United States - The glass is still half empty - Samiran Chakraborty, Standard Chartered

50 %
50 %
Information about United States - The glass is still half empty - Samiran Chakraborty,...
Business & Mgmt

Published on March 6, 2014

Author: nasscom



United States – The glass is still half empty Samiran Chakraborty 10 November 2013

G4: The US recovery stands out Rebased GDP (Q1-2008=100) 108 US 106 104 102 100 Japan Euro area 98 UK 96 94 92 90 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Sources: Datastream, Standard Chartered Research 2

US GDP growth has shifted down a gear since the financial crisis Nominal US GDP growth (since 1990), % y/y 10 8 6 4 3.1 2 0 -2 -4 Dec-90 Jul-92 Feb-94 Sep-95 Apr-97 Nov-98 Jun-00 Jan-02 Aug-03 Mar-05 Oct-06 May-08 Dec-09 02 Jul-11 Feb-13 Source: Bloomberg, Standard Chartered Research 3

Business surveys are rather upbeat Businesses seem to have seen through the political uncertainty ISM business surveys Manufacturing 60 55 Non-manufacturing Non 50 45 40 35 30 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Sources: Bloomberg, Standard Chartered Research 4

But consumer surveys are less upbeat University of Michigan consumer confidence survey (index) 85 80 75 72.0 70 65 60 55 Nov-07 Nov-08 Nov-09 Nov-10 Nov Nov-11 Nov-12 Nov-13 Source: Bloomberg, Standard Chartered Research 5

Mortgage rates are higher than in early 2013, but gas prices are lower Average gasoline prices (USD/gallon) and average 30 30-year mortgage rates, % 5.5 4.5 Average gasoline prices (RHS) 5.0 4.0 4.5 3.5 4.0 MBA 30Y avg mortgage rate, % (LHS) 3.5 3.0 Oct-10 3.0 2.5 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Sources: Bloomberg, Standard Chartered Research 6

Car sales have moderated after a solid summer Monthly car sales, mn (annualised) 18 17 16 15 14 13 12 11 10 9 8 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Sources: Bloomberg, Standard Chartered Research 7

Unemployment vs. GDP growth: something will have to give The unemployment rate has dropped more than anticipated given the still still-soft growth backdrop US real GDP growth (%, y/y) vs. 1Y change in the unemployment rate, % -2.0 6 Unemployment, 1Y chg. (inverted, LHS) -1.0 4 0.0 2 1.0 Sep-93 2.0 GDP growth, % y/y (RHS Sep-95 Sep-97 Other assets Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 0 Sep-13 -2 3.0 4.0 5.0 -4 -6 Source: Bloomberg, Standard Chartered Research 8

US manufacturing ‘renaissance’: data is inconclusive, so far Unemployment rate, % 19 18 US manufacturing employment, mn (LHS) 105 US manufacturing production, index RHS 100 y/y gain: 2.6% 17 95 16 90 15 85 14 80 13 75 12 y/y gain: 0.5% 11 70 65 10 60 Oct-93 Feb-95 Jun-96 Oct-97 Feb-99 Jun-00 Oct-01 Feb-03 Jun-04 Oct-05 Feb-07 Jun-08 Oct-09 Feb-11 Jun-12 Oct-13 Source: Bloomberg, Standard Chartered Research 9

Still no signs that earnings growth is taking off Earnings growth (private sector), % y/y 4.0 3.5 3.0 2.5 2.0 1.5 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Source: Bloomberg, Standard Chartered Research 10

US growth: still-high headwinds in the near term high Growth expectations are being lowered (again) Evolution of the Bloomberg consensus forecast for annual GDP growth The Fed’s growth forecasts are too optimistic Current Fed forecasts (mid-point of central tendency) 3.5 Q4-2014 Q4-2016 GDP growth, % y/y 3.00 3.25 2.90 Unemployment rate, % 6.60 6.05 5.65 PCE inflation, y/y % 1.55 1.80 1.85 Core PCE, y/y % 3.0 Q4-2015 1.60 1.85 1.95 2014 2.6 2.5 N.B.:Our 2014 forecast is 2.4% 2013 2.0 1.6 1.5 Time forecast was made 1.0 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Source: Bloomberg, Standard Chartered Research 11

US export growth is plateauing Top 3 partners: recent trends US exports, USD bn Other main trade partners: recent trends Exports, USD bn 350 80 Canada 300 Japan 70 60 250 Mexico 200 150 Germany 50 40 Netherlands HK China 30 100 Korea Brazil 20 50 0 Aug-03 Australia Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 10 Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 Source: Bloomberg, Standard Chartered Research 12

US imports: less reliance on energy suppliers Top 3 partners: recent trends US imports, USD bn Other main trade partners: recent trends Imports, USD bn 500 170 450 China Japan 150 400 130 350 Canada Germany 110 300 Mexico 250 90 200 70 Saudi Arabia Korea UK 150 50 100 France 30 50 0 Aug-03 India Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 10 Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 Source: Bloomberg, Standard Chartered Research 13

October payrolls: revisions helped push up moving averages Non-farm payrolls and averages (3 and 6 months), ‘000s farm 350 NFP 300 3-month avg. 250 6-month avg. 200 150 100 50 0 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Sep Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Source: Bloomberg, Standard Chartered Research 14

The household survey posts a big drop due to a different methodology for furloughed federal staff Employment gains (‘000s) according to the two surveys 1,000 800 600 Payroll survey 400 200 0 -200 -400 Household survey -600 -800 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Source: Bloomberg, Standard Chartered Research 15

A continued fall in the US participa ipation rate, contrasting with other advanced countries’ situation Labour-force participation rate, % (seasonally adjusted) force 68 Canada 67 66 65 64 UK 63 US 62 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Source: Bloomberg, Standard Chartered Research 16

Services jobs continue to lead the job recovery, while the decline in federal jobs has decelerated Employment by sector, rebased 2005=100 130 Health and education 120 110 Other services Government (federal and local) 100 Finance & real estate 90 Manufacturing 80 Construction 70 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Note: Oil & mining jobs are not shown (c. 890,000 jobs). Source: Bloomberg, Standard Chartered Research 17

Part-time employment has moderated recently after strong gains time in the spring Part-time vs. full-time split (rebased Dec 2006=100) 115 Part-time jobs 110 105 100 Full-time jobs 95 90 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: Bloomberg, Standard Chartered Research 18

Hours worked have been stagnating Weekly hours worked (private sector) 41.5 34.8 41.0 34.6 Manufacturing (LHS) 40.5 40.0 34.4 39.5 34.2 39.0 Other assets Hours worked (RHS) 38.5 34.0 38.0 33.8 37.5 37.0 Dec-06 33.6 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: Bloomberg, Standard Chartered Research 19

The increase in mortgage rates over the summer has cooled the housing market, but fundamentals remain supportive Builders are still enthusiastic, despite higher rates NAHB survey (home builders) and new home sales, ‘000s House prices are recovering from low levels FHFA and Case-Shiller house price indices 2,500 220 80 2,000 230 FHFA index (purchase), RHS 200 60 New home sales, LHS NAHB survey, RHS 1,500 220 180 210 160 200 40 1,000 20 500 0 Oct-04 140 Oct-07 Oct-10 0 Oct-13 120 Aug-05 190 Case-Shiller 20, LHS Aug-07 Aug-09 Aug-11 180 Aug-13 Source: Bloomberg, Standard Chartered Research 20

Low inflation moving higher on the Fed’s worry list Selected core inflation measures, % y/y 3.0 2.5 Core CPI index 2.0 1.5 Core PCE index 1.0 0.5 0.0 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Source: Bloomberg, Standard Chartered Research 21

US economic dashboard moderate bond-buying programme Low inflation and still-moderate growth: no rush to reduce the Fed’s bond 6.5 7.0 US Economic Dashboard (1) 7.5 5.5 1.5 8.5 2.0 2.5 1.0 9.0 7.3 9.5 4.5 4.0 5.5 6.5 0.0 4.0 4.5 4.0 1.2 4.5 -0.5 -1.0 5.0 Core PCE inflation, % y/y 1.6 -1.0 7.5 8.0 4.5 5.0 Percent of jobs recovered 5.5 -1.5 8.5 4.6 9.0 9.5 3.5 3.0 3.5 0.0 3.5 0.5 -0.5 7.0 5.0 4.0 3.0 0.5 3.0 10.0 Unemployment rate 6.0 2.5 1.0 8.0 6.0 5.0 2.0 1.5 2 . 8 75.9 (3 months ago) Real GDP growth, y/y Legend 10.0 High-yield bond spread 6.0 -2.0 8 (3) Current levels (2) 3 months ago (1) Illustration inspired by a Dallas Fed 2013 presentation; (2) spread of the FINRA US high igh-yield corporate index (yield to maturity) to the UST 5Y yield, in percent; (3) total non-farm payrolls, as of the latest data, compared to trough versus peak; Sources: Bloomberg, Standard Chartered Research 22

The current FOMC on a dovish-hawkish scale hawkish Narayana Kocherlakota Minneapolis Fed Janet Yellen Fed Vice Chair Ben Bernanke Chairman Jeremy Stein Fed Board Esther George Kansas City Fed William Dudley New York Fed Daniel Tarullo Fed Board Sandra Pianalto Cleveland Fed Charles Plosser Philadelphia Fed James Bullard St Louis Fed Jerome Powell Fed Board Eric Rosengren Boston Fed Dennis Lockhart Atlanta Fed Charles Evans Chicago Fed John Williams San Francisco Fed Two vocal hawks are voting next year Richard Fisher Dallas Fed Jeffrey Lacker Richmond Fed Many doves were voting this year Permanent vote – dark blue | Voters in 2013 – dark green | Voters in 2014 – green Dove | Voters in 2015 – blue Hawk Note: Federal Reserve Board Member Elizabeth Duke left in August (vacant seat); Sarah Bloom Raskin was appointed to the Treasury. Sandra Pianalto indicated she will be leaving the Cleveland Fed in early 2014. Source: Fed, Standard Chartered Research 23

Global Disclaimer (page 1 of 2) Analyst Certification Disclosure: The research analyst or analysts responsible for the content of this research report certify that: (1) the views expressed and attributed to the research analyst or analysts in the research report accurately reflect their personal opinion(s) about the subject securities and issuers and/or other subject matter as appropriate; and, (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this research report. On a general basis, the efficacy of recommendations is a factor in the performance appraisals of analysts. Global Disclaimer: Standard Chartered Bank and or its affiliates (“SCB”) makes no representation or warranty of any kind, express, implied or statutory regarding this document or any information contained or referred to on the document. The information in this document is provided for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices, or represent that any such future movements will not exceed those shown in any illustration. The stated price of the securities mentioned herein, if any, is as of the date indicated and is not any representation that any transaction can be effected at this price. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. The contents of this document may not be suitable for all investors as it has not been prepared with regard to the specific investment objectives or financial situation of any particular person. Any investments discussed may not be suitable for all investors Users of this document should seek professional advice regarding the appropriateness of investors. investing in any securities, financial instruments or investment strategies referred to on this document and should understand that statements regarding future prospects may not be realised. Opinions, forecasts, assumptions, estimates, derived valuations, projections and price target(s), if any, contained in this document are as of the date indicated and are subject to change at any time without prior notice. Our recommendations are under constant review. The value and income of any of the securities or financial instruments mentioned in this document can fall as well as rise and an investor may get back less than invested. Future returns are not guaranteed, and a loss of original capital may be incurred. Foreign-currency denominated securities and financial instruments are subject to fluctuation in exchange rates that could have a positive or adverse effect on the value, price or income of such securities and financial instruments. Past performance is not indicative of comparable future results and no representation or warranty is made regarding future performance. While we endeavour to update on a reasonable basis the information and opinions contained herein, there may be regulatory, compliance or other reasons that prevent us from doing so. Accordingly, information may be available to us which is not reflected in this material, and we may have acted upon or used the information prior to or immediately following its publication. SCB is not a legal or tax adviser, and is not purporting to provide legal or tax advice. Independent legal and/or tax advice should be sought for any queries relating to the legal or tax implications of any investment. SCB, and/or a connected company, may have a position in any of the securities, instruments or currencies mentioned in this document. SCB and/or any member of the SCB group of companies or its respective officers, directors, employee benefit programmes or employees, including persons involved in the preparation or issuance of this document may at any time, to the extent permitted by applicable law and/or regulation, be long or short any securities or financial instruments referred to in this document and on the website or have a material interest in any such securities or related investment, or may be the only market maker in relation to such investments, or provide, or have provided advice, investment banking or other services, to issuers of such investments. SCB has in place policies and procedures and physical information walls between its Research Department and differing public and private business functions to help ensure confidential information, including ‘inside’ information is not disclosed unless in line with its policies and procedures and the rules of its regulators. Data, opinions and other information appearing herein may have been obtained from public sources. SCB makes no representation or warranty as to the accuracy or completeness of such information obtained from public sources. You are advised to make your own independent judgment (with the advice of your professional advisers as necessary) with respect to any matter contained herein and not rely on this document as the basis for making any trading, hedging or investment decision. SCB accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental, consequential, punitive or exemplary damages) from use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services. This material is for the use of intended recipients only and, in any jurisdiction in which distribution to private/retail customers would require registration or licensing of the distributor which the distributor does not currently have, this document is intended solely for distribution to professional and institutional investors. 24

Global Disclaimer (page 2 of 2) Country-Specific Disclosures - If you are receiving this document in any of the countries listed below, please note the following: United Kingdom and European Economic Area: SCB is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This communication is not directed at Retail Clients in the European Economic Area as defined by Directive 2004/39/EC. Nothing in this document constitutes a personal recommendation or investment advice as defined by Directive 2004/39/EC. Australia The Australian Financial Services License for SCB is License No: 246833 with the following Australia: Australian Registered Business Number (ARBN: 097571778). Australian investors should note that this document was prepared for wholesale investors only within the meaning of section 761G of the Australian Corporations Act 2011 and the Corporations Regulations. This document is not directed at persons who are “retail clients” as defined in the Australian Corporations Act 2011. Brazil: SCB disclosures pursuant to the Securities Exchange Commission of Brazil (“CVM”) Instruction 483/10: This research has not been produced in Brazil. The report has been prepared by the research analyst(s) in an autonomous and independent way, including in relation to SCB. THE SECURITIES MENTIONED IN THIS REPORT HAVE NOT BEEN AND WILL NOT BE . REGISTERED PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL AND MAY NOT BE OFFERED OR SOLD IN BRAZIL EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS AND IN COMPLIANCE WITH THE SECURITIES LAWS OF BRAZIL. China: This document is being distributed in China by, and is attributable to, Standard Chartered Bank (China) Limited which is mainly regulated by China Banking Regulatory Commission (CBRC), State Administration of Foreign Exchange (SAFE), and People’s Bank of China (PBoC). Hong Kong: This document, except for any portion advising on or facilitating any decision on futures contracts trading, is being distributed in Hong Kong by, and is attributable to, Standard Chartered Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority. Japan: This document is being distributed to Specified Investors, as defined by the Financial Instruments and Exchange Law of Japan (FIEL), for information only and not for the purpose of soliciting any Financial Instruments Transactions as defined by the FIEL or any Specified Deposits, etc. as defined by the Banking Law of Japan. Singapore: This document is being distributed in Singapore by SCB Singapore branch, only to accredited investors, expert investors or institutional investors, as defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients in Singapore should contact document. SCB Singapore branch in relation to any matters arising from, or in connection with, this document South Africa: SCB is licensed as a Financial Services Provider in terms of Section 8 of the Financial Advisory and Intermediary Services Act 37 of 2002. SCB is a Registered Credit Provider in terms of the National Credit Act 34 of 2005 under registration number NCRCP4. UAE (DIFC): SCB is regulated in the Dubai International Financial Centre by the Dubai Financial Services Authority. This document is intended for use only by Professional Clients and should not be relied upon by or be distributed to Retail Clients. United States: Except for any documents relating to foreign exchange, FX or global FX, Rates or Commodities, distribution of this document in the United States or to US persons is intended to be solely to major institutional investors as defined in Rule 15a-6(a)(2) under the US Securities Act of 1934. All US persons that receive this document by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities. Any US recipient of this document wanting additional information or to effect any transaction in any security or financial instrument mentioned herein, must do so by contacting a registered representative of Standard Chartered Securities (North America) Inc., 1095 Avenue of the Americas, New York, N.Y. 10036, US, tel + 1 212 667 0700. WE DO NOT OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS EITHER (A) THOSE SECURITIES ARE REGISTERED FOR SALE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND WITH ALL APPROPRIATE U.S. STATE AUTHORITIES; OR (B) THE SECURITIES OR THE SPECIFIC TRANSACTION QUALIFY FOR AN EXEMPTION UNDER THE U.S. FEDERAL AND STATE SECURITIES LAWS NOR DO WE OFFER OR SELL SECURITIES TO U.S. PERSONS UNLESS (i) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL ARE PROPERLY REGISTERED OR LICENSED TO CONDUCT BUSINESS; OR (ii) WE, OUR AFFILIATED COMPANY AND THE APPROPRIATE PERSONNEL QUALIFY FOR EXEMPTIONS UNDER APPLICABLE U.S. FEDERAL AND STATE LAWS. © Copyright 2013 Standard Chartered Bank and its affiliates. All rights reserved. All copyrights subsisting and arising out of all materials, text, articles and information contained herein is the property of Standard Chartered Bank and/or its affiliates, and may not be reproduced, redistributed, amended, modified, adapted, transmitted in any way without the prior written permission of Standard Chartered Bank. 25

Add a comment

Related presentations

Canvas Prints at Affordable Prices make you smile.Visit http://www.shopcanvasprint...

30 Días en Bici en Gijón organiza un recorrido por los comercios históricos de la ...

Con el fin de conocer mejor el rol que juega internet en el proceso de compra en E...

With three established projects across the country and seven more in the pipeline,...

Retailing is not a rocket science, neither it's walk-in-the-park. In this presenta...

What is research??

What is research??

April 2, 2014

Explanatory definitions of research in depth...

Related pages

Presentations | NASSCOM

United States - The glass is still half empty - Samiran Chakraborty, Standard Chartered; Global economic overview - Samiran Chakraborty, Standard Chartered
Read more

Is the glass half empty or half full - Health & Medicine

1.IS THE GLASS HALF EMPTY OR HALF FULL?If you ... The Copenhagen glass; half full or half empty and where is ... Samiran Chakraborty, Standard Chartered.
Read more

A Reflection on the Economic Trends in the Domestic and ...

A Reflection on the Economic Trends in the Domestic and ... Dr. Samiran Chakraborty Standard Chartered ... United States - The glass is still half empty ...
Read more

Global Focus 2011 – The Year Ahead - Standard Chartered

Our Team Chief Economist and Group Head of Global Research Gerard Lyons, +44 20 7885 6988, Global Alex Barrett Head of Client Research ...
Read more

Our Team Chief Economist and Group Head of Global Research Gerard Lyons, +44 20 7885 6988, Global Alex Barrett Head of Client Research ...
Read more

The Super-Cycle Report by Christian Jepsen - issuu

The Super-Cycle Report. ... Standard Chartered Bank, United States +1 212 667 ... China’s income per head will still only be half that of the US in ...
Read more