upstate new york regional advisory council …...wednesday, june 1, 2016 agenda 10:30am introductory...
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Upstate New York Regional Advisory Council Meeting
Federal Reserve Bank of New York 33 Liberty Street
10F, Paul Volcker Boardroom Wednesday, June 1, 2016
AGENDA
10:30am Introductory Remarks Jack Gutt, Executive Vice President
10:40am-11:10am The National Economy Richard Peach, Senior Vice President
11:10am-11:30am Regional Update
Jaison Abel, Research Officer 11:30am-12:00pm International Update
Matthew Higgins, Vice President 12:00pm 12:15pm 12:15pm-1:55pm
Adjourn to NWCR-10F Lunch Round Table Discussion with William Dudley, President Questions for discussion with President Dudley:
Your experience and that of your customers and suppliers can give us insight into current economic conditions. 1. Has your firm experienced an increase in demand in recent
months? 2. Has demand for your product or service increased sufficiently that you increased or plan to increase employment in 2016? 3. Has demand for your product or service increased sufficiently
that you plan to increase investment in plant and equipment in 2016?
4. Has your access to credit changed in 2016? 5. How is the labor market in meeting your needs?
2:00 pm Adjourn
Upstate New York Regional Advisory Board
Federal Reserve Bank of New York 33 Liberty Street New York, NY
Wednesday, June 1, 2016
ATTENDEE LIST
Board Members Aminy Audi CEO & Chairman of the Board L. & J.G. Stickley Lynn Marie Finn President & CEO Superior Workforce Solutions, Inc. Kenneth M. Franasiak Chairman Calamar James P. Laurito President Central Hudson Gas & Electric Corporation
Jordan Levy NY Partner Softbank Capital Linda MacFarlane President & CEO Community Loan Fund of the Capital Region Martin Mucci President & CEO PayChex, Inc. Carlos Unanue President Goya de Puerto Rico, Inc.
Federal Reserve Bank of New York
William Dudley Michael Strine Jack Gutt Richard Peach Matthew Higgins Anand Marri
President First Vice President EVP, Head of Communications & Outreach Group SVP, Research & Statistics VP, Integrated Policy Analysis VP and Head of Outreach & Education
Jaison Abel Luis Uranga Tony Davis Chelsea Cruz Edison Reyes Angela Sun
Research Officer, Research & Statistics Officer and Chief of Staff, Chief of Staff’s Office Director, Community Engagement, Outreach & Education Associate, Community Engagement, Outreach & Education Associate, Community Engagement, Outreach & Education Associate, Legal
US Macro Overview June 1, 2016
Overview
• US economic growth slowed over the past year due primarily to substantial dollar appreciation and weaker global growth.
– Consumer spending and housing continued to be the engines of growth for the US economy.
– Growth of business fixed investment slowed substantially, due in part to the sharp contraction in oil and gas drilling activity.
– Net exports exerted a substantial drag. – Inventories high relative to sales.
• Nonetheless, labor market conditions have continued to improve.
– Labor market is showing classic signs of being at or near full employment.
• Core inflation has moved up of late. – Rent inflation continues to edge higher. – Health care price inflation has moved higher. – Rate of decline of core goods prices has slowed.
2
80
100
120
140
80
100
120
140
2012 2013 2014 2015 2016
Nominal Trade-Weighted Value of US$ Index Index
Source: Federal Reserve Board
Jan-97=100
-1
-0.9
-0.8
-0.7
-0.6
-0.5
-0.4
-1
-0.9
-0.8
-0.7
-0.6
-0.5
-0.4
1947 1957 1967 1977 1987 1997 2007 2017
Log Inventory/Sales with Trend Component (HP, 1600) Ln(I/S) Ln(I/S)
Source: BEA
Note: Shading shows NBER recessions.
-25
-20
-15
-10
-5
0
5
10
15
20
25
-25
-20
-15
-10
-5
0
5
10
15
20
25
2005 2007 2009 2011 2013 2015
Imports and Exports of Real Goods 4 Quarter % Change 4 Quarter % Change
Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
Exports
Imports
0
200
400
600
800
1000
1200
1400
1600
1800
0
200
400
600
800
1000
1200
1400
1600
1800
2000 2002 2004 2006 2008 2010 2012 2014 2016
Baker Hughes US Oil Rig Count Active Oil Rigs Active Oil Rigs
Source: Baker Hughes Note: Shading shows NBER recessions.
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
2012 2013 2014 2015 2016
Aggregate Weekly Hours Worked Y/Y % Change Y/Y % Change
Source: Bureau of Labor Statistics
Note: Shading shows NBER recessions.
Goods-Producing Industries
Private Service-Providing
Industries
-6
-5-4-3-2-10123456
-6-5-4-3-2-10123456
2006 2008 2010 2012 2014 2016
Real Wage & Salary Income versus Real PCE 24 Mo % Change AR 24 Y/Y % Change AR
Source: Bureau of Economic Analysis
Note: Shading shows NBER recessions.
Real W&S Income
Real PCE
Housing Starts
0
400
800
1200
1600
2000
0
50
100
150
200
250
300
350
400
450
2000 2002 2004 2006 2008 2010 2012 2014 2016
Thousands, 3 MMA Thousands, 3 MMA
Source: Census Bureau, via Haver Analytics Note: Shading shows NBER recessions.
Total Multifamily (Left Axis)
Single Family (Right Axis)
4
Single Family Housing Market
3
4
5
6
7
8
9
10
11
12
13
-20
-15
-10
-5
0
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014 2016
12 Month % Change Months
Source: CoreLogic, National Association of Realtors, via Haver Analytics Note: Shading shows NBER recessions.
Single Family House Price Index
(Left Axis) Months’ Supply
(Right Axis)
“Normal” Range for Months’ Supply
0
0.005
0.01
0.015
0.02
0.025
0.03
0
0.005
0.01
0.015
0.02
0.025
0.03
1968 1978 1988 1998 2008
Housing Starts and Existing Homes Sales Per Capita Units Units
Source: BLS, Census Bureau, NAR
Note: Shading shows NBER recessions.
Housing Starts
Existing Home Sales
.0178 (average over 1968-2003)
.009 (average over 1968-2003)
-800-600-400-200020040060080010001200140016001800
-1000
-500
0
500
1000
1500
2000
1999 2001 2003 2005 2007 2009 2011 2013 2015
Household Formations 2 Year Avg. Change 2 Year Avg. Change
Source: Bureau of the Census Note: Shading shows NBER recessions.
Total (Left Axis)
Renter (Left Axis)
Owner (Right Axis)
500
550
600
650
700
750
800
500
550
600
650
700
750
800
1999 2001 2003 2005 2007 2009 2011 2013 2015
Credit Score at Mortgage Origination: All First Mortgages Credit Score Credit Score
Source: FRBNY / Consumer Credit Panel
Note: Shading shows NBER recessions.
Median
10th Percentile
25th Percentile
About 35 – 40 Million People
-25
-20
-15
-10
-5
0
5
10
15
20
25
-25
-20
-15
-10
-5
0
5
10
15
20
25
2005 2007 2009 2011 2013 2015
Bank Assets: Domestically and Foreign Chartered Banks % Change Year-to-Year % Change Year-to-Year
Source: Federal Reserve Board Note: Shading shows NBER recessions.
Commercial and Industrial Loans
(Left Axis)
Residential Real Estate Loans (Right Axis)
Commercial Real Estate Loans
(Left Axis)
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
60 65 70 75 80 85 90
Quarterly data1980Q1 – 2007Q4
Equipment Investment Spending and Capacity Utilization Real Business Investment in New Equipment (% Change – Year to Year)
Real Business Investment in New Equipment (% Change – Year to Year)
Source: Federal Reserve Board, Bureau of Economic Analysis
Manufacturing Capacity Utilization (Percent of Capacity)
2016 Q1:
(75.3, -0.3)
15
-8
-6
-4
-2
0
2
4
6
8
10
-8
-6
-4
-2
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012 2014 2016
Real Government Consumption and Gross Investment 4 Quarter % Change 4 Quarter % Change
Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
Federal (Left Axis)
State & Local (Right Axis)
0
2
4
6
8
10
12
56
58
60
62
64
66
68
2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent Percent
Source: Bureau of Labor Statistics, via Haver Analytics Note: Shading shows NBER recessions.
Labor Force Participation Rate
(Left Axis)
Unemployment Rate
(Right Axis)
Employment-Population Ratio
(Left Axis)
Labor Market Indicators
5
0
2
4
6
8
10
12
60
65
70
1955
1959
1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
2007
2011
2015
Labor Share of National Income and Unemployment Percent Rate
Source: Bureau of Economic Analysis, BLS Note: Shading shows NBER recessions.
Labor Share of National Income
(Left Axis)
Unemployment Rate
(Right Axis)
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012 2014 2016
12 Month % Change 12 Month % Change
Source: Bureau of Economic Analysis, via Haver Analytics Note: Shading shows NBER recessions.
Total PCE
Core PCE
FOMC Objective
PCE Deflator
-3
-2
-1
0
1
2
3
4
5
-3
-2
-1
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012 2014 2016
CPI Inflation: Core Goods and Core Services 12 Month % Change 12 Month % Change
Source: Bureau of Labor Statistics Note: Shading shows NBER recessions.
Core Goods
Core Services
Total Core CPI
6
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
2000 2002 2004 2006 2008 2010 2012 2014 2016
Rental Vacancy Rate and Rent of Primary Residence Percent 12 Month % Change
Source: Census Bureau, BLS Note: Shading shows NBER recessions.
Rental Vacancy Rate
(Left Axis)
Rent of Primary Residence (Right Axis)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Personal Consumption Expenditures: Health Care Price Index 12 Month % Change 12 Month % Change
Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.
17% of total PCE deflator 19% of core PCE deflator
-30
-20
-10
0
10
20
30
-10
-8
-6
-4
-2
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012 2014 2016
Dollar Exchange Rate and Nonoil Import Prices 12 Month % Change 12 Month % Change
Source: Federal Reserve Board, Bureau of Labor Statistics, via Haver Analytics
Note: Shading shows NBER recessions. Dollar is Board’s trade-weighted measure.
Nonoil Import Prices
(Left Axis)
Exchange Value of Dollar
(Right Axis)
7
40
42
44
46
48
50
52
54
56
58
60
-2
-1
0
1
2
3
4
5
6
2012 2013 2014 2015 2016
Manufacturing Output and the ISM Manufacturing Index 6 Mo. % Change AR Level
Source: Federal Reserve Board, ISM.
Manufacturing Output
(Left Axis)
ISM Index (Right Axis)
-0.09
-0.06
-0.03
0
0.03
0.06
0.09
-0.09
-0.06
-0.03
0
0.03
0.06
0.09
1947 1957 1967 1977 1987 1997 2007 2017
Cyclical Component of Log Inventory/Sales Log points Log points
Source: BEA
Note: Shading shows NBER recessions.
Regional Economic Conditions Jaison R. Abel, Research Officer
Upstate New York Regional Advisory Board Meeting – June 1, 2016
The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.
Overview of Regional Conditions
• Upstate New York’s slow and steady expansion lost some momentum over the past year, with little job gains seen in recent months.
• Job growth has been modest in Albany and Buffalo, and flat in Rochester and Syracuse, while steep job losses have continued to plague Binghamton.
• The region’s housing markets have generally remained stable, though home building activity has picked up recently in a few areas.
FEDERAL RESERVE BANK OF NEW YORK 1
Source: Federal Reserve Bank of New York. 2
Current Economic Conditions FRBNY Regional Business Surveys
-30
-20
-10
0
10
20
30
Jul14 Sep14 Nov14 Jan15 Mar15 May15 Jul15 Sep15 Nov15 Jan16 Mar16 May16
Business Leaders Survey (Service Sector)
Empire State Manufacturing Survey
Diffusion Index
May
Harsh Winter
Current Business Climate FRBNY Business Leaders Survey
Source: Federal Reserve Bank of New York. 3
-100
-75
-50
-25
0
25
50
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Business Leaders Survey (Current Climate)
May
Diffusion Index
Shading indicates NBER recession
Regional Consumer Confidence Overall Consumer Confidence
4 Source: Sienna Research Institute, University of Michigan.
45
60
75
90
105
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
United States
Upstate NY
May Prelim
Index Value
Shading indicates NBER recession
Q1
Regional Employment Trends Total Employment, Seasonally Adjusted
Source: Bureau of Labor Statistics and Moody’s Economy.com. 5
92
96
100
104
108
112
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
United States
Upstate Metros
Downstate NY
Apr
+2.2%
+2.0%
+0.4%
12-Month Annual Percent
Change
Index (December 2007 = 100)
Shading indicates NBER recession
Dashed Line Indicates U.S. Employment Trough (February 2010)
Sectors Driving Upstate Job Growth 3-Month Moving Average, Seasonally Adjusted
6 Source: Bureau of Labor Statistics and Moody’s Economy.com.
90
95
100
105
110
115
2010 2011 2012 2013 2014 2015 2016
Manufacturing
Leisure & Hospitality
Education & Health
Professional & Business
Government
Total
Index (February 2010 = 100)
Apr
Job Growth in the Region 12-Month Annual Percent Change
Source: Bureau of Labor Statistics and Moody’s Economy.com. 7
2.6%
1.4%
1.1% 0.9%
0.7% 0.6% 0.6% 0.2% 0.1%
-0.9%
-2%
-1%
0%
1%
2%
3%
United States
Albany Utica Syracuse
Binghamton
New York City
Kingston Dutchess- Putnam
Buffalo
Rochester
Long Island
Regional Home Price Trends CoreLogic Single-Family Home Price Index, Seasonally Adjusted
8 Source: CoreLogic Home Price Index (including distressed sales); Aggregation and seasonal adjustment by FRBNY staff.
60
70
80
90
100
110
120
130
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Buffalo
Rochester
Syracuse
United States
Albany
Index (U.S. Peak of March 2006 = 100) Dec 2011
Shading indicates NBER recession
Percent Change Dec11-Mar16
+19%
+2% +5% +7% +38%
Regional Home Building Activity Total Residential Permits, 4-Quarter Moving Average
9 Source: Census Bureau and Moody’s Economy.com.
0
200
400
600
800
1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Q1
Buffalo
Rochester
Syracuse
Albany
Number of Units
Shading indicates NBER recession
Global Economic Outlook
Upstate New York Regional Advisory Council Matthew Higgins, 1 June 2016
The views expressed here are those of the author, and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.
Roadmap Recent global economic performance and medium-term
outlook
Foreign advanced economies’ struggle to escape “lowflation”
Political economy risks in Europe
Economic outllook and risks in China
Global oil market developments and outlook
70
80
90
100
110
120
14-01 14-04 14-07 14-10 15-01 15-04 15-07 15-10 16-01 16-04
Indexes, January 2014 = 100 U.S. and EME equity performance
S&P500 FTSE EME equity index
Note: Index values are in dollar terms
-40
-30
-20
-10
0
10
20
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16
Percent positive or negative* Citigroup Economic Surprise Indexes
Advanced Economies
Emerging Economies
*Weighted by series’ historical FX impact
0
2
4
6
8
10
12
10 11 12 13 14 15 16 17 18
Global GDP Growth Percent Q/Q-4
Market Forecasts
Advanced
China
EMEs ex. China 6.3
2017:Q4
3.4
1.6
40.0
42.5
45.0
47.5
50.0
52.5
55.0
57.5
05 06 07 08 09 10 11 12 13 14 15 16
Diffusion Index
Global Manufacturing PMI
Source: Markit.
Average 2005 – 2008:Q1 = 53.2
Average 2012 – 2015:Q2 = 51.1
90
95
100
105
110
115
08 09 10 12 12 13 14 15 16
Indexes, 2008:Q1 = 100
Advanced Economy Real GDP
Japan
United States
Euro area
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
12 13 14 15 16
Percent change from year ago
G-3: Core Consumer Price Inflation
Japan
U.S.
Euro Area
Sources: BEA, Eurostat, BoJ. U.S. inflation measured using the PCE index.
1.6
0.7 0.7
0
20
40
60
80
100
08 09 10 11 12 13 14 15 16 17 18
Percent
Central Bank Credit as a Share of GDP
Japan
United States
Euro Area
Sources: BoJ, ECB, Federal Reserve. Projections assume that announced BoJ and ECB asset purchase programs proceed as planned, and that Federal Reserve credit remains constant at its current level. Nominal GDP is assumed to grow in line with current market forecasts.
AE Core Inflation Performance with Negative Policy Rates
Country Date AdoptedInitial Core
InflationCurrent Core
Inflation
Japan January 2016 0.8 0.7
Sweden Feruary 2015 0.8 1.5
Switzerland December 2014 0.1 -0.3
Denmark September 2014 0.6 0.4
Euro Area June 2014 0.7 0.7
Sources: National sources, OECD. Policy rates are as follows: Japan, marginal current account balances; Sweden, repo rate; Switzerland, 3-mo. LIBOR target; Denmark, CD rate; Euro Area, deposit rate.
-12
-10
-8
-6
-4
-2
0
2
4
-12
-10
-8
-6
-4
-2
0
2
4
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Greece: Primary Budget Balance Percent of GDP Percent of GDP
Sources: European Commission, IMF April 2016 Fiscal Monitor, staff calculations. Note: Primary balances exclude bank recapitalization costs.
Program Targets IMF Assessment
49%
41%
10%
18%
0
5
10
15
20
25
30
35
40
45
50
0
10
20
30
40
50
60
Remain Leave Undecided Brexit Odds
Brexit: Current Polls and Bookmakers' Odds Percent, 5-poll average Percent
Sources: Whatukthinks.org, Oddschecker.com. As of May 26, 2016.
Bookmakers
6
8
10
12
14
16
18
6
8
10
12
14
16
18
1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 11-Mar 25-Mar 8-Apr 22-Apr 6-May 20-May
GBP, EUR, and JPY 3m Implied Volatility Index Index
Sources: Bloomberg.
EUR
GBP
JPY
45.0
47.5
50.0
52.5
55.0
57.5
10 11 12 13 14 15 16
Diffusion Indexes
China: Manufacturing PMIs
National Stat. Bureau
Caixin
6.0
6.1
6.2
6.3
6.4
6.5
6.6
6.7
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16
China: Actual vs basket-implied exchange rate RMB per USD
Source: Bloomberg, IPA staff calculations.
RMB/dollar spot rate that would keep basket-implied RMB constant at mid-August 2015 value
RMB/$ spot rate
-250
-200
-150
-100
-50
0
50
100
150
200
10 11 12 13 14 15 16
Basic balance
Reserves
Net Private non-FDI capital flows
Chinese Capital Flows $U.S. billions
April, quarterly rate
China: Incremental Increases in Real Credit and Real GDP
0
4
8
12
16
20
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
Sources: BIS, PBoC, China National Bureau of Statistics, staff estimates and forecast.
Trillions of 2010 Rmb
Bank credit
Shadow credit and corporate bonds
Incremental increase in real GDP
20
30
40
50
60
70
80
1-yr. 2-yr. 3-yr. 4-yr. 5-yr. 6-yr. 7-yr.
June 30, 2015
January 20
May 3
U.S. dollars per barrel
Brent futures curve
Source: Bloomberg.
1-mo.
84
86
88
90
92
94
96
98
84
86
88
90
92
94
96
98
06 07 08 09 10 11 12 13 14 15 16
Global Oil Supply and Demand Millions of barrels per day
Source: International Energy Agency, Oil Market Report, various issues
Global Supply
Global Demand
Forecast