § Strong track record of diversification, revenue growth and profitability § Fabless model with >1,000 employees and 10 R&D locations worldwide
Ø Focused on mixed-signal innovation § Broad portfolio addressing consumer, industrial and communications markets § Serve >10,000 customers with >5 billion devices shipped § >1,300 patents issued or pending
15
Key Industry Trends
Drive to improve energy efficiency and
reduce power consump5on creates new markets for mixed-‐signal ICs
Green Technology
The connec5on of low-‐cost, low-‐power devices to enable
home and industrial automa5on, smart grid and more
Internet of Things
Demand for data drives infrastructure
investment in telecommunica5ons, cloud compu5ng and wireless infrastructure
Bandwidth Expansion
16
More Connected Devices Than People
Source: Silicon Labs, Thomson Reuters, Morgan Stanley
17
The Internet of Things Is a Game Changer
Connected Home
Lighting Control
Smart Grid
Building Automation
Health Fitness
Safety Security
Smart Devices
Broad range of technologies and applications creates opportunities for new products and entrants
18
Convergence of Technologies Multiple technologies converging simultaneously – all enabled by semiconductors and software –
Massive data centers for cloud computing
Mobile computing and connected devices
Internet of Things
+
19
The Internet of Things Is Here Today
Ø Availability of low-cost, integrated end devices § Embedded processors and microcontrollers (ARM) § Wireless connectivity (Wi-Fi, Bluetooth, ZigBee) § Sensors and actuators § Long battery life or energy harvesting
Ø Big Data / Analytics + Internet of Things § Increased asset utilization § Improved energy efficiency and reduced
environmental impact § Increased employee productivity § Elimination of waste in supply chain and logistics § Improved customer experience § Reduced time to market across all industries
Ø Economic impact across all industries estimated to be $14.4 trillion over the next decade (Source: Cisco)
www.silabs.com
Thank You
www.silabs.com
Austin Start-Up Forecast 2014 October 3, 2013
Austin Start-Up Forecast
" Austin Start Up Demographics
" Local Investment Environment
" Talent Pool
" 2014 Forecast
Austin Start-up Demographics
" It’s getting bigger…fast • But we are still pretty small, comparatively
" More start-ups • More resources
- Incubators, UT programs, Angel & VC • More talent
- Home grown and transplants • Cultural shift
- Entrepreneurism more part of the local ethos
" Founders are tending to be: • Less experienced • Focused on solving market problems rather than “hard” business
problems (except Big Data).
Local Investment Environment
" More firms doing deals • But smaller size funds • Both local and outside Austin
" More angels • And more sophisticated, networked, and organized and funded
" Smaller deal sizes • More “activity” • More shut downs • Higher expectations
Talent
" Austin has great engineers • Which is why Google, Apple, IBM, Facebook, BMC, HP, etc., all
opened offices here
" Small companies have to be competitive on wages and benefits • And differentiate on environment, responsibility, excitement and
upside
" More startups then there are good managers • Founders vs Operators
" Certain specialties are very hard to find: • Mobile, UIX, Data Analytics/Scientist
2014 Start Up Forecast
" Talent “crunch” will hurt growth
" More deals, but increasingly small in size • Venture investment will remain the same or decline slightly • More “micro-VC” and angel deals
" By the end of 2014 there will be a glut of failed start-ups • Big Question: Do those founders leave town or start fresh?
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Life Science LiCoff In Texas
Dennis McWilliams CEO / Founder Apollo Endosurgery
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Healthcare Innova4on Ma5ers
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Health Care Spend as % of GDP
17.7%
8.9%
11.3%
9.6%
6.3%
5.8%
11.7% 11.4%
3.9%
9.6%
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For notes only on previous slide
Country Name Avg United States 17.7 France 11.7 Germany 11.4 Spain 9.6 Sweden 9.6 Brazil 8.9 Swaziland 8.2 Russian Federa5on 6.3 Nigeria 5.8 China 5.1 India 3.9
For notes only on previous slide: Healthcare spend as % of GDP (Avg 2009-‐2012)
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Life Science Impact in Texas
$75 Billion es5mated economic impact of biotech
in Texas (2009)
89,000+ Number of biotech workers in Texas
#2 in Clinical Trials in the US
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Public Investment
Venture Capital
Industry Investment
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$2.6 Billion invested by Texas Public Ins3tu3ons in life science R&D
Ins4tu4on Total R&D (Millions)
Univ. of Texas (UT) M.D. Anderson Cancer $528.1
Baylor College of Medicine-‐Houston $450.6
UT Southwestern Medical Center $389.0
UT Health Science Center at Houston $226.7
Texas A&M University $189.3
UT Health Science Center at San Antonio $163.8
UT Medical Branch (UTMB) at Galveston $139.4
The University of Texas at Aus5n $82.5
Texas A&M Health Science Center $77.5
Texas Tech University Health Science Ctr. $60.6
Total $2,361.4
Top Ten Texas Ins4tu4ons for Biomedical R&D FY 2012 Expenditures
Source: Texas Higher Educa3on Coordina3ng Board
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Number of Biotechnology-‐Related Degrees Awarded, 2009-‐2012 All Texas Public Universi5es, All Degree Levels
Biological and Biomedical Sciences 26,084
Healthcare Professionals and Technicians
14,413
Plant and Agricultural Sciences 6,842
Animal Sciences 3,318
Total 50,657
Source: Texas Higher Educa3on Coordina3ng Board
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Life Science Investment in Aus4n Economy
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Public Investment in Healthcare Innova4on
Texas Enterprise
Fund
$3B $98.1M $277.9M
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Venture Investment in Innova4on
$1.4 billion invested by VC firms
(2007-‐2012) in Texas biotech & medical device
Peripheral stents
Heart valves
Less invasive AV fistulas
Cancer Therapies
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Apollo Endo-‐ Impor5ng Technology…
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Endoscopy Laparoscopy Endoscopic Surgery
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Global innova5on chain
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