The Economic Outlook
Dr. George Mokrzan
Director of Economics
November 9, 2017
The Economic Outlook for the Nation
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• The U.S. economy (real GDP) is forecasted to grow at a moderate pace of 2.3% in
2018, close to projected 2.2% growth in 2017, and up from 1.6% in 2016.
• Consumer spending is expected to continue a gradual moderating trend.
Consumers are benefitting from strengthened labor markets, solid overall finances
and relatively strong consumer confidence. However, consumer pent-up demand
has been easing, and personal income growth has been slowing.
• Business Equipment and Exports are expected to continue to recover from
weakness in 2015 and 2016. A strong international economy is supporting
commodity prices as well as export growth. Manufacturing is the strongest overall
sector in 2017. Agricultural prices should benefit from rising world economic growth.
• After 2 slow years, inflation is expected to return to 2.0% in 2017, and 2.2% next
year. Both short-term and long-term interest rates are probably headed upwards,
but the magnitude has a high degree of uncertainty. With respect to the Fed and
interest rates, our view is that the risks for the Fed Funds rate target and overall
market interest rates are to the upside, which will largely depend on the net
stimulatory impact of potential fiscal policy change by the new administration and
Congress.
Economic Activity Volatile, but Strongest Overall since August 2005
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Historical Data Source: Institute for Supply Management, Haver Analytics, Inc. Recessions shown in Grey
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60
55
50
45
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35
65
60
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45
40
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Most Recent Data: October 2017
ISM Index -- Manufacturing and Non-Manufacturing Composite(Greater than 50 = Growth)
Combined Non-manufacturing & Manufacturing
New Orders for Manufacturing and Non-Manufacturing Rising
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Historical Data Source: Institute for Supply Management Haver Analytics, Inc. Recessions shown in Grey
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70
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30
20
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70
60
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20
Most Recent Data: October 2017
ISM New Orders Index (Growth Greater Than 50)
Manufacturing Non-Manufacturing
Unemployment Claims Trend Indicating Continued Economic Expansion
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Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey
Employment Growth Solid in Recovery
6
Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey
Official Unemployment Rate at 4.1% and Falling
7
Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey
Underemployment at 7.9% -- Lowest Since December 2006
8
Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey.
Workforce Participation Has Begun to Rise in Non-retirement Ages. Potential for New Workers May be Large
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Historical Data Source: Haver, Inc., BLS, Recessions shown in Grey
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80
75
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65
60
55
50
85
80
75
70
65
60
55
50
Latest month plotted: Q3 2017
Labor Force Participation Rates By Age Group (NSA)
20 - 24 Years Old 25 - 54 Years Old55 - 64 Years Old
Household Financial Obligations Ratio has Risen Somewhat, but Level Still Comparable to Early 1980s
Financial obligations
have fallen on
historically low
interest rates and
debt reductions from
historically high
levels.
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*Financial Obligations Ratio (FOR) is an estimate of the ratio of
financial obligations payments to disposable personal income. It’s
a broader measure than the debt service ratio and includes
automobile lease payments, rental payments on tenant-occupied
property, homeowners' insurance and property tax payments.
Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey.
16141210080604020098969492908886848280
18.5
18.0
17.5
17.0
16.5
16.0
15.5
15.0
14.5
Latest data plotted: 2017-Q2
Household Debt Service Ratio (ratio of debt-service payments to disposable personal income),plus auto lease payments, rent on tenant-occupied property, homewoners' insurance and property tax
Household Financial Obligation Ratio
Debt High in All Sectors, but Households have brought down Mortgage Debt
11
Historical Data Source: Federal Reserve, Haver
Analytics, Inc., recessions shown in gray
Consumer inflation components have become increasingly disperse between goods, energy, food and services
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey
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876543210
-1-2-3
876543210-1-2-3
Latest data plotted: September 2017
Consumer Price Inflation12 Month Percent Change
CPI-U Services less energy services
Goods less foods and energy Owners' Equivalent Rent -- Primary Residence
Food at Home
Producer Prices Rising Broadly Again
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey
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4
3
2
1
0
-1
-2
5
4
3
2
1
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-1
-2
Latest data plotted: September 2017
Producer Prices12 Month Percent Change
Final Demand Producer Prices
Final Demand Excluding Food, Energy and Services
FIBER pointing to gradually rising inflation from lowest levels since the Great Recession
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey
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5.5
5.0
4.5
4.0
3.5
3.0
5.5
5.0
4.5
4.0
3.5
3.0
Most Recent Data: October 2017
FIBER Industrial Materials Price Index Log Scale
World Commodity Prices Challenged by Slow Demand Growth and Strong Supply in recent years
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey; Most Recent Data: Oct. 31, 2017
Headline Inflation has Led Long-term Interest Rates
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey;
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15
10
5
0
-5
20
15
10
5
0
-5
Most Recent Data: September 2017
Inflation Leads Long-term Interest Rates
10-Year Treasury interest rate CPI-U 12-month Change
Real GDP Growth has been modest during the current Economic Recovery
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Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey
Real Personal Income before taxes and transfer receipts has been volatile
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Historical Data Source: Haver Analytics, Inc. Recessions shown in Grey
Personal Income Trends Generally Upward, but real per capita disposable income growth has slowed
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey
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105100
959085807570656055504540353025201510
50
10510095908580757065605550454035302520151050
Latest month plotted: September 2017
Personal Income Growth Since 2000 (Percent)
Disposable Personal Income Real (inflation adj) Disposable P. IncomePersonal Income Per Capita Real Disposable P. Income
Net Farm Income ($Billions) has struggled in Current Expansion
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Historical Data Source: FACTSET, Inc. Recessions shown in Grey; Most Recent Data: 2015
Prices Received by Farmers rising in 2017; Highly sensitive to the business cycle and world economic conditions
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Historical Data Source: Haver Analytics, Inc.
Recessions in Grey
Business Sales Recovering After 2-Year Slump
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey
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10
0
-10
-20
-30
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10
0
-10
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Most Recent Data: August 2017
Business Sales -- Seasonally Adjusted12-Month Percent Change
Total Business ManufacturingWholesale Trade Retail Trade
Capital Goods Orders showing nascent signs of Business Equipment Recovery in 2017
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Historical Data Source: Haver Analytics, Inc.
Recessions Shown in Grey
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20
10
0
-10
-20
-30
-40
30
20
10
0
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Latest month plotted: September 2017
Non-Defense Capital Goods Excluding Aircraft12-Month Change (SA Billions$)
New Orders
Exports Growing Again as International Economy Improves
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Historical Data Source: Haver Analytics, Inc.
Recessions in Grey
1716
1514
1312
1110
0908
0706
05
32
24
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8
0
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-24
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8
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-8
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Latest data plotted: September 2017
U.S. Exports12 Month Percent Change
Exports, f.a.s.: Goods (SA, Millions $) Exports of Services (SA, Millions $)
The U.S. – Advanced Economy Export Growth Leader
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Historical Data Source: Haver Analytics, Inc.
Recessions in Grey
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170
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150
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100
90
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160
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110
100
90
80
Latest month plotted: August 2017
Export Trade VolumeMonthly (January 2003 = 100)
Total Advanced Economies United States WorldEuro Area Japan
Global Growth Strongest since May 2006
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Historical Data Source: Haver Analytics, Inc.
Recessions in Grey
Agricultural export prices show greater sensitivity to world economic conditions than non-agricultural export prices
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Historical Data Source: Haver Analytics, Inc.
Recessions in Grey
Dollar has risen strongly and held much of its gains despite drop in 2017
On Positive Side: Strong dollar could help some emerging economies to recover, although it creates debt risks for others
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Historical Data Source: Federal Reserve, Haver
Analytics, Inc., recessions shown in gray
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120
100
80
60
140
120
100
80
60
Most Recent Data: November 2, 2017
Foreign Exchange Value of U.S. DollarNominal Trade-Weighted Indexes (3/73=100)
vs. Major Currencies vs. All Currencies
Most Regional States Have Grown Faster than the National Average During the Economic Recovery
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Source: Philadelphia FRB State Coincident
Indexes
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55504540353025201510
50
-5
5550454035302520151050-5
Most Recent Data: September 2017 -- Seasonally Adjusted Data
Philadelphia FRB Coincident Economic Activity Index Since End of Recession (June 2009)
Wisconsin
U.S.
Ohio Indiana Michigan Kentucky
Pennsylvania WV Illinois
Midwest Consumer Confidence in September at Highest Since 2000
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Source: Haver Analytics, Conference Board
Recessions shown in grey
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140
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100
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60
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20
0
160
140
120
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80
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Latest month plotted: October 2017
Conference Board Consumer ConfidenceIndex 1985=100
Nation East North Central (OH,MI,IN,IL,WI)
Unemployment rates drop sharply; near their lowest points since the early 2000s in most states
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Historical Data Source: Haver Analytics, Inc.,
BLS, Recessions in Grey
September 2017
State Unemployment Decline*
Wisconsin 3.5% -5.4%
Indiana 3.8% -6.9%
Michigan 4.3% -10.6%
Pennsylvania 4.8% -3.6%
Illinois 5.0% -5.5%
West Virginia 5.1% -3.1%
Kentucky 5.2% -5.7%
Ohio 5.3% -5.4%
U.S. 4.2% -5.3%
* From end of recession June 2009
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Most Recent Data: September 2017 for States
Unemployment Rate (SA)
Michigan
Wisconsin Pennsylvania
WV
Ohio Kentucky Nation
Indiana Illinois
State Employment Has Been Growing, But at Varying Speeds
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Historical Data Source: Haver Analytics, Inc. Region: Ohio, Michigan, Indiana, Pennsylvania, West
Virginia, Kentucky, Illinois, Wisconsin
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Most Recent Data: August 2017 -- States Seasonally Adjusted Data
Percent Growth in Non-farm Payrolls since End of Recession (June 2009)
U.S.
Ohio Indiana Michigan
Kentucky Pennsylvania Illinois
Wisconsin WV
Columbus MSA Surpasses Ohio, Other Large Ohio MSAs and Nation in creating jobs in New Millennium
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Historical Data Source: Haver Analytics, Inc.
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15
12
9
6
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-3
-6
-9
-12
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9
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-3
-6
-9
-12
-15
Most Recent Data: August 2017 -- Seasonally Adjusted Data
Percent Growth in Non-farm Payrolls since January 2000
U.S.
Ohio Columbus MSA Cincinnati MSA Cleveland MSA
Private Sector Goods – the Strongest Growth Area of the Ohio Economy in the Recovery
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Historical Data Source: Haver Analytics, Inc.
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Most Recent Data: 2016
Ohio Real GSP (Chained 2009 $)Annual Rate of Change
Private Goods Private Services Ohio Total GSP
Ohio not yet experiencing the lift in exports of other states in 2017
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Historical Data Source: Haver Analytics, Inc.
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6000
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0
7000
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Most Recent Data: August 2017; Non-Seasonally Adjusted
Total Monthly Exports (Mil. $)3-Month Moving Average / Non-Seasonally Adjusted
Pennsylvania
Ohio Indiana
West Virginia Michigan
Illinois Wisconsin
Kentucky
The Philadelphia FRB Leading Indicator predicts strong regional growth in next 6 months except for Michigan and Indiana
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Source: Federal Reserve Bank of Philadelphia
Housing Markets have been generally more stable in the region than in the country
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Source: Haver Analytics, Inc.
Recessions in Grey
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Most Recent Data: Q2 2017
FHFA House Price Index - Four Quarter Percent Change
Ohio Indiana WV Illinois
Michigan Wisconsin U.S. Pennsylvania
Kentucky
Housing affordability highest in the Midwest
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Source: Haver Analytics, Inc.
National Association of Realtors (NAR)
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300
250
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150
100
50
300
250
200
150
100
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Most Recent Data: August 2017
NAR Composite Housing Affordability Index
Median family incomequalifies for 80% mortgage
on median priced home.
U.S. Midwest
South WestNortheast First Time Homebuyer U.S.
This publication contains general information. The views and strategies described may
not be suitable for all investors. Any forecasts presented are for illustrative purposes only
and are not to be relied upon as advice or interpreted as a recommendation. Individuals
should consult with their investment adviser regarding their particular circumstances. This
material has been prepared for informational purposes only, and is not intended to
provide, and should not be relied on for, accounting, legal, or tax advice. Contents herein
have been compiled or derived in part from sources believed reliable and contain
information and opinions that are accurate and complete. However, Huntington is not
responsible for those sources and makes no representation or warranty, express or
implied, in respect thereof, and takes no responsibility for any errors and omissions. The
opinions, estimates and projections contained herein are as of the date of this publication
and are subject to change without notice. This material is not intended as an offer or
solicitation for the purchase or sale of any financial instrument. Investing in securities
involves risk, including possible loss of principal amount invested. Past performance is no
guarantee of future results.
Data Sources: Haver Analytics, FACTSET and and other sources shown for applicable
slides
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Disclaimer
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