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Economic OutlookAlissa DeJonge

Vice President of Research

March 1, 2018

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Connecticut Economic Resource Center, Inc.

▪ Private, nonprofit organization; founded in 1992

▪ CERC drives economic development in Connecticut by providing research-based data, planning and implementation strategies to foster business formation, recruitment and growth

▪ Funded by utility and telecommunication companies, state contracts, and fee based services

▪ Provide research, municipal, business, real estate, and marketing services

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Presentation Outline

▪Global Trends

▪National Trends

▪Connecticut Effects

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Global TrendsStrengthening Economic Activity as a Whole

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Percentage of World GDP

27.6%

4.8%

10.0%

24.3%

14.9%

5.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2005 2015

Source: World Development Indicators Database, World Bank, Feb, 2017

(GDP in Current U.S Dollars)

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World Output Estimates

0

1

2

3

4

5

6

7

World U.S Euro Area Canada Japan U.K EmergingMarket

China Low income

2016 2017 2018Source: World Economic Outlook, October 2017

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National TrendsTax Reform Effects

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2016 U.S GDP Components

Source: World Development Indicators Database, World Bank, Feb, 2017

Personal Consumption Expenditures

65%

Business Investment

15%

Government Spending

17%

Net Exports of Goods and

Services3%

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U.S Industry TrendsAffects How Businesses Anticipate Consumer

Demand, Profitability and Competitiveness

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Property & Casualty Insurance: Adapt

Traditional insurance models need to adapt to:

• Fewer insurable workers due to robotic automation of industrial processes

• Sharing economy will shift insurance policies more toward commercial

• Fewer home owners, more renters

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Retail: The Experience

Physical stores: Experiences that make the

customer feel relaxed and comfortable lead

to increases in sales and a clear

differentiation from the online experience.

Online Stores: In addition to offering faster

delivery times, online businesses have

formed partnerships with stores for pick-up

and return options.

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Warehousing

✓ Rapid delivery

✓ Smaller packages

✓ Variety of goods

VS.Large number of same goods on pallets

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Financial Services

✓ User friendly online interface

✓ Fewer/no local bankers

✓ International expansion

New trends:

Longer-term goals:

✓ Enhancing cyber security

✓ Responding to breaches in a transparent

and customer friendly way

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Manufacturing: Automation

• Automation and robotic technology becomes more widespread for manufacturing

businesses

• Will cause disruption or displacement of jobs but will also will create approximately

15 million new jobs in the U.S. over the next ten years

A fundamental economic transition

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Construction – Slow Growth

ADVANTAGES OFFSET BY CHALLENGES

Technology advancements:-Drones, self-driving vehicles, visualization Software and hardware

Increased costs in raw materials and labor

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Healthcare

• The cost of health care and medical

procedures continues to grow

• Major focus of the industry is figuring out

ways to reduce costs without

compromising quality of care

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Connecticut

Why Millennials

Aren’t Buying

Homes?

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Housing is less affordable for millennials

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Student debt makes it hard to take on a mortgage loan

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Millennials are spending more on renting...

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Millennials are more likely to live with their parents

ConnecticutModest Economic Growth Yet Needs a Boost

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Source: Source: U.S. Bureau of Economic Analysis, Nov. 2017

Top 10 CT Industries

27.5%

12.1%

10.9%

10.5%

10.1%

6.5%

5.5%

5.1%

3.2%

3.2%

Finance, Insurance, Real Estate, Rental and Leasing

Professional and Business Services

Manufacturing

Government

Educational Services, Health Care and Social Assistance

Wholesale Trade

Retail Trade

Information

Construction

Arts, Entertainment, Recreation,Accommodation and Food Services

Percentage of 2016 GDP

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Source: CT Department of Labor

CT 2016-2017 Employment Change

-2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%

Information

Government

Leisure And Hospitality

Trade, Transportation, Utilities

Manufacturing

Construction, Natural Resources & Mining

Other Services.

Professional & Business Services

Education And Health Services

Financial Activities

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CT Median Household Income

$65,000

$66,000

$67,000

$68,000

$69,000

$70,000

$71,000

$72,000

$73,000

2010 2011 2012 2013 2014 2015 2016

Median Household Income

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Source: Federal Reserve Economic Data

CT Resident Population

3460

3480

3500

3520

3540

3560

3580

3600

3620

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Resident Population in CT

Resident Population in CT

In Thousands

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Source: Connecticut’s Population and Migration Trends: A Multi-Data Source Dive, CT Office of Policy and Management, 2016

Components of Population ChangePre- and Post-recession

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Births Deaths Net InternationalMigration

Net Domestic Migration

2004-2007 Average 2013-2016 Average

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Source: U.S Census Bureau

CT Population by Age

32% 32% 32% 31% 31% 31% 31%

33% 33% 33% 32% 32% 31% 31%

28% 28% 29% 29% 30% 30% 31%

7% 7% 7% 7% 7% 7% 7%

2010 2011 2012 2013 2014 2015 2016

Below 25 25-49 50-74 74 and over

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Source: U.S Census Bureau

CT Housing Permits 2010-2016

-1,500

-500

500

1,500

2,500

3,500

4,500

5,500

6,500

2010 2011 2012 2013 2014 2015 2016

1 Unit 2-4 Unit 5 + Units Demolitions Net Total

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Housing Unit Vacancy Rates

92% 91%

8% 9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016

Occupied Vacant

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Budget Situation Continues to Plague the State

• Uncertainties in state fiscal policies tend to

reduce confidence among businesses and

consumers

Connecticut residents believe that overall business conditions in the state are worsening and will be about the same six months from now.

-2017 Q3 InformCT Consumer Confidence Survey

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Amid Uncertainties, 2018 Economic Outlook has Positive Signs

• Projections for global and national economic growth are positive

• Estimate for Connecticut’s economic performance in 2018 is modest

• Overall industry trends affecting competitiveness of businesses will affect how companies do business in the state

• Any substantial changes in population or employment will affect Connecticut’s economy

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Thank YouAlissa DeJonge

Vice President of Research

860-571-6206

adejonge@cerc.com

@CERCInc