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2011 – 2012 Economic Forecast

2011 – 2012 Economic Forecast. Mr. Gene Collins John B. and Lillian E. Neff Department of Finance College of Business and Innovation The University of Toledo. Review of 2010 Forecast. The Immediate Global Banking Liquidity Crisis has been resolved – Slow Liquidity removal remains.

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2011 – 2012 Economic Forecast

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  1. 2011 – 2012 Economic Forecast Mr. Gene Collins John B. and Lillian E. Neff Department of Finance College of Business and Innovation The University of Toledo

  2. Review of 2010 Forecast • The Immediate Global Banking Liquidity Crisis has been resolved – Slow Liquidity removal remains. • Coordinated Global Credit management efforts are working unevenly • Slow growth will likely continue through the first quarter of 2013 • The increase in taxes to pay for the prior excesses has already begun • Dollar stability some strength until 2011

  3. Themes for 2011-2012 • More consistent but relatively slow growth continues through 2012. • Bank Liquidity withdraw may need to wait until 2012 as Bank Lending improves. • Manufacturing continues to grow - small inventory rebuild – dollar competitiveness • Housing continues to be a drag on the economy into 2012. • Government Deficits will continue to be a drag through 2012 as State and Local Governments reduce spending and Federal reduction perception improves

  4. 2010-11 Economic Forecast Detail

  5. 2011-12 Economic Forecast Detail

  6. Forecasted CPI

  7. Inflation –Employment - Housing • Domestic CPI will rise gradually reaching an actionable target range for the FED in H22012. • Core CPI will remain under control and show a stable to upward bias. • Unemployment Rate will not be a reliable economic indicator because of participation rate variation. The percent of the population employed will continue to decline in 2011– While employment increases. • Housing prices remain flat to weak in most areas as 2010 foreclosure postponements are pushed into 2011 with no further tax subsidies and established tighter underwriting. • The over built areas will continue to see some further price depreciation into Q 4 2011 from foreclosure pressure.

  8. Modest Inflation Expectations

  9. Unemployment Participation Rate Adjusted

  10. Stimulating Monetary Policy • Fed Funds rate will remain well below the Fed 0.5% target into Q3. QE2 $600B bond purchases could continue after June if national and global events affect domestic demand. Year end Fed Funds still below 1%. • Direct Fed stress sector lending has ended. No major liquefying of the Fed balance sheet until 2012 • The term structure of interest rates indicates low inflationary economic growth continues.

  11. Non-Stimulating Fiscal Policy • Stimulating Federal Payroll Tax Holiday • Extension of Tax reductions for 2 years • Modest Spending Increases • Some Public Works Infrastructure • State fiscal problems a major economic negative • Reductions in employment • Reductions in capital projects • Continued tax and user fee increases

  12. Steady Eddie – Slow Growth • Annual Average Expected GDP Growth • 2010 (A) 2.7 % • 2011 3.2 % • 2012 3.1 %

  13. The Future is Now • Carpe Diem

  14. Data and information resources: • LaSalle Economics, Inc (Analysis and context) • Barclays Capital Markets Research • Bloomberg LLC

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