United States and South Dakota Economic Outlook Presentation to the SD Banking Commission December 5, 2014 Jim Terwilliger, Bureau of Finance and Management
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United States and South DakotaEconomic Outlook
Presentation to the SD Banking CommissionDecember 5, 2014
Jim Terwilliger, Bureau of Finance and Management
US & SD Economic Overview
• United States– Current US economic forecast from IHS Economics
• South Dakota– Compare to the US average for various indicators– Recent employment growth– Changes in SD & US economic forecasts– Recent tax collection trends
• Agriculture Sector– Farm income/Equipment tax collections– Crop production & prices
2
IHS Economics Current US Baseline Forecast
Source: IHS Economics
Indicator 2013 A 2014 F 2015 F 2016 F
Real GDP 2.2% 2.2% 2.6% 2.8%
NF Employment 1.7% 1.8% 1.9% 1.5%
Personal Income 2.0% 4.2% 4.3% 5.0%
Consumer Prices 1.5% 1.7% 1.0% 1.6%
UnemploymentRate 7.4% 6.2% 5.7% 5.5%
3
SD Economic Indicators
0
2
4
6
8
10
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Unemployment Rate(monthly)
United States South Dakota
‐5%‐4%‐3%‐2%‐1%0%1%2%3%4%5%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Nonfarm Employment Growth(monthly year/year % chg.)
United States South Dakota
‐2%
0%
2%
4%
6%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
U.S. Inflation(monthly year/year % chg. in CPI)
‐4%
‐2%
0%
2%
4%
6%
8%
10%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Nonfarm Income Growth(quarterly year/year % chg.)
United States South Dakota 4
Nonfarm EmploymentSD vs. US
385
390
395
400
405
410
415
420
425
129
134
139
2007 2008 2009 2010 2011 2012 2013 2014
Thousands of Jobs ‐SDMillions of Job
s ‐U
S
SD Surpasses Previous Peak
(March 2012)
Great Recession
US Surpasses Previous Peak
(May 2014)
Source: Bureau of Labor Statistics5
South Dakota Employment Changes(October 2013 ‐ October 2014 seasonally adjusted)
Source: Bureau of Labor Statistics
Y/Y % Chg. Y/Y Gain (Loss)
Total Nonfarm (seasonally adj.) 1.4% 6,000Mining, Logging & Construction 5.7% 1,200Manufacturing 3.9% 1,600Wholesale Trade 7.1% 1,400Retail Trade (0.6%) (300)Transportation & Utilities 2.4% 300Information 3.3% 200Financial Activities 0.3% 100Prof. and Business Services 2.0% 600Ed & Health Services (0.7%) (500)Leisure and Hospitality (1.1%) (500)Other Services 4.4% 700Government 1.5% 1,200
6
Forecasted Growth for Major Economic Variables Continues to Revise Downward
Changes in Forecasts for CY 2015
SD VariablesFeb. 2014 July 2014 Oct. 2014 BFM/Nov.
2014SD Nonfarm Empl. 1.9% 1.7% 1.9% 1.2%SD Nonfarm Income 5.4% 5.1% 4.9% 4.4%SD Housing Starts 6,100 5,900 5,800 4,800
US VariablesReal GDP 3.3% 3.0% 2.7% 2.7%US Housing Starts 1.47M 1.37M 1.19M 1.19MBusiness Investment 6.8% 6.5% 5.5% 5.5%Consumption Expend. 3.1% 2.7% 2.8% 2.8%US Total Income 5.1% 4.7% 4.6% 4.6%
Source: IHS Economics and SD Bureau of Finance and Management 7
Recent SD Tax Collection Trends
Source: SD Bureau of Finance and Management
Tax Source FY2015 YTD Historical Sales and Use Tax 2.1% 4.6%Contractor’s Excise Tax 5.9% 2.4%Video Lottery (state’s share) 6.2% (2.2%)Insurance Company Tax 7.9% 3.8%
Tourism Promotional Tax 3.6% 4.5%Deadwood Gaming Tax 3.7%* 2.2%
8
Agriculture is a Major Contributor to the SD Economy
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Farm Income as % of Total Personal IncomeSD: 9.2% in 2013
Plains Region: 3.5% in 2013
US: 0.8% in 2013
Source: BEA 9
Farm Income Strong through 2013, Lower Levels expected for 2014
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Equipment Tax Collections ‐MillionsFarm Income Billions
Source: BEA and SD Dept. of Revenue10
Record 2014 Corn ProductionOffset by Lower Prices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
0
100
200
300
400
500
600
700
800
900
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
f
Avg. Price Received/bu.Millions of Bushels
Source: NASS11
Record 2014 Soybean Production, Price Decrease not as Drastic
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
0
50
100
150
200
250
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
f
Avg. Price Received/bu.Millions of Bushels
Source: NASS12
Summary
• The United States and South Dakota economies are expected to continue to grow at a moderate pace in 2015, but at growth rates lower than before the great recession.
• Challenges remain at the federal level regarding monetary and fiscal policy. The Federal Reserve has a delicate balancing act over the next several years in terms of normalizing its balance sheet and acting on interest rates.
• The Agriculture sector has been a major boost to overall economic activity in South Dakota the past several years. However, lower crop prices are having downward pressure on farm income in 2014.
• Lower crop prices, transportation issues, and decreasing farm real estate value are concerns looking to 2015 and beyond.
13
Further InformationFinancial Metrics• http://bfm.sd.gov/dashboards/Default.aspx
Monthly Economic Update• http://bfm.sd.gov/econ/current.pdf
Dr. Ralph Brown’s Presentation to Governor’s Council of Economic Advisors• http://bfm.sd.gov/econ/GCEA_20141028.pdf
14
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