global economic context for the us economy · 2014-06-09 · global economic context for the us...

Global Economic Context for the US Economy The research views expressed herein are those of the author and do not necessarily represent the views of CME Group or its affiliates. All examples in this presentation are hypothetical interpretations of situations and are used for explanation purposes only. This report and the information herein should not be considered investment advice or the results of actual market experience. Blu Putnam Chief Economist, CME Group June 2014

© 2013 CME Group. All rights reserved

Risk Disclosures: Futures and Swaps Trading

Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. All examples discussed are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.

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© 2013 CME Group. All rights reserved 3

Additional Risk Disclosures

The Globe Logo, CME®, Chicago Mercantile Exchange®, and Globex® are trademarks of Chicago Mercantile Exchange Inc. CBOT® and the Chicago Board of Trade® are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange, and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. CME Group is a trademark of CME Group Inc. All other trademarks are the property of their respective owners.

The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Although every attempt has been made to ensure the accuracy of the information within this presentation, CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.

All matters pertaining to rules and specifications herein are made subject to and are superseded by official CME, CBOT and NYMEX rules. Current rules should be consulted in all cases concerning contract specifications.


Global Growth: Mature Economies

4

-2% 0% 2% 4% 6% 8%

United States

Japan

Euro-Zone

United Kingdom

Source: Estimates by CME Group Economics Team

2014 Real GDP Mature Country Projections


Global Growth: Emerging Markets

5

-2% 0% 2% 4% 6% 8%

Brazil

Russia

India

China

Source: Estimates by CME Group Economics Team

2014 Real GDP Emerging Market Projections


Low Inflation: Mature Industrial Countries

6

-4%

-2%

0%

2%

4%

6%

1995 1998 2001 2004 2007 2010 2013

Year

over

year

Perce

ntag

e Cha

nge

Source: Bloomberg Professional.

Inflation: US, Germany, Japan

US

Japan

Germany


Fed Ending QE by Late 2014

7

$0

$1

$2

$3

$4

US$ T

rillio

ns

Source: Federal Reserve Bank of St. Louis FRED Database

Composition of Federal Reserve Assets

Other

MBSUST 10+ Years

US Treasuries Less Than 10-Years


ECB Balance Sheet is Shrinking

8

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1999 2001 2003 2005 2007 2009 2011 2013

Euro

Milli

ons

Source: European Central Bank Monthly Bulletins

European Central Bank Assets

Securities & Govt Debt

LoansOtherFX and Gold


Bank of Japan is Still Buying Aggressively

9

0

50,000

100,000

150,000

200,000

250,000

300,000

1997 1999 2001 2003 2005 2007 2009 2011 2013

Milli

ons o

f Jap

anes

e Yen

Source: Bank of Japan (www.boj.or.jp)

Bank of Japan Assets

Japanese Government Securities

LoansOther


Focus on United States

Budgetary Stability

Healthy Private Sector Job Growth

Job Losses from Government Sector Ending

Labor Market Dynamics in Flux

Changing Nature of US Energy Production Boom

Agricultural Risks and Drought Prospects

10


Federal Budget Coming into Balance

11

$0

$1

$2

$3

$4

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

US$ T

rillion

s

Source: US Treasury Department,Projections by CME Economics.

US Federal GovernmentRevenues and Expenditures

Expenditures

Revenues


US Private Sector Job Growth Is Healthy

12

100,000

103,000

106,000

109,000

112,000

115,000

118,000

2003 2005 2007 2009 2011 2013 2015

1000

s of P

rivate

Secto

r Job

s

Source: Federal Reserve Bank of St. Louis FRED Database (USPRIV)

US Private Sector Jobs

Private sector job growth has been about as strong as the last economic recovery -- starting from a lower base.


Governments Stopped Reducing Their Workforces in mid-2013

13

20,500

21,000

21,500

22,000

22,500

23,000

23,500

2003 2005 2007 2009 2011 2013

1000

s of G

over

nmen

t Job

s

Source: Federal Reserve Bank of St. Louis FRED Database (USGOVT)

US Federal, State, and Local Government Jobs

Census Workers (2010)

QE was never going to help state and local governments get their budgets in order --817,000 jobs were lost between April 2009 and March 2013.


Pace of Decline of Unemployment Rate

14


Duration of Unemployment: Tale of Two Indicators

15

0

1000

2000

3000

4000

5000

6000

7000

8000

in Th

ousa

nds o

f Per

sons

Number of Unemployed Persons: Short Duration vs. Long Duration

Source: St. Louis Federal Reserve FRED Database (UEMP27OV and UEMPLT5).

Long Duration Unemployment (27 + weeks)

Short DurationUnemployment(less than 5 weeks)


Part-Timers Staying Elevated due to Aging and E-Commerce

16


Participation Rate

17


Quit vs Layoff Rates

18


Aging of US Labor Force

19


Deceleration of the US Labor Force Growth

20


Monthly Job Creation: Long-Term Perspective

21


Natural Gas

22

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

1949 1957 1965 1973 1981 1989 1997 2005 2013

MM

cf

Source: US Energy Information Administration, Sourcekeys N9140US2 (Consumption) and N9010US2 (Withdrawals).

US Natural Gas Production & Consumption

Production

Consumption


Petroleum

23

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

U.S.

Field

Prod

uctio

n of C

rude

Oil

(Thou

sand

Barre

ls)

Source: US Energy Information Administration,Sourcekey MCRFPUS1.

US Crude Oil Production


Petroleum Exports and Imports

24


Coal

25

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2008 2009 2010 2011 2012 2013

Thou

sand

s of s

hort

tons

of co

al

Source: U.S. Department of Commerce, Bureau of the Census,Monthly Reports EM 545 and Monthly Report IM 145.

US Coal Exports and Imports

Exports

Imports


Corn

26

Source: United States Department of Agriculture

http://www.nass.usda.gov/Charts_and_Maps/Field_Crops/cornac.asp


California and Texas/Oklahoma Droughts

Source: University of Nebraska (May 27, 2014)

http://droughtmonitor.unl.edu/data/jpg/20140527/20140527_conus_trd.jpg

27


Ocean Surface Temperature Anomalies

Source: UNYSIS for 31 May 2014 -- http://weather.unisys.com/surface/sfc_daily.php?plot=ssa&inv=0&t=cur

28


Geo-Political Risks (Source of Black Swans ?) Scottish Independence Vote (Sept 2014)

Repercussions from EU Parliament Election (May 2014)

Brazil Presidential Election (Oct 2014)

India’s New Prime Minister (May 2014)

Russia’s Post-Crimean Annexation Ambitions (2014)

Russia-China Natural Gas Agreement (In progress)

US Congressional Elections (Nov 2014)

US Keystone Pipeline Decision (? Late 2014)

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Global Economic Context for the US Economy The research views expressed herein are those of the author and do not necessarily represent the views of CME Group or its affiliates. All examples in this presentation are hypothetical interpretations of situations and are used for explanation purposes only. This report and the information herein should not be considered investment advice or the results of actual market experience. Blu Putnam Chief Economist, CME Group June 2014

Global Economic Outlook for the Remainder of 2014

Blu Putnam, Chief Economist, CME Group June 11th, 2014

© 2014 CME Group. All rights reserved.

Disclaimer

32

Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade. All references to options refer to options on futures.

Swaps trading is not suitable for all investors, involves the risk of loss and should only be undertaken by investors who are ECPs within the meaning of section 1(a)12 of the Commodity Exchange Act. Swaps are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.

Any research views expressed are those of the individual author and do not necessarily represent the views of the CME Group or its affiliates.

CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners.

The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.

All matters pertaining to rules and specifications herein are made subject to and are superseded by official Exchange rules. Current rules should be consulted in all cases concerning contract specifications.

Copyright © 2014 CME Group. All rights reserved.

© 2014 CME Group. All rights reserved.

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Bluford Putnam

Bluford (Blu) Putnam has served as Managing Director and Chief Economist of CME Group since May 2011. He is responsible for leading economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their impact on CME Group and the company's business strategy. He also serves as CME Group's spokesperson on global economic conditions and manages external research initiatives

global economic context for the us economy · 2014-06-09 · global economic context for the us...

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