An Economic Forecast in Uncertain Times

Orlando, FLMay 22nd, 2014

U.S. Forecast

Policy Uncertainty Still Hangs Overthe Economy

Health Care Reform Impact on labor market Delayed mandates

Dodd-Frank Financial Regulatory Reform Impact on credit flows & financial sector 45.7% (128)

Fiscal “Cliff” Sequester, shutdown/debt ceiling…

Monetary Policy

U.S. Forecast The economic impact of economic

policy uncertainty

Statistical analysis shows that higher policy uncertainty causes:

1. Lower private investment2. Lower industrial production3. Much lower employment

Economic Policy Uncertainty Index

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. Forecast

17161514131211100908070605040302010099

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

Civilian Unemployment Rate(%)

Unemployment Rate

U.S. Forecast

U.S. Forecast

U.S. Forecast

17161514131211100908070605040302010099

2800.0

2600.0

2400.0

2200.0

2000.0

1800.0

1600.0

1400.0

1200.0

Private Fixed Nonresidential Investment(Billions of Dollars)

Private Fixed Nonresidential Investment

U.S. Forecast

17161514131211100908070605040302010099

1300.0

1200.0

1100.0

1000.0

900.0

800.0

700.0

600.0

Real Investment Equipment & Software

(Billions of Dollars)

Real nonresidential investment-equipment & software

U.S. Forecast

Sky Mall™ Policy:

An Expensive Policy that Fails to Achieve its Desired Outcome

U.S. Forecast

U.S. Forecast

U.S. Forecast

U.S. ForecastSky Mall™ Policies:

T.A.R.P.Foreclosure Prevention Act 2008ARRA of 2009

Shovel ready projectsMaking work pay tax breaks

Affordable Care ActDodd-FrankHIRE Act 2010

U.S. Forecast

Lost housing wealth

Weak labor market recovery

Both have weighed on consumers

“Mini age of austerity”

U.S. Household Wealth(Trillions of $)

 

2005 2006 2007 20082009 Q1*

2013 Q4

Total Assets 71.3 78.6 79.5 66.6 62.8 94.4

Financial Assets

42.9 49.0 51.4 42.2 39.6 66.9

Home Equity 13.2 12.8 10.3 7.0 6.1 10.0

Net Worth 59.1 65.1 65.1 52.4 48.7 80.6

U.S. Economic Outlook

2013Q3

2013Q4

2014Q1

2014 2015 2016

GDP% Change, Annual Rate 4.1 2.6 -0.8 2.4 2.6 2.9

Consumer Price Index% Change, Annual Rate 2.2 1.1 1.8 1.5 1.4 1.7

Consumer Sentiment 81.6 76.9 80.9 80.9 81.4 82.5

Consumption% Change, Annual Rate 2.0 3.3 2.7 2.3 2.6 2.9

Monetary Policy

The job of the Federal Reserve is to take away the punch bowl just as the party gets going

William McChesney MartinFormer Fed Chairman

U.S. Forecast

Florida Housing Market

Housing market recovery continues to unfold

Double-digit price appreciation

High level of investor activity

Housing finance still problematic

Will momentum be maintained?

Florida Housing Market

Florida Housing Market

February 2014

February 2013 Percent

change

Closed Sales 15,826 15,591 1.5%

Median Sale Price

$165,000 $150,000 10.0%

Median Days on Market

61 62 -1.6%

Inventory(Months Supply)

5.7 5.5 2.1%

Florida Housing Market

Florida Housing Market

Investors are still active in Florida residential real estate

Evidenced by high share of cash transactions

Private equity & hedge funds

Is this a good thing or a bad thing?

February 2014

February 2013

Cash as % of February

2014 Sales

Florida 7,596 7,928 48.0%

Miami 1,429 1,380 49.2%

Tampa 1,122 1,243 47.4%

Jacksonville 507 290 44.2%

Orlando695 847 41.4%

Housing MarketCash Sales

Housing MarketHousing Finance

Unsustainably high share of cash transactions

Mortgage availability has been restricted by

Dodd FrankCapital StandardsUnderwriting StandardsLimited Private SecuritizationDemise of Mortgage BrokeringShell shock

Is this a good thing or a bad thing?

Florida Forecast

171615141312111009080706050403020100

300.0

250.0

200.0

150.0

100.0

50.0

0.0

9%

8%

7%

6%

5%

4%

3%

Florida Housing Starts(thousands)

Total Private Housing Starts30 year Mortgage Rates

Florida Forecast

171615141312111009080706050403020100

21000.0

20000.0

19000.0

18000.0

17000.0

16000.0

15000.0

Florida Population(Thousands)

Florida Forecast

171615141312111009080706050403020100

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

Florida & U.S. Unemployment Rate(%)

FL Unemployment RateU.S. Unemployment Rate

Florida Forecast

171615141312111009080706050403020100

10%

5%

0%

-5%

-10%

Florida Real Gross State Product(% change year ago)

Florida Forecast

171615141312111009080706050403020100

8400.0

8200.0

8000.0

7800.0

7600.0

7400.0

7200.0

7000.0

6800.0

Florida Employment(Thousands)

Wage & Salary Employment

171615141312111009080706050403020100

1300.0

1200.0

1100.0

1000.0

900.0

800.0

Florida Professional & Business Services Employment

(Thousands)

Florida Forecast

171615141312111009080706050403020100

1400.0

1300.0

1200.0

1100.0

1000.0

900.0

800.0

Florida Professional & Business Services Employment

(Thousands)

Florida Forecast

171615141312111009080706050403020100

700.0

600.0

500.0

400.0

300.0

Florida Construction Employment(Thousands)

Florida Forecast

171615141312111009080706050403020100

1150.0

1100.0

1050.0

1000.0

950.0

900.0

850.0

800.0

Florida Leisure & Hospitality Employment

(Thousands)

2014-2017 Averages;Q1 2014 Forecast

Florida

Sector% Average Annual

Growth

Construction 8.7

Professional & Business Services 4.3

Trade, Transportation & Utilities 4.0

Education-Health Services 2.3

Leisure & Hospitality 1.9

Information 1.8Manufacturing 1.3Financial 0.8State & Local Government 0.6Federal Government -1.0

RegionPopulation Growth

Average % Chg Rank

Florida 1.4 ---

Deltona 1.1 8

Gainesville 0.4 12

Jacksonville 1.4 4

Lakeland 0.9 10

Miami 1.2 5

Naples 2.5 1

Ocala 1.7 3

Orlando 2.0 2

Palm Bay 0.9 11

Pensacola 0.9 9

Tallahassee 1.1 7

Tampa 1.2 6

2014-2017 Averages;Q4 2013 Forecast

RegionEmployment Growth

Average % Chg Rank

Florida 2.4 ---

Deltona 1.8 11

Gainesville 1.5 12

Jacksonville 2.2 6

Lakeland 1.9 9

Miami 2.3 4

Naples 4.3 1

Ocala 2.6 3

Orlando 3.0 2

Palm Bay 2.0 7

Pensacola 1.9 8

Tallahassee 1.9 10

Tampa 2.3 5

2014-2017 Averages;Q4 2013 Forecast

Sean M. SnaithSean M. Snaith, Ph.D.

Director Director

Institute for Economic CompetitivenessInstitute for Economic Competitiveness

(407) 823-1453(407) 823-1453

Sean@SeanSnaith.comSean@SeanSnaith.com

WWW.IEC.UCF.EDUWWW.IEC.UCF.EDU

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Thank you