RECESSION AND RECOVERY IN MISSOURI AND THE U.S. The views expressed are those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System. Alison Felix Senior Economist Federal Reserve Bank of Kansas City
Alison Felix, PhD and Senior Economist at the Federal Reserve Bank of Kansas City shares trends and projections for recession and recovery in Missouri and the U.S.
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RECESSION AND RECOVERY IN MISSOURI
AND THE U.S.
The views expressed are those of the presenter and do not necessarily reflect the positions of theFederal Reserve Bank of Kansas City or the Federal Reserve System.
Alison FelixSenior Economist
Federal Reserve Bank of Kansas City
After slowing in the first half of 2011, growth is picking up.
Real Gross Domestic ProductPercent change from previous period, annualized
Source: Bureau of Economic Analysis; FOMC
-4
-3
-2
-1
0
1
2
3
4
5
-4
-3
-2
-1
0
1
2
3
4
5
FOMC Forecast Central Tendency(Nov. 2011)
Business investment increased sharply in the second and third quarters of last year.
Growth in Components of Real GDP
Percent change from previous period, annualized Percent
Source: Bureau of Economic Analysis
-6
-4
-2
0
2
4
6
8
10
12
14
16
-6
-4
-2
0
2
4
6
8
10
12
14
16
Total GDP Consumer Spending
Residential Investment
Business Investment
Exports Government Spending
2010:Q4
2011:Q1
2011:Q2
2011:Q3
Unemployment rates have fallen over the past year but remain stubbornly high.
Unemployment RatePercent Percent
Source: Bureau of Labor Statistics; FOMC
0
1
2
3
4
5
6
7
8
9
10
11
12
0
1
2
3
4
5
6
7
8
9
10
11
12FOMC Forecast Central Tendency(Nov. 2011)
After increasing in the first half of 2011, inflation has moderated and is expected to be below 2% in 2012.
PCE InflationPercent change from previous period, annualized
Source: Bureau of Economic Analysis; FOMC
-5
-4
-3
-2
-1
0
1
2
3
4
5
-5
-4
-3
-2
-1
0
1
2
3
4
5
FOMC Forecast Central Tendency(Nov. 2011)
Fed Funds Rate
Percent Percent
Source: FOMC
0
1
2
3
4
5
6
0
1
2
3
4
5
6
Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11
Fed Funds Rate
FOMC December Statement: “The Committee… currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
FOMC December Statement: “… the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.”Federal Reserve Balance Sheet
Residential construction activity remains weak but has increased over the past few months.
Value of Residential Construction Contracts
Seasonally adjustedIndex Nov-01=100 Index
Source: FW Dodge
0
25
50
75
100
125
150
175
200
225
0
25
50
75
100
125
150
175
200
225
Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11
US
MO
Home prices in Missouri increased in the third quarter but remain well-below peak levels.
Home Prices
Seasonally adjustedIndex: 2001:Q3=100 Index
Source: FHFA - purchase only index
90
100
110
120
130
140
150
160
90
100
110
120
130
140
150
160
2001:Q3 2003:Q3 2005:Q3 2007:Q3 2009:Q3 2011:Q3
US
MO
Foreclosure rates in Missouri are lower than in other parts of the nation.
Foreclosure Rate
Percent Percent
Source: Mortgage Bankers Association
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2001:Q3 2003:Q3 2005:Q3 2007:Q3 2009:Q3 2011:Q3
U.S.
MO
U.S. commercial construction activity is weaker than pre-recession levels.
Value of Commercial Construction Contracts
Seasonally adjusted, 3-month moving averageIndex Nov-01=100 Index
Source: FW Dodge
0
25
50
75
100
125
150
175
200
225
250
275
300
325
0
25
50
75
100
125
150
175
200
225
250
275
300
325
Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11
US
MO
Federal government debt levels have increased significantly over the past few years.
Federal Government Debt as a Percent of GDPPercent Percent
Source: Congressional Budget OfficeNote: According to the CBO, "The extended-baseline scenario adheres closely to currentlaw, following CBO's 10-year baseline budget projections through 2021 and then extending the baseline concept for the rest of the long-term projection period. The alternative fiscal scenario incorporates several changes to current law that are widelyexpected to occur or that would modify some provisions that might be difficult to sustainfor a long period."
0
20
40
60
80
100
120
140
160
180
200
0
20
40
60
80
100
120
140
160
180
200
1945 1955 1965 1975 1985 1995 2005 2015 2025 2035
Actual
Extended-Baseline Scenario
Alternative Fiscal Scenario
CBO Projection June 2011
State government tax revenues increased in FY2011 but remained below pre-recession levels.State Tax Revenue
Among the top 25 Missouri export countries, EU countries combine for 14% of exports.
Missouri Exports by Destination
31%
10%
8%5%5%
4%
20%
Canada
Mexico
China
Korea, South
Japan
Belgium
Singapore
Germany
Brazil
United Kingdom
Australia
Netherlands
Venezuela
Argentina
Other
The baby boom generation is nearing retirement.
Missouri Population by AgePercent Percent
Source: US Census Bureau
0
2
4
6
8
10
0
2
4
6
8
10
1990
2010
Conclusions
The pace of the U.S. economic recovery slowed in the first half of 2011, but growth picked up in the second half of last year.
The U.S. and Missouri economies are still expected to recover at a moderate pace over the next few years.
However, economic growth may rely more heavily on private demand in the U.S. as problems persist in Europe and the U.S. federal government faces high debt levels.
Presentations can be found online at:http://www.kansascityfed.org/speeches/i