U.S. Forecast May 2007

U.S. Forecast May 2007

Institute for Economic Competitiveness College of Business Administration University of Central Florida

Message From D ea n T h o ma s L . K e o n

A b o ut U n i v e r s it y o f C e n t r al F l o r ida ( U C F ) T h e Un i ve r s i t y o f C e n t r a l Fl o r i d a i s a public, multi-campus, metropolitan r e s e a r c h u n i v e r s i t y, d e d i c a t e d t o serving its surrounding communities

As we head into the summer months, our thoughts often drift towards family vacations, trips to the beach and outdoor barbecues.

But this summer, things may really heat up. This comprehensive forecast addresses many critical issues facing consumers such as rising energy prices, government spending, inflation, and unemployment rates.

with their diverse and expanding populations, technological corridors, and international partners. The mission of the university is to offer high-quality undergraduate and graduate education, student development, and continuing education; to conduct research and creative activities; and to provide services that enhance the intellectual, cultural, environmental, and economic development of the metropolitan region, address national and international issues in key areas, establish UCF as a major presence, and contribute to the global c o m m u n i t y.

A b o ut t h e C o lle g e o f B u s i n e s s A dmi n i s t r ati o n The College of Business Administration a d v a n c e s t h e u n i v e r s i t y ’s m i s s i o n

The forecast also examines the housing sector.

If you think Spiderman 3 and Pirates of the Caribbean are going to be the biggest blockbusters this summer, think again. Be sure to check out what’s playing at the “Housing Hysteria Theater” on page 11. I think we may have some real Oscar contenders!

These quarterly forecasts have proven to be very successful. Information from previous editions has appeared in many national publications. Dr. Sean Snaith uses a clever and unique format to present his research. His success will soon be crossing over to broadcast as well. In the fall, Sean will begin hosting his own television show, Money Talks, and will address many of the same popular subjects included in his printed publications.

Please take a moment to look through this forecast. I think you will enjoy the latest edition.

and goals in providing intellectual leadership through research, teaching, and service. The college is striving to enhance graduate programs, while maintaining the strong undergraduate base. The college delivers research and quality business education programs at the undergraduate, masters, doctoral, and executive levels to citizens of the state of Florida and to select clientele n a t i o n a l l y a n d i n t e r n a t i o n a l l y.

Have a great summer!

L . Keon omasL. Keon ThThomas Sincerely,

Dean

Institute for Economic Competitiveness College of Business Administration University of Central Florida

F o r eca s t f o r t h e N at i o n Forecast 2006 - 2009 May 2007 Report

Publications of the Institute for Economic Competitiveness are made possible by the following staff: Dr. Sean Snaith, Director Barbie Barontini, Editor Published quarterly by the Institute for Economic Competitiveness, College of Business Administration, University of Central Florida Copyright Š 2007 Institute for Economic Competitiveness. All rights reserved.

This forecast was prepared based upon assumptions reflecting the Institute for Economic Competitiveness’ judgments as of the date it bears. Actual results could vary materially from the forecast. Neither the Institute for Economic Competitiveness nor the University of Central Florida shall be held responsible as a consequence of any such variance. Unless approved by the Institute for Economic Competitiveness, the publication or distribution of this forecast and the preparation, publication or distribution of any excerpts from this forecast are prohibited.

h i g h l i g h t s o f t h e 2 Q 2 0 0 7 F OR E C A ST In this quarter’s U.S. forecast from the University of Central Florida’s Institute for Economic Competitiveness:

H I GHL I GHTS

• Th e Federal Reserve is in fine-tuning mode when it comes to interest rate adjustment, and there will be no major movements in interest rates over the forecast horizon. We do anticipate that there may be one single 0.25% reduction in the federal funds rate to soften the impact of the housing sector on the economy.

• H ousing Hysteria Theater presents six movies that Hollywood is remaking to incorporate and exploit the media hyperbole on the housing sector.

• Th e biggest impact of the housing slowdown on the economy is over. Paltry GDP growth in the 1st quarter of 2007 will accelerate through the rest of 2007; growth for the full year is expected to come in at 2.0%.

• E nergy prices continue to plague the economy and threaten to reignite inflation, but do record gasoline prices matter?

• Th e U.S. economy resumes above trend growth in 2008 and 2009 at 2.8% and 3.3%, respectively.

• C ore inflation remains above the Fed’s comfort zone at 2.2%, but the rate of overall CPI inflation falls to 2% in 2008 and 2009.

• Th e housing soufflé continues to cool: Housing starts decline through the 3rd quarter of 2007 and then begin a slow upward climb through 2009.

• M ortgage rates slowly creep to 6.9% in 2009. Excess supply of new and existing homes in many markets will put downward pressure on prices through 2007 and into the 1st quarter of 2008.

• U nemployment rates end their three-year decline and begin to rise slightly in 2007 but still will remain below 5% before falling back to 4.7% in 2009. Payroll job growth slows to 1% in 2008 before recovering to 1.5% in 2009.

• Th e dollar will continue to depreciate against major trading partners through 2009. The trade deficit will improve as a result of the decline in the dollar, slower growth in the U.S., and stronger growth abroad.

U . S . F o r eca s t

Worry Warts?

20% level. The graph below illustrates the historical values of the anxious index, with the gray bars indicating periods of recession. The current levels of the anxious index suggest that there is some reason to be worried about the possibility of a decline in GDP in the third quarter. As the forecast horizon is lengthened, however, economists’ estimates of the probability of a decline in real GDP increase to 18.82% by the 4th quarter of 2007.

Does the preliminary real GDP growth of 1.3% for the 1st quarter of 2007 and the ongoing pain in the housing sector have economic forecasters concerned that a recession is just around the corner? The most recent release (2nd quarter 2007) of the Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia suggests that the 45 forecasters surveyed for this publication, including the author, have a moderate concern that a decline in real GDP could occur in the 3rd quarter of 2007.

The survey asks panelists to estimate the probability that real GDP will decline in the quarter in which the survey is taken and the probability of a decline in each of the following four quarters. The anxious index, a term coined by The New York Times reporter David Leonhardt, is the probability of a decline in real GDP in the quarter after a survey is taken. In the survey taken in the 2nd quarter of 2007, the index stands at 14.00%, which means that forecasters believe there is a 14.00% chance that real GDP will decline in the 3rd quarter of 2007.

Prior to each of the previous six recessions, the anxious index showed steep increases and surpassed the

Will the Fed’s Next Move Be Not to Move a t A l l ( A g ain ) ?

At seven straight Federal Open Market Committee (FOMC) meetings, the Federal Reserve has decided to keep its target for the federal funds rate at 5.25%.

The next meeting is scheduled for June 27-28. The statement that was released on May 9th during the most recent FOMC meeting suggests that the Fed is not predisposed to any movement in the federal funds rate at this point.

There are legitimate arguments on both sides of the debate to raise or lower interest rates. The argument to

FIGURE 1

The Anxious Index Probability of Decline in Real GDP in the Following Quarter Quarterly, 1968:Q4 to 2007:Q2 100 90

70 60 50 40 30 20

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

1970

0

1969

10

1968

Probability (percent)

80

Survey Date Institute for Economic Competitiveness

5

U . S . F o r eca s t

raise rates stems from the potential pressure on prices that comes from the tightness in resource markets that could push resource prices higher. Unemployment rates remain at extremely low levels nationally, and these low levels could lead to higher wages if productivity growth is not sustained. Added to this tightness in labor markets is yet another spike in energy prices that is pushing gasoline prices to new record levels. With the embers of inflation still glowing, will higher energy prices cause these sparks of inflation to burst into a full-fledged inflationary fire?

This is a concern; however, there is one key ingredient necessary to transform these embers into an inflationary fire and then sustain the fire thereafter.

That missing ingredient, the oxygen in the inflation combustion process, is higher inflationary expectations.

Whether measured via survey instruments or by examining the behavior of long-term interest rates, it is clear that, despite the current high levels of CPI inflation, expectations about future inflation remain well-contained. It would appear that confidence in the Fed, along with the multiyear string of interest rate hikes, has kept these expectations in check.

The Fed cannot afford to wait until there is evidence of rising inflationary expectations. The problem is that once the horse is out of the barn, it is too late to close the barn door. If expectations about inflation were to come untethered, it would likely take more than one 25 basis point (0.25%) hike in the federal funds rate to bring inflation back into check. The ounce of prevention pound of cure argument is not without merit.

What about the argument to cut interest rates?

Should the Fed be looking to lower the federal funds rate at one of its upcoming meetings? The basis for this argument stems from the current status of the housing market and the preliminary GDP growth for the 1st quarter of 2007. The cooling of the housing market is clearly having an impact (though not the Deep Impact many of the bubble proponents predicted), and GDP growth of 1.3% is certainly below trend. Both of these facts could justify some easing by the Fed. This quarter’s forecast includes one 0.25% decrease in the federal funds rate at an upcoming FOMC meeting, likely taking place in the 3rd quarter. This decrease is not a done deal, and the Fed could just as easily keep the federal funds rate at 5.25%. However, I think the dip in GDP may be a little too low, and the sub-prime mortgage woes are going to lengthen the time it takes to recover from the housing “hangover,” 6

U.S. Forecast

thereby explaining why a little easing could be in the cards.

The FOMC statement finished with its usual caveat: “Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.” The next several months of data releases will determine which way the Fed will go. Regardless of the direction of interest rate changes, if they occur at all, the magnitude of such changes will be small. We are in the fine tuning phase of monetary policy; it is time to put away the chainsaw and use the scalpel for the finishing touches.

S t umb l in g Ou t o f t h e Blocks As mentioned above, preliminary real GDP growth came in at just 1.3% for the 1st quarter of 2007. While that certainly does not qualify as robust growth, all things considered, it could be worse. The housing glut is in full swing; with inventories quite high in many locations, starts have dropped precipitously. Starts, by the way, are far more bubble-like in their behavior than housing prices, but more on the housing drama later.

Where do we go from here? Was the 1st quarter the apocalypse that many Chicken Littles were calling for? Well, if you are a fan of calamity or were rooting for a recession, you probably feel a little disappointed, cheated even. The slowdown in the 1st quarter is most likely the low point of the year and the worst of the fallout from the housing slump.

The final act in the housing drama, one that was played to the hilt in the media, detailed the problems that began to emerge in the sub-prime sector of the mortgage market. Sub-prime mortgages are loans made to borrowers with less than stellar credit ratings. These borrowers are a higher risk to make loans to, given their history of missing payments or late payments for other debts that appear on their credit reports. It should not be a shock to hear that these borrowers are defaulting on their mortgages and going into foreclosure at a rate that is higher than in the prime mortgage market. As we reached the tail end of this record period of housing price appreciation, Johnny-come-lately buyers were taking out loans that were destined to fail, unless the record rate of housing price appreciation continued.

Twenty-five to 30% price appreciation per year never was sustainable, and when it ended, many of these loans failed, and foreclosure ensued.

U . S . F o r eca s t

The sub-prime market represents about 14% of all first lien mortgages. One point to make here is that just because a mortgage is sub-prime does not imply that it will go into default; it just has a higher chance of default occurring. While this segment of the mortgage market is not going to be responsible for bringing down the housing sector or the economy as a whole, the resulting increase in housing inventories and subsequent tightening of lending standards will prolong the time it takes for the economy to recover from this housing hangover.

Consequently, we are lowering our forecast for 2007 GDP growth and have extended the housing hangover into the first quarter of 2008. Real GDP growth for 2007 should come in around 2.0%. The 1st quarter of 2008 will still see growth below the 3.0% level due to the lingering effects of the housing correction.

That being said, the economy will accelerate mildly throughout the remainder of the year and into 2008; however, the rate of acceleration will be modest.

E ne r g y P r ice s Ga s o l ine Se t s N ew P r ice Rec o r d s , bu t Doe s it M at te r?

Gasoline prices hit a new record high recently, surpassing the previous inflation-adjusted high reached in 1981, which was $3.20 in current dollars ($1.42 in 1981 dollars). Recent prices also topped the postHurricane Katrina high of $3.07. In the 4th quarter of 2005, consumer spending growth ground to a near halt as surging energy prices left consumers shell-shocked and sent the domestic auto and light truck industry into a deep tailspin from which it is still trying to recover.

Will this new record high have a similar effect on the consumer, causing spending to grind to a halt in the 2nd quarter of 2007? Yes and no. Consumer spending growth will slow in the second quarter, as higher gas prices sour consumer sentiment, but we will not see a replay of 2005. The sudden spike in gasoline prices was accompanied by even more dramatic natural gas price increases in 2005, and this increase came just as the country was headed into home heating season. Also at that time, the psychology was different; this spike was a sudden jolt into a whole new level for energy prices. This time around, there is a bit of the “been there, done that” psychology at play. Sure,

nobody enjoys higher prices for gasoline, but the shock and awe of post-Katrina energy prices are not present this time around.

The seesawing of energy prices during the past year and a half puts uncertainty into the consumer’s budget and erodes consumer confidence. Continuing volatility has the potential to cause a cumulative effect of lowering average consumer confidence and dragging down spending.

Another risk is that we have not yet seen the peak of energy prices. We are forecasting that oil prices remain in the $60-$68 range throughout our forecast horizon.

However, the supply of oil and gasoline is tight, with very little to no excess capacity. The forecast is for an active 2007 hurricane season this year (those guys are kind of like the housing bubble crew – doom and gloom that never plays itself out) raising the spectre of a replay of hurricane Katrina. The possible disruption from political unrest or terrorism is an ongoing concern. The recently disrupted plot to attack major oil facilities in Saudi Arabia demonstrates this ongoing terrorist interest in attacking Saudi oil production.

The potential for a supply induced surge in prices coupled with existing global demand could lead to a much larger surge in energy prices with economic repercussions much more far-reaching than what we have experienced to date.

I n v e s t men t Corporate profit growth is slowing significantly (record setting on Wall Street certainly does not reflect this as of now), and after five years of incredibly fat bottom lines, this slowing profitability will begin to have an impact on investment spending. 2007 will bring relatively high levels of investment growth, as many firms still have war chests of retained earnings, and interest rates remain low. Investment will be slower than in 2006, with growth in the high single digits. Looking beyond 2007, we anticipate that firms will be more interested in adding bodies rather than buildings, and nonresidential investment in structures will decelerate significantly through 2009, with growth turning slightly negative by the end of our forecast horizon.

Residential fixed investment growth, on the other hand, had already begun to sour in 2006, and the contraction will continue through 2008. 2007 will be the worst year for residential fixed income growth, with a double-digit decline of more than 16%, as developers Institute for Economic Competitiveness

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U . S . F o r eca s t

have severely cut back on projects in the wake of high inventories and moderated demand. In 2009, the housing sector should be out of the doldrums, and residential fixed investment should return to a more sustainable rate of growth of 6.4%.

G o v e r nmen t Spen d in g Now that the house and senate are in the hands of Democrats and a Republican is in the White House, neither party has the freedom to push its agenda through the legislative and budgetary process with impunity. Consequently, we are expecting the growth rate of government expenditures to slow each year from 2007 through 2009. Unfortunately, as the economy slows, receipts which grew at a strong pace in 2005 and 2006, will grow more slowly as well. The federal deficit which has narrowed for several years, primarily as a result of the surge in receipts, will reverse course and worsen slightly in 2008 and 2009.

The fiscal policy picture is complicated by the fact that there is the upcoming presidential election in 2008, and numerous candidates have declared their intention to run. It is highly unlikely that any major change in the course of discretionary fiscal policy could transpire prior to the election, so the changes in spending and receipts will reflect the underlying cyclical movements in the economy.

Political prognostication makes economic forecasting look like child’s play, but it is hard to imagine, given the approval rating of the current administration, that a Republican president can win the upcoming election. With a Democrat in the White House, we would expect the tax burden to rise, looking at 2009 and beyond. It will likely be the case that the U.S. presence in Iraq would be significantly reduced after the election (regardless of which party wins), and the reduction in expenditures that have been going to fund the war in Iraq, if not then allocated to other spending, would help shrink the deficit.

We expect real government spending growth to slow to less than 2% from 2007-2008. The eventual reduction of military expenditures in Iraq will help slow spending growth beyond 2008, and in 2009, we anticipate real government spending to contract for the first time in over a decade.

State and local government spending will expand at a decreasing rate from 2.4% growth in 2006 to 1.0% growth in 2008-2009. Many states are still spending as a result of playing infrastructure catch-up after three 8

U.S. Forecast

years of sub 1% growth in spending and a backlog of projects extended by infrastructure needs stemming from the housing boom. The slowdown in spending will also be a result of tax coffers that are no longer overflowing from real estate taxes, impact fees, sales taxes, and other revenues buoyed by the “house-apalooza.”

Net Exports Domestic demand for goods and services has eased in the wake of the housing boom, but foreign demand for U.S. goods and services will help ease the slowdown in domestic markets. For the first time since 2001, net exports, which have had a downward pull on GDP since 1975 (the last time the U.S. had a trade surplus), will show an increase (a shrinking of the deficit) in the 2007-2009 time frame. While the overall trade balance will still be a sizeable deficit, the deficit will shrink over our forecast horizon. The U.S. dollar has been depreciating significantly against our major trading partners for the past several years, and that depreciation, which initially worsened the trade balance (the J-curve of textbook legend) has started to affect trade flows. We are forecasting that this depreciation will continue through 2009 (and probably beyond).

The U.S. dollar has even fallen against the Chinese Renminbi.

The weakening dollar and the slowing U.S. economy will cause import growth to decelerate from the doubledigit growth of the past three years to an average of 5% from 2007 to 2009. Export growth will average nearly 10% during the same time period, thanks to the weakened dollar and strong economic growth in the rest of the world.

The flow of capital from the rest of the world continues to pour into the United States. In the next few weeks, the U.S. Treasury department’s report on foreign holdings of U.S. securities is due to be released.

The report covers holdings as of June 2006 and has detailed information on who the U.S. government and corporations are borrowing from. Preliminary data released from this report reveals that foreigners were holding almost $2 trillion worth of marketable U.S. Treasury debt. This represents more than 50% of the total U.S. Treasury debt.

This flow of capital into the U.S. from abroad has been an important factor in allowing the current U.S. expansion to continue. The federal government continues to run large budget deficits, and within the

U . S . F o r eca s t

past eight months the Federal Reserve Bank ended a two-year campaign of interest rate hikes, yet interest rates have remained at very low levels historically. What gives? Well-contained expectations about inflation are part of the story, which we will touch on below.

The bigger piece of the puzzle is foreign purchases of Treasury bonds, which keeps their prices high and yields much lower than they otherwise would be.

There is very little talk about how government budget deficits “crowd out” private investment. During the Reagan administration, another period when record budget deficits were the norm, crowding out was a common concern raised often in discussion of fiscal policy. In 1984, interest rates on the 10-year Treasury bonds were in the range of 13% to 14%, and they are in the 4% to 5% range today. Many private sector investments would not take place with interest rates at 13% or higher, but these same investments become profitable and, thus, take place when interest rates are just 4%. One of the key differences between these two historical periods is foreign ownership of government debt. In 1984, only 22% of outstanding debt was held by foreigners, while currently this percentage is much higher, as noted above.

While the trade deficits are a drag on growth, the capital flows that are the flip side of this deficit have bolstered the U.S. economy and boosted output which offsets the trade deficit many, many times over.

If interest rates had recently risen to the same levels witnessed in the Reagan era, the housing boom would have never taken place, investment spending by firms would have been drastically lower, and the current tepid pace of growth we are now experiencing would seem blistering by comparison.

I nf l a t i o n : Li k e A l P acin o in G o d fa t h e r I I I ?

Just when you thought inflation was out, it keeps pulling you back in. Thanks again to another spike in energy prices we are going to see CPI inflation surge over 5% in the 2nd quarter of this year. This surge appears to be another transitory event, and even though energy prices are not likely to fall precipitously, they will most likely retreat going into the 3rd quarter.

Labor markets still remain very tight, and the unemployment rate is still at a very low level. Labor costs continue to be pushed upward, and coupled with some evidence of slowing productivity, the possibility of a wage-price inflation spiral taking hold exists.

Inflationary expectations, a key measure of how deeply rooted inflation has become in the economy, continue to remain contained. The spread between the 10-year Treasury bond and the 10-year inflation indexed Treasury bond indicates that inflationary expectations have not shown much upward movement.

This spread can be thought of as a measure of inflationary expectations.

The official reserve purchases of Treasury bonds by foreign central banks for the purpose of exchange rate management may have lowered the yield on 10-year bonds and, consequently, may be distorting this spread.

However, new survey data on inflationary expectations does indicate that expectations are remaining contained. The Philadelphia Federal Reserve Bank’s Survey of Professional Forecasters for the 2nd quarter of 2007 shows that the expected average rate of CPI inflation is 2.47% for the next 10 years.

Looking forward, we expect CPI inflation to moderate over the forecast horizon. Consumer price inflation should fall from the peak level in the 2nd quarter of 2007 to around the 2.0% level through 2009. Core inflation should stabilize around 2.2% looking forward. This level of core inflation is above the reported 1% to 2% comfort range for the Federal Reserve. It seems unlikely that any action would be taken to bring down core inflation by 0.2%, but if it does rise above these levels, the Fed may have to take action.

U nemp l o y men t Since 2003, unemployment rates have been steadily falling and appear to have bottomed out around 4.5%.

This downward trend is coming to a close in 2007.

Given the extremely low level of unemployment, a reversal of trend is not something to necessarily be alarmed about. Unemployment will rise slightly throughout the rest of 2007 and into 2008, where it will stabilize at just below 5%. In 2009, we expect that unemployment will begin to decline once again as the economy regains momentum.

The proposed increases in the federal minimum wage will likely pass but have no perceivable impact on unemployment rates. Even though the current minimum wage will rise to $7.25/hour, it will have little impact on overall unemployment. Market wage rates are already at or above the proposed minimum wage levels in most areas, so there is not going to be much fallout as a result of this pending legislation. The Institute for Economic Competitiveness

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reality is that market forces raised the minimum wage long before legislators got around to it.

We expect that the unemployment rate will rise through 2007 and hit 4.9% in the 1st quarter of 2008, where it will stay for the remainder of the year. In the 1st quarter of 2009, the unemployment rate will begin to decline once again, and we are forecasting it to fall to 4.6% in the 4th quarter of 2009. The decline in the unemployment rate will be driven by strong GDP growth in the second half of 2008 and 2009. The slight increase in unemployment during the intervening quarters will be fueled by continued job losses in the manufacturing, information, financial, and construction sectors. Job losses in the latter two sectors are part of the fallout from the cooling housing sector.

H o u s in g D r ama The latest episode in the hyperbole-filled world of the housing sector centered on the segment of the mortgage market known as sub-prime mortgages, as we touched upon earlier. These mortgages have higher rates of delinquency, and borrowers in this segment end up in foreclosure at a higher rate than their counterparts with better credit ratings. When some of the problems with these mortgages started to come to light, the drama in the media ramped up very quickly, and predictions of a crisis in the mortgage market began broadcasting though media outlets of every type. It wasn’t too long before politicians jumped on board and added to the hype and started screeching for the need for bailouts for “victims” of the sub-prime mortgage sector.

Fortunately, the cacophony didn’t last long, and again we are left with a cooling housing sector that, in the aggregate, will not have the devastating outcome predicted by so many economists. The soufflé metaphor stands as a more accurate description of what has happened and what is going to happen in the housing sector. As long as DEMAND remains in place (the determinants and underpinnings of demand are the key ingredients of the soufflé recipe we reprinted here in our first U.S. forecast in September 2006), the housing correction will be just that – a correction and not a recession. Regions that have endured housing price recessions all have a common thread – the economic underpinnings of demand were lost. Whether it was the oil bust in Texas in the 80’s, or the California housing recession in the early 90’s (driven by defense spending cuts and high unemployment resulting from these 10

U.S. Forecast

cuts), or what is happening in areas hit by cuts to the automotive industry - all of these housing recessions share the common trait of withering demand. However, for several years now, many of my colleagues were predicting a pretty catastrophic end to the remarkable housing boom. Many predicted that a recession would precipitate from the collapse of the alleged speculative bubble in the housing market. One economist was so sure that there was a bubble in housing that was going to burst and send house prices plummeting that he sold his home before his nightmare scenario could play itself out. That was 2004, and his wife and children probably still hate him.

If my contemporaries can be so apocalyptic and let’s be frank here, economists are not noted for their excitability or flair for the dramatic, should it be any surprise that Hollywood has jumped on the bandwagon?

I still have some connections in California and in Los Angeles in particular, and as a result, I have had access to some movie posters from projects that are underway. Given current events and Hollywood’s proclivity toward remakes and sequels, is it any surprise that there are several projects underway that are remakes of previous movies, but this time with a housing bubble theme running through them? I feel bound by duty to share them with you, even if movie studio thugs may come knocking at my door. It is with this sense of duty that I present to you six features now playing in the Housing Hysteria Theatre.

All six of our features are remakes of previous celluloid releases, some classics and some, well, let’s just call them almost classics. Listed below are the original movies, and under the marquee are the posters for the housing related remakes.

1. Primal Fear starring Richard Gere 2. Armageddon with Bruce Willis 3. Not Without My Daughter starring Sally Field 4. The Boy in the Plastic Bubble starring John Travolta 5. The Grapes of Wrath starring Henry Fonda 6. Flipper with Paul Hogan and Elijah Wood

U. s. F o r E C A s t

Institute for Economic Competitiveness

11

tomobile and Light Truck Sales May 2007 (Millions Vehicles)

Charts

99 00 01 02 03 04 05 06 07 08 09 Auto Sales Light Truck Sales

F OR E C A ST f o r t h e na t i o n

U . S . F o r eca s t C h a r t s

30-Year Mortgage Rates and Housing Starts 8.5

(Mortgage rates - Left axis, %)

2.20

8.0

2.00

7.5 7.0

1.80

6.5

1.60

6.0

1.40

5.5 5.0

97 98 99 00 01 02 03 04 05 06 07 08 09 30-Year Fixed Mortgage Rate Housing Starts - Millions

1.20

Automobile and Light Truck Sales 11.0

(Millions Vehicles)

10.0 9.0 8.0 7.0 6.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Auto Sales Light Truck Sales

Consumer Prices 4.0

(% Change Year Ago)

3.0 2.0 1.0 0.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Consumer Price Index Core Consumer Price Index Institute for Economic Competitiveness

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Federal Budget Surplus (Billions of Dollars)

300.0 200.0 100.0 0.0 -100.0 -200.0 -300.0 -400.0 -500.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Federal Budget Surplus

Real GDP Growth and Federal Funds Rate 8.0

(%)

6.0 4.0 2.0 0.0 -2.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Quarterly Growth Rate Real GDP Fed Funds Rate

Money Supply

20.0

(Annual Growth Rate %)

15.0 10.0 5.0 0.0 -5.0 -10.0

14

U.S. Forecast

96 97 98 99 00 01 02 03 04 05 06 07 08 09 Annual Growth Rate of M2 Annual Growth Rate of M1

U . S . F o r eca s t C h a r t s

Industrial Production 125.0 120.0 115.0 110.0 105.0 100.0 95.0 90.0 85.0

(2002=100)

97 98 99 00 01 02 03 04 05 06 07 08 09 Industrial Production

Manufacturing Employment 18.0

(Millions)

17.0 16.0 15.0 14.0 13.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Manufacturing Employment

Total Nonfarm Payroll Employment 145.0

(Millions)

140.0 135.0 130.0 125.0 120.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Total Nonfarm Employment Institute for Economic Competitiveness

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U . S . F o r eca s t C h a r t s

Real Disposable Income and Consumption 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 -1.0

(% Change Year Ago)

96 97 98 99 00 01 02 03 04 05 06 07 08 09 Real Disposable Income Consumption

Civilian Unemployment Rate 6.5

(%)

6.0 5.5 5.0 4.5 4.0 3.5

97 98 99 00 01 02 03 04 05 06 07 08 09 Unemployment Rate

Yield Curve 7.0

(%)

6.0 5.0 4.0 3.0 2.0 1.0

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U.S. Forecast

97 98 99 00 01 02 03 04 05 06 07 08 09 1-Year T-Bill Yield 5 Year Treasury Bond Yield 25 year Treasury Bond Yield

U . S . F o r eca s t C h a r t s

0 -100 -200 -300 -400 -500 -600 -700 -800

Trade Balance and Real Exchange Rate

1.20 1.10 1.00 0.90 0.80 0.70

97

98

99 00 01 02 03 04 05 06 07 08 09 Trade Balance (Billions $) Left axis U.S. Dollar Real Exchange Rate (2000 = 1.0) Right axis

0.60

Twin Deficits 400.0

(Billions of Dollars)

200.0 0.0 -200.0 -400.0 -600.0 -800.0 -1000.0

97 98 99 00 01 02 03 04 05 06 07 08 09 U.S. Federal Budget Surplus Current Account

Change in Real Business Inventories 150.0

(Billions of 2000 Dollars)

100.0 50.0 0.0 -50.0 -100.0

97 98 99 00 01 02 03 04 05 06 07 08 09 Change in Real Business Inventories Institute for Economic Competitiveness

17

2006

2007

Forecast 2008

2009

2053.9 999.1 219.5 87.8 691.7

Federal Government Receipts and Expenditures 2016.2 1853.2 1879.9 2001.0 2246.8 2538.2 994.5 830.5 774.5 801.4 927.9 1060.0 164.7 150.5 197.8 244.5 326.4 388.5 85.8 87.3 89.7 94.6 101.1 100.8 717.5 734.3 758.9 802.2 855.4 919.7

2687.4 1145.2 401.8 101.7 968.2

2794.5 1190.4 412.2 104.7 1011.7

2949.1 1263.3 431.2 108.7 1066.3

1864.4 578.8 370.3 208.5 1038.1 770.0 18.3 247.3 263.2 46.1 189.5

1969.5 612.9 392.6 220.3 1131.4 838.7 14.0 276.1 240.2 53.1 46.7

2859.4 971.2 656.4 314.8 1656.1 1246.1 27.5 379.3 288.3 51.3 -172.1

3013.8 1013.7 684.9 328.9 1755.6 1322.2 29.6 400.3 305.5 50.7 -219.4

3140.6 1035.6 693.7 341.9 1843.8 1387.7 30.6 421.9 324.3 51.3 -191.5

State and Local Government Receipts and Expenditures 893.2 915.8 929.0 979.5 1060.9 1154.4 1233.6 1287.7 236.6 242.7 221.3 226.6 248.4 275.2 300.6 321.4 35.6 30.2 32.2 35.3 43.1 58.0 68.7 70.3 621.1 642.8 675.5 717.5 769.4 821.2 864.2 896.0 11.0 13.7 15.8 19.8 24.3 25.3 24.8 25.5 247.3 276.1 304.6 338.5 349.0 361.1 358.0 379.3

1344.4 340.5 71.3 932.6 26.3 400.3

1409.7 363.6 73.1 973.1 27.3 421.9

1975.4 1765.0 467.7 31.6 4.5 2.8 0.0 -8.3

2055.1 1826.0 499.0 31.9 3.5 2.9 0.0 12.0

2000

2001

History 2002

May 2007

1368.2 1212.8 305.2 5.2 3.6 2.0 0.0 4.8

1444.3 1281.5 332.0 16.5 -1.6 2.0 0.0 -34.2

2252.1 756.4 497.2 259.2 1328.7 963.7 23.6 338.5 196.5 45.4 -372.2

1514.6 1336.0 353.0 24.8 0.7 2.2 0.0 -20.4

ta b l es

1269.5 1142.8 271.7 -4.5 -7.1 1.9 0.0 50.0

2101.1 679.7 437.1 242.5 1243.0 916.9 18.8 304.6 213.7 39.1 -248.0

2003

2004

2383.0 825.9 551.3 274.7 1393.3 1015.4 25.9 349.0 205.3 45.5 -382.0

1605.5 1400.4 382.9 29.7 4.1 2.4 0.0 -12.9

2005

2555.9 878.3 589.3 289.0 1476.7 1078.6 33.9 361.1 238.0 61.8 -309.2

1703.9 1494.5 402.3 30.7 10.8 2.4 0.0 -3.3

2691.8 926.6 621.0 305.6 1551.1 1167.3 22.7 358.0 264.4 53.5 -153.6

1785.1 1601.1 399.6 32.1 8.9 2.6 0.0 2.6

F O R E C A S T for t h e n at i o n

1903.7 1703.5 440.5 32.4 8.3 2.7 0.0 -29.3

U . S . F o r eca s t Tab l e s Table 1. Annual Summary of the U.S. Forecast

Table 1. Summary of the Long-Term Forecast of the U.S.

Gross Domestic Product Final Sales of Domestic Product Total Consumption Durables Nondurables Services Nonresidential Fixed Investment Equipment & Software Information Processing Equipment Computers & Peripherals Communications Equipment Industrial Equipment Transportation Equipment Aircraft Other Equipment Structures Commercial & Health Care Manufacturing Power & Communication Mining & Petroleum Other Residential Fixed Investment Exports Imports Federal Government State & Local Government Real GDP Nominal GDP GDP Deflator Consumer Prices Excl. Food & Energy Producer Prices, Finished Goods Employment Cost Index - Total Comp.

Oil - WTI ($ per barrel) Productivity (% change) Industrial Production (% change) Factory Operating Rate Nonfarm Inven. Chg. (Bil. of 2000 $) Consumer Sentiment Index Light Vehicle Sales (Million units) Housing Starts (Million units) Existing House Sales (Million units) Unemployment Rate (%) Payroll Employment (% change) Federal Surplus (Unified, FY, bil. $) Current Account Balance (Bil. $)

1998

1999

2000

2001

4.2 4.2 5.0 11.3 4.0 4.2 9.3 13.3 22.0 44.7 16.0 3.6 6.3 39.3 21.4 5.2 5.8 3.4 15.4 -7.7 5.4 7.6 2.5 11.7 -1.1 3.6

4.4 4.5 5.1 11.8 4.6 4.0 12.1 12.7 21.2 41.4 19.2 -0.1 16.8 51.6 11.8 -0.4 3.2 -22.6 17.3 -8.5 0.9 6.1 4.3 11.4 2.2 4.7

3.7 3.8 4.7 7.4 3.8 4.5 11.1 9.4 17.4 21.1 30.1 7.7 -4.0 2.8 -10.3 6.8 6.3 -5.4 15.1 27.7 2.9 0.8 8.8 13.2 0.9 2.7

0.8 1.6 2.5 4.3 2.0 2.4 9.2 -4.8 -1.6 2.6 -7.1 -8.4 -11.7 3.7 -25.3 -2.1 -5.0 -10.2 3.0 18.5 -4.8 0.4 -5.3 -2.6 3.9 3.2

9066.9 9470.4 9817.0 9890.7 8747.0 9268.4 9817.0 10128.0 1.1 1.5 2.3 -0.5 3.4

1.6 2.6 2.0 2.9 3.5

History 2002

2006

2007

Forecast 2008

2009

Composition of Real GDP, Percent Change 1.6 2.5 3.9 3.2 3.3 1.2 2.5 3.5 3.5 3.1 2.7 2.8 3.9 3.5 3.2 7.2 5.8 6.4 5.5 5.1 2.5 3.2 3.6 4.5 3.7 1.9 1.9 3.5 2.6 2.6 8.7 -4.1 -8.8 3.3 10.4 -6.1 2.8 7.2 9.0 6.5 -4.6 5.8 10.2 8.5 8.8 5.4 13.1 14.3 18.0 16.6 -21.0 1.4 10.5 12.4 11.8 -7.3 2.9 -4.0 8.1 6.1 -10.9 -6.2 19.4 12.8 0.2 -26.6 -22.3 -6.8 -20.9 -22.1 -0.4 -8.7 27.7 16.7 6.4 -17.0 -3.9 2.2 1.1 9.0 -15.6 -6.4 2.6 -0.8 7.1 -41.2 -6.0 5.2 21.4 12.3 -6.5 3.7 -1.5 -12.6 -12.4 -23.1 18.2 13.4 11.0 11.1 -15.4 -4.3 3.1 -5.1 13.0 4.8 8.4 10.0 8.6 -4.1 -2.0 1.3 9.2 6.8 8.9 3.5 4.1 10.8 6.1 5.8 7.0 6.8 4.3 1.5 2.0 0.5 2.1 3.1 0.2 0.5

2.0 2.3 3.1 3.4 2.7 3.2 9.4 1.6 7.1 19.3 6.0 0.7 -3.9 32.6 -23.7 6.8 7.7 10.8 5.1 3.1 9.5 -16.3 6.3 2.2 1.8 2.4

2.8 2.7 2.7 2.5 2.9 2.6 7.0 4.7 7.0 16.6 4.0 -2.5 9.4 14.3 10.9 0.9 -4.9 9.0 8.7 2.5 2.7 -4.9 9.2 3.9 1.9 1.0

3.3 3.2 3.0 4.7 2.8 2.8 5.5 7.6 7.1 19.2 3.4 4.3 17.0 13.9 26.8 -0.5 -0.3 13.3 1.9 -9.7 1.9 6.4 9.0 5.9 -0.2 1.0

Billions of Dollars 10301.1 10703.5 11048.6 11415.3 10960.8 11712.5 12455.8 13246.6

11645.1 13851.1

Prices & Wages, Percent Change, Annual Rate 1.7 2.2 3.1 3.1 2.5 2.2 1.9 3.3 3.7 1.9 2.0 1.2 2.1 2.1 2.6 3.5 4.5 5.1 0.3 1.0 3.1 3.9 3.7 2.8 3.2

2.4 2.6 2.1 3.9 3.0

2.0 1.8 2.2 1.4 3.1

2.0 2.0 2.2 1.0 3.4

10048.9 10469.6

2003

2004

2005

11966.4 12363.1 14516.0 15297.4

2.2 3.4 2.6 3.8 4.4

2.4 1.9 2.7 -1.1 4.0

14.4 19.3 30.4 2.8 2.9 2.8 6.1 4.7 4.6 81.7 80.8 80.1 71.2 71.5 57.8 104.6 105.8 107.6 15.506 16.888 17.342 1.621 1.647 1.573 4.492 4.636 4.614 4.5 4.2 4.0 2.6 2.4 2.2 70 122 236 -214 -300 -415

26.0 2.6 -3.5 73.9 -31.8 89.2 17.115 1.601 4.727 4.7 0.0 127 -389

26.1 4.1 0.1 73.0 15.2 89.6 16.816 1.710 4.997 5.8 -1.1 -160 -472

Other Measures 31.1 41.5 56.6 3.7 3.0 2.1 1.1 2.5 3.2 74.2 76.6 78.8 14.0 47.0 19.6 87.6 95.2 88.6 16.643 16.866 16.948 1.854 1.949 2.073 5.443 5.914 6.182 6.0 5.5 5.1 -0.3 1.1 1.7 -375 -411 -321 -528 -665 -792

66.1 1.6 4.0 80.4 40.6 87.3 16.499 1.817 5.707 4.6 1.9 -248 -857

64.0 1.5 1.6 79.9 13.6 89.5 16.356 1.403 5.199 4.7 1.2 -192 -818

62.4 2.3 2.2 79.9 26.2 90.4 16.544 1.470 4.908 4.9 1.0 -227 -784

63.0 2.0 3.0 80.6 46.8 92.5 16.793 1.663 5.073 4.7 1.5 -235 -804

Financial Markets, NSA 1.13 1.35 3.21 1.01 1.36 3.13 1.24 1.89 3.62 2.97 3.43 4.05 4.02 4.27 4.29 5.05 5.12 4.56 5.82 5.84 5.86 964 1131 1207 -1.3 18.0 6.8 0.916 0.840 0.825 -12.3 -8.1 -1.8

4.96 4.72 4.93 4.75 4.79 4.87 6.42 1311 8.6 0.813 -1.4

5.22 4.93 5.00 4.68 4.74 4.89 6.25 1462 11.6 0.781 -3.9

5.07 4.96 5.08 5.02 5.09 5.26 6.64 1527 4.5 0.741 -5.2

5.01 4.92 5.12 5.24 5.33 5.62 6.89 1609 5.4 0.718 -3.1

10883 6.3 9523 5.4 8313 2.6 -1.1 1336 19.4

11505 5.7 10038 5.4 8576 3.2 -1.1 1404 5.2

12107 5.2 10576 5.4 8875 3.5 -0.4 1444 2.9

12816 5.9 11190 5.8 9205 3.7 0.2 1466 1.6

Federal Funds Rate (%) 3-Month Treasury Bill Rate (%) 1-Year Treasury Note Yield (%) 5-Year Treasury Note Yield (%) 10-Year Treasury Note Yield (%) 25-Year Treasury Note Yield (%) 30-Year Fixed Mortgage Rate (%) S&P 500 Stock Index (% change) Exchange Rate, Major Trading Partners (% change (negative = depreciation))

5.35 4.79 5.05 5.15 5.26 5.58 6.94 1084 24.8 0.969 4.8

4.97 4.63 5.08 5.54 5.64 5.86 7.43 1326 22.3 0.953 -1.6

6.24 5.81 6.11 6.15 6.03 5.95 8.06 1427 7.7 1.000 4.9

3.89 3.43 3.48 4.55 5.02 5.50 6.97 1192 -16.4 1.060 6.0

1.67 1.61 2.00 3.82 4.61 5.42 6.54 996 -16.7 1.044 -1.5

Personal Income (Bil. of $) (% change) Disposable Income (Bil. of $) (% change) Real Disposable Income (Bil. Of 2000 $) (% change) Saving Rate (%) After-Tax Profits (Billions of $) (% change)

7423 7.3 6396 6.8 6664 5.8 4.3 470 -14.8

7802 5.1 6695 4.7 6862 3.0 2.4 517 10.1

8430 8.0 7194 7.5 7194 4.8 2.4 508 -1.6

8724 3.5 7487 4.1 7333 1.9 1.8 504 -0.9

8882 1.8 7830 4.6 7562 3.1 2.4 576 15.2

Incomes 9164 9731 3.2 6.2 8163 8682 4.2 6.4 7730 8011 2.2 3.6 2.1 2.0 665 844 15.6 27.3

10239 5.2 9036 4.1 8105 1.2 -0.4 1119 32.6

Institute for Economic Competitiveness

19

U . S . F o r eca s t Tab l e s Table Real Gross Domestic Product Table 2.2.

Annual Real Gross Domestic Product 1998

Gross Domestic Product Final Sales of Domestic Product Total Consumption Durables

1999

2000

2001

History 2002

2003

2004

2005

2006

2007

Forecast 2008

2009

9066.9 9470.4 9817.0 9890.7 10048.9 10301.1 10703.5 11048.6 11415.3

11645.1 11966.4 12363.1

8997.6 9404.1 9760.5 9921.0 10036.5 10285.1 10648.3 11025.2 11365.8

11624.3 11934.5 12311.4

6125.8 6438.6 6739.4 6910.4 863.3

7577.1

7841.2

8091.4

8338.9

8562.6

8819.3

900.7

964.8

1020.6

1085.7

1145.3

1202.9

1244.1

1275.5

1335.9

1794.4 1876.6 1947.2 1986.7

2037.1

2103.0

2179.2

2276.8

2362.0

2424.9

2495.0

2564.6

Services

3614.9 3758.1 3928.8 4023.2

4100.4

4178.8

4323.9

4436.6

4550.4

4695.1

4818.0

4952.2

1037.8 1133.3 1232.1 1180.5

1071.5

1081.8

1145.8

1223.8

1312.4

1353.1

1400.4

1473.2

Equipment & Software

804.5

7295.4

Nondurables Nonresidential Fixed Investment

720.3

7099.3

745.6

840.2

918.9

874.2

820.2

843.1

904.2

984.9

1048.6

1065.3

1115.2

1200.1

Information Processing Equipment 328.9

398.5

467.6

459.0

437.4

462.7

509.3

552.6

601.2

643.9

689.2

738.3

Computers & Peripherals

59.5

83.9

101.6

103.7

108.9

123.2

140.7

165.9

193.3

230.6

269.0

320.6

Communications Equipment

80.0

95.4

124.1

114.7

90.5

91.4

100.7

113.2

126.4

133.9

139.2

144.0

Industrial Equipment

148.1

147.9

159.2

145.7

134.5

138.4

132.7

143.5

152.2

153.2

149.4

155.8

Transportation Equipment

144.0

167.6

160.8

141.7

126.3

118.3

141.6

158.3

158.5

152.1

166.4

194.6

22.0

31.7

32.6

33.5

23.9

17.8

16.7

12.7

9.9

12.6

14.4

16.4

41.0

45.7

40.9

30.4

30.1

27.4

35.1

40.6

43.2

33.0

36.4

46.2

Aircraft Other Equipment Structures

294.5

293.2

313.2

306.1

253.8

243.5

248.7

251.5

274.0

292.4

294.8

293.4

125.4

129.4

137.6

130.3

109.8

102.6

105.2

104.4

111.7

120.2

114.3

113.8

Manufacturing

43.7

33.9

31.8

28.5

16.7

15.4

16.2

19.6

22.0

24.4

26.6

30.1

Power & Communication

34.7

40.8

46.8

48.2

47.1

41.0

35.8

33.5

34.6

36.3

39.4

40.2

Mining & Petroleum

23.3

21.3

27.2

32.0

24.5

29.0

32.8

36.4

40.5

41.7

42.7

38.6

Other

67.4

67.9

69.9

66.6

55.9

53.4

55.1

52.2

58.9

64.5

66.2

67.5

443.6

446.9

Commercial & Health Care

Residential Fixed Investment

418.3

448.5

469.9

509.4

559.9

608.0

582.3

486.9

461.8

491.6

Exports

966.5 1008.2 1096.3 1036.7

1013.3

1026.1

1120.4

1196.1

1302.8

1385.5

1512.7

1648.7

Imports

1170.3 1304.5 1475.8 1435.8

1484.6

1545.0

1711.3

1815.3

1920.9

1962.9

2040.4

2161.2

601.4

643.4

687.1

716.6

727.6

742.0

755.3

769.2

767.9

1063.0 1113.2 1142.8 1179.0

1215.5

1217.8

1223.9

1230.4

1256.4

1286.0

1298.9

1312.3

Federal Government State & Local Government

20

U.S. Forecast

561.3

573.7

578.8

U . S . F o r eca s t Tab l e s Table 3. Quarterly Summary of the Forecast of the U.S.

Table 3. Quarterly Summary of the U.S. Forecast

2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 Gross Domestic Product Final Sales of Domestic Product Total Consumption Durables Nondurables Services Nonresidential Fixed Investment Equipment & Software Information Processing Equipment Computers & Peripherals Communications Equipment Industrial Equipment Transportation Equipment Aircraft Other Equipment Structures Commercial & Health Care Manufacturing Power & Communication Mining & Petroleum Other Residential Fixed Investment Exports Imports Federal Government State & Local Government Real GDP Nominal GDP GDP Deflator Consumer Prices Excl. Food & Energy Producer Prices, Finished Goods Employment Cost Index - Total Comp.

1.9 1.9 2.8 6.2 1.5 2.8 9.6 7.5 9.7 20.4 10.5 0.2 4.0 -41.6 4.4 14.9 23.4 10.9 15.2 9.6 7.1 -20.1 6.7 5.5 1.2 1.9

2.4 3.6 4.2 4.3 5.8 3.4 -3.1 -4.9 -1.8 0.3 -7.8 -5.4 -6.9 -57.2 5.5 0.8 1.7 -13.9 -2.9 3.7 2.8 -21.5 10.2 -2.6 4.5 2.7

1.3 1.6 3.8 7.1 2.9 3.6 2.0 1.9 15.0 45.0 25.5 1.8 -2.4 267.9 -68.4 2.2 11.2 29.5 -7.9 -12.7 0.1 -18.2 -1.3 2.3 -3.1 3.2

Composition of Real GDP, Percent Change, Annual Rate 2.1 2.3 2.5 2.6 3.1 3.4 3.2 3.2 2.1 2.3 2.2 2.7 2.9 3.2 3.0 3.1 1.6 2.6 2.5 2.8 2.7 3.0 2.9 2.9 -0.4 1.1 0.0 4.0 2.5 5.3 4.4 3.6 0.1 2.6 3.6 3.1 2.8 2.9 2.7 2.8 2.8 2.8 2.5 2.4 2.6 2.7 2.8 2.8 3.0 4.1 3.5 2.0 3.4 4.5 5.6 5.7 3.1 2.8 4.1 5.4 3.8 6.0 7.5 8.4 6.9 5.4 7.0 7.3 7.1 6.8 6.9 7.1 9.7 11.9 14.6 16.0 17.9 18.3 18.8 17.9 6.1 1.6 5.2 4.2 3.7 3.3 3.2 3.0 7.0 -4.4 -5.1 -4.1 -3.0 -0.7 4.2 5.0 -12.8 5.4 11.0 15.6 2.7 13.8 16.4 20.7 -3.9 -1.6 2.3 23.4 15.0 26.2 25.0 7.8 -47.0 -10.7 15.8 28.1 9.8 20.1 7.4 41.6 11.7 3.4 4.2 -0.7 -2.3 -2.5 -2.6 -1.1 4.6 0.7 -3.6 -6.8 -9.4 -8.1 -3.9 1.3 12.3 1.9 6.6 6.2 11.9 12.9 17.6 10.0 21.2 3.1 17.1 7.1 4.6 8.2 -3.1 -0.7 5.9 7.5 12.5 3.8 -1.7 -8.2 -12.8 -13.9 28.4 4.5 1.4 -1.5 0.7 1.4 2.5 2.5 -13.2 -18.2 -13.7 -6.2 3.8 8.5 6.2 6.5 9.4 8.7 8.7 9.2 8.8 8.7 9.0 8.8 3.7 3.3 4.8 6.3 5.9 3.8 3.0 3.9 5.6 5.7 1.5 1.0 1.2 0.3 -0.2 -1.0 1.5 1.5 1.2 0.6 0.8 1.0 0.9 1.0

3.3 3.2 2.9 4.3 2.6 2.8 6.2 7.2 6.9 17.2 3.8 7.4 10.5 4.5 9.5 3.9 6.0 20.9 3.8 -5.9 1.7 5.5 8.5 6.0 0.2 1.3

3.0 3.2 3.2 6.9 2.6 2.8 5.1 5.7 7.0 17.4 4.1 6.7 4.9 7.7 -3.3 3.6 11.7 4.6 4.8 -11.2 1.0 4.1 8.3 6.4 0.6 1.3

Billions of Dollars 11443.5 11513.0 11549.1 11609.2 11675.2 11746.8 11822.1 11914.4 12016.4 12112.7 12211.1 12314.5 12416.4 12510.6 13322.6 13458.2 13632.6 13788.2 13916.8 14066.9 14237.4 14419.2 14610.8 14796.6 14995.1 15196.7 15400.7 15597.3 Prices & Wages, Percent Change, Annual Rate 1.4 1.9 2.3 2.0 1.9 1.9 0.3 1.1 1.8 1.8 1.8 1.9 2.0 2.2 2.3 2.2 2.2 2.1 0.1 0.3 2.2 1.0 1.1 1.1 3.4 3.0 3.2 2.9 3.0 3.1

1.9 3.0 3.0 0.7 3.5

1.7 -2.1 1.9 -3.1 3.1

3.9 3.8 2.3 6.6 2.3

2.4 5.2 1.8 8.7 3.2

70.5 -0.5 4.0 80.9 53.3 84.0 16.578 1.714 5.500 4.7 1.6 -173 -918

60.1 2.1 -1.5 80.1 20.0 92.5 16.267 1.559 5.503 4.5 1.5 -131 -783

58.1 1.7 1.4 79.9 11.3 92.2 16.507 1.474 5.623 4.5 1.5 -137 -808

67.1 1.1 1.9 79.9 12.4 86.9 16.211 1.458 5.210 4.6 1.0 -159 -834

66.5 2.4 1.4 79.8 11.4 90.3 16.367 1.337 5.057 4.8 0.6 -190 -821

Other Key Measures 64.2 63.2 62.3 62.2 2.6 2.1 2.4 2.4 1.8 2.0 2.6 2.8 79.8 79.6 79.8 80.0 19.2 16.9 22.7 28.6 88.6 88.6 90.6 91.1 16.338 16.481 16.468 16.584 1.344 1.370 1.436 1.509 4.907 4.890 4.862 4.914 4.8 4.9 4.9 4.9 0.8 0.9 1.2 1.4 -203 -205 -229 -223 -810 -793 -778 -778

Federal Funds Rate (%) 3-Month Treasury Bill Rate (%) 1-Year Treasury Note Yield (%) 5-Year Treasury Note Yield (%) 10-Year Treasury Note Yield (%) 25-Year Treasury Note Yield (%) 30-Year Fixed Mortgage Rate (%) S&P 500 Stock Index (% change) Exchange Rate, Major Trading Partners (% change (negative = depreciation))

5.25 4.91 5.09 4.84 4.90 4.99 6.57 1288 2.1 0.805 -1.9

5.25 4.91 4.99 4.60 4.63 4.74 6.25 1389 31.4 0.803 -0.7

5.26 4.98 5.01 4.65 4.68 4.80 6.22 1425 10.3 0.806 1.5

5.25 4.85 4.91 4.57 4.66 4.84 6.16 1481 15.6 0.784 -11.0

5.25 4.95 5.02 4.72 4.76 4.91 6.24 1461 -5.3 0.773 -5.4

Personal Income (Bil. of $) (% change) Disposable Income (Bil. of $) (% change) Real Disposable Income (Bil. Of 2000 $) (% change) Saving Rate (%) After-Tax Profits (Billions of $) (% change)

10939 4.9 9577 5.5 8311 3.2 -1.4 1363 8.4

11066 4.6 9679 4.3 8420 5.2 -1.2 1362 -0.6

11311 8.9 9867 7.8 8513 4.4 -1.0 1408 13.6

11422 3.9 9964 3.9 8510 -0.1 -1.5 1426 5.2

11570 5.2 10095 5.3 8601 4.3 -1.1 1389 -10.6

11715 5.0 10225 5.1 8682 3.8 -0.8 1394 1.7

Oil - WTI ($ per barrel) Productivity (% change) Industrial Production (% change) Factory Operating Rate Nonfarm Inven. Chg. (Bil. of 2000 $) Consumer Sentiment Index Light Vehicle Sales (Million units) Housing Starts (Million units) Existing House Sales (Million units) Unemployment Rate (%) Payroll Employment (% change) Federal Surplus (NIPA bil. $) Current Account Balance (Bil. $)

3.4 3.3 3.1 6.1 2.8 2.7 6.3 8.8 6.8 17.7 3.4 6.0 22.6 7.1 47.6 0.2 0.8 8.7 3.1 -8.5 1.7 6.7 8.6 6.2 -0.3 1.0

2.1 2.2 2.2 1.8 3.2

2.0 1.8 2.2 0.4 3.3

2.0 1.9 2.2 0.9 3.5

2.1 2.0 2.2 0.8 3.4

62.0 2.0 3.0 80.1 36.7 91.4 16.641 1.566 4.966 4.9 1.4 -221 -785

64.0 1.9 3.1 80.4 43.0 91.4 16.699 1.611 5.017 4.8 1.5 -204 -800

62.3 2.0 3.1 80.6 46.6 92.5 16.774 1.652 5.045 4.7 1.6 -208 -802

62.7 1.9 3.0 80.7 50.7 92.9 16.807 1.682 5.094 4.7 1.6 -183 -806

62.8 1.7 2.9 80.5 46.9 93.2 16.893 1.706 5.135 4.6 1.5 -172 -810

Financial Markets, NSA 5.12 5.10 5.07 5.06 4.96 4.97 4.97 4.95 5.06 5.08 5.09 5.08 4.80 4.87 4.96 5.09 4.86 4.92 5.04 5.17 5.01 5.07 5.19 5.33 6.39 6.47 6.59 6.73 1479 1493 1512 1539 4.9 3.7 5.3 6.9 0.761 0.751 0.744 0.737 -6.3 -5.3 -3.6 -3.8

5.04 4.94 5.09 5.15 5.23 5.45 6.78 1564 6.7 0.730 -4.0

5.03 4.94 5.10 5.19 5.28 5.54 6.83 1587 5.7 0.723 -3.5

5.01 4.93 5.11 5.22 5.31 5.58 6.86 1599 3.2 0.718 -3.0

5.01 4.92 5.12 5.25 5.35 5.65 6.91 1616 4.0 0.714 -2.0

5.00 4.91 5.13 5.29 5.39 5.69 6.95 1634 4.5 0.715 0.5

Incomes 11866 12026 5.1 5.4 10354 10506 5.0 5.9 8750 8838 3.1 4.0 -0.7 -0.4 1413 1435 5.3 6.2

12354 5.6 10796 5.5 8995 3.5 -0.2 1471 3.5

12535 5.8 10946 5.6 9071 3.4 -0.1 1467 -1.0

12723 6.0 11114 6.1 9166 4.2 0.2 1469 0.5

12909 5.8 11269 5.6 9248 3.6 0.3 1468 -0.4

13099 5.9 11430 5.7 9333 3.7 0.4 1460 -2.0

12183 5.2 10650 5.5 8916 3.6 -0.3 1458 6.4

Institute for Economic Competitiveness

21

U . S . F o r eca s t Tab l e s Table 4. Quarterly Gross Table 4. Quarterly Gross Domestic ProductDomestic Product 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 Gross Domestic Product 11443.5 11513.0 11549.1 11609.2 11675.2 11746.8 11822.1 11914.4 12016.4 12112.7 12211.1 12314.5 12416.4 12510.6 Final Sales of Domestic Product 11381.6 11484.5 11529.2 11589.6 11657.1 11721.5 11799.4 11886.0 11982.2 12070.6 12162.9 12262.9 12360.9 12458.7 Total Consumption 8111.2 8195.9 8273.6 8307.3 8360.9 8414.0 8472.3 8529.0 8593.3 8656.0 8718.6 8786.3 8850.4 8921.7 Durables 1208.8 1221.9 1243.5 1242.2 1245.5 1245.4 1257.8 1265.6 1282.3 1296.2 1308.1 1327.9 1342.3 1365.4 Nondurables 2360.1 2394.0 2411.2 2411.6 2427.4 2449.4 2468.7 2486.2 2504.1 2521.0 2538.8 2556.3 2573.1 2590.1 Services 4566.6 4605.2 4646.8 4679.3 4712.6 4741.9 4770.0 4801.4 4833.5 4866.9 4900.9 4934.5 4969.1 5004.3 Nonresidential Fixed Investment 1334.2 1323.7 1330.2 1349.3 1359.4 1373.4 1385.4 1392.2 1404.2 1419.8 1439.9 1462.7 1485.5 1504.5 Equipment & Software 1060.7 1047.8 1052.7 1060.9 1068.4 1079.3 1093.8 1104.3 1120.9 1141.7 1165.8 1191.5 1212.8 1230.2 Information Processing Equipment 608.6 605.9 628.6 639.5 648.1 659.4 671.5 683.4 695.0 706.9 719.5 731.8 744.5 757.6 Computers & Peripherals 198.6 198.7 221.1 226.5 233.2 241.7 251.4 262.6 274.6 287.5 300.4 313.6 327.1 341.4 Communications Equipment 126.3 123.8 131.7 133.7 134.2 136.0 137.4 138.7 139.9 141.0 142.0 143.2 144.6 146.1 Industrial Equipment 153.9 151.9 152.5 155.2 153.5 151.5 150.0 148.9 148.6 150.2 152.1 154.3 157.2 159.8 Transportation Equipment 157.5 154.8 153.8 148.9 150.9 155.0 161.1 162.2 167.7 174.6 183.7 194.0 199.1 201.6 Aircraft 8.9 7.6 12.7 12.6 12.5 12.6 13.3 13.8 14.8 15.7 16.0 16.3 16.5 16.8 Other Equipment 43.2 43.8 36.3 32.0 31.2 32.4 34.7 35.5 37.3 38.0 42.0 47.0 48.1 47.7 Structures 282.0 282.6 284.1 292.4 294.9 298.0 297.5 295.8 294.0 292.0 291.2 291.3 294.2 296.9 Commercial & Health Care 115.6 116.1 119.3 120.7 120.9 119.8 117.8 115.0 112.7 111.6 112.0 112.2 113.9 117.2 Manufacturing 22.9 22.1 23.7 24.4 24.5 24.9 25.3 26.1 26.9 28.1 28.8 29.4 31.0 31.3 Power & Communication 35.4 35.1 34.4 36.3 36.5 38.1 38.8 39.2 40.0 39.7 39.7 40.0 40.3 40.8 Mining & Petroleum 41.5 41.9 40.5 41.1 41.9 43.2 43.6 43.4 42.5 41.2 39.8 38.9 38.3 37.3 Other 60.4 60.8 60.9 65.2 65.9 66.1 65.9 66.0 66.2 66.7 67.1 67.4 67.6 67.8 Residential Fixed Investment 570.3 539.7 515.1 498.1 475.4 459.1 452.0 456.2 465.9 473.2 480.9 489.0 495.7 500.8 Exports 1310.0 1343.5 1339.3 1370.9 1400.6 1431.1 1463.9 1495.9 1528.3 1562.7 1596.9 1631.2 1665.9 1700.7 Imports 1938.8 1926.1 1937.0 1955.4 1969.8 1989.2 2007.6 2024.3 2048.7 2081.0 2111.9 2144.6 2176.6 2211.6 747.2 741.5 751.8 762.5 765.4 767.3 769.6 770.2 769.8 767.9 767.3 767.7 768.9 Federal Government 738.9 State & Local Government 1260.3 1268.7 1278.9 1283.8 1288.6 1292.6 1294.7 1297.2 1300.4 1303.4 1306.7 1310.0 1314.2 1318.4

Table 5. Annual Employment

Table 5. Annual Employment 1998

Total Nonfarm Employment Private Nonfarm Mining Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities Education & Health Professional & Business Services Information Leisure & Hospitality Government Federal State & Local

Total Nonfarm Employment Private Nonfarm Mining Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities Education & Health Professional & Business Services Information Leisure & Hospitality Government Federal State & Local 22

U.S. Forecast

1999

2000

2001

History 2002

2003

2004

2005

2006

Millions 125.924 128.992 131.792 131.832 130.347 129.990 131.423 133.696 136.175 106.014 108.680 111.002 110.711 108.838 108.411 109.804 111.890 114.187 0.565 0.518 0.520 0.532 0.512 0.503 0.523 0.562 0.619 6.147 6.545 6.788 6.826 6.715 6.734 6.976 7.336 7.690 17.560 17.323 17.266 16.442 15.257 14.506 14.316 14.229 14.201 25.186 25.770 26.225 25.986 25.500 25.286 25.532 25.959 26.232 4.167 4.298 4.412 4.373 4.224 4.184 4.248 4.362 4.465 7.462 7.646 7.688 7.808 7.847 7.976 8.031 8.153 8.363 14.445 14.795 15.109 15.643 16.201 16.588 16.952 17.371 17.836 15.142 15.954 16.670 16.481 15.981 15.987 16.386 16.946 17.555 3.219 3.418 3.629 3.629 3.394 3.189 3.117 3.060 3.054 11.232 11.544 11.860 12.032 11.986 12.173 12.495 12.814 13.139 19.910 20.312 20.790 21.120 21.509 21.579 21.620 21.806 21.988 2.771 2.770 2.865 2.763 2.766 2.761 2.731 2.732 2.728 17.139 17.542 17.925 18.357 18.744 18.819 18.889 19.074 19.260

2.57 2.82 -1.10 5.74 0.82 1.97 3.51 3.95 2.54 5.66 4.37 1.96 1.27 -1.23 1.69

2.44 2.51 -8.37 6.47 -1.35 2.32 3.13 2.48 2.42 5.36 6.18 2.77 2.02 -0.04 2.35

2.17 2.14 0.52 3.74 -0.33 1.77 2.66 0.54 2.13 4.49 6.21 2.74 2.36 3.44 2.19

0.03 -0.26 2.38 0.57 -4.78 -0.91 -0.86 1.57 3.53 -1.11 0.02 1.46 1.59 -3.40 2.41

-1.12 -1.69 -3.81 -1.63 -7.17 -1.87 -3.40 0.50 3.57 -3.01 -6.46 -0.38 1.84 0.09 2.11

Growth Rates -0.27 1.10 -0.39 1.28 -1.82 4.02 0.28 3.59 -4.93 -1.29 -0.84 0.98 -0.93 1.51 1.64 0.69 2.39 2.19 0.04 2.50 -6.04 -2.25 1.56 2.64 0.33 0.19 -0.17 -1.08 0.40 0.37

1.73 1.90 7.46 5.16 -0.61 1.67 2.69 1.52 2.47 3.42 -1.81 2.56 0.86 0.06 0.98

1.85 2.05 10.07 4.86 -0.19 1.05 2.38 2.58 2.68 3.59 -0.20 2.54 0.83 -0.16 0.98

2007

Forecast 2008

2009

137.869 139.270 141.345 115.605 116.859 118.836 0.649 0.643 0.618 7.607 7.467 7.592 14.055 13.861 13.811 26.456 26.881 27.279 4.533 4.662 4.831 8.435 8.449 8.581 18.335 18.644 18.973 17.961 18.579 19.513 3.057 3.024 3.034 13.506 13.759 13.911 22.264 22.411 22.508 2.722 2.726 2.711 19.542 19.685 19.797

1.25 1.24 5.02 -1.08 -1.03 0.85 1.51 0.87 2.80 2.32 0.09 2.79 1.26 -0.23 1.47

1.02 1.08 -0.98 -1.84 -1.38 1.61 2.86 0.16 1.68 3.44 -1.07 1.87 0.66 0.16 0.73

1.49 1.69 -3.83 1.68 -0.36 1.48 3.61 1.57 1.77 5.03 0.34 1.10 0.43 -0.53 0.57

U . S . F o r eca s t Tab l e s Table 6. Quarterly Table 6. Quarterly Employment Employment 2006Q3

2006Q4

2007Q1

2007Q2

2007Q3

2007Q4

2008Q1

2008Q2

Total Nonfarm Employment Private Nonfarm Mining Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities Education & Health Professional & Business Services Information Leisure & Hospitality Government Federal State & Local

136.4 114.4 0.6 7.7 14.2 26.2 4.5 8.4 17.9 17.6 3.0 13.2 22.0 2.7 19.3

137.0 114.8 0.6 7.7 14.1 26.3 4.5 8.4 18.0 17.7 3.1 13.3 22.1 2.7 19.4

137.4 115.3 0.6 7.7 14.1 26.4 4.5 8.4 18.1 17.8 3.1 13.4 22.2 2.7 19.5

137.8 115.5 0.7 7.7 14.1 26.4 4.5 8.4 18.3 17.9 3.1 13.5 22.2 2.7 19.5

138.0 115.7 0.7 7.6 14.0 26.4 4.5 8.4 18.4 18.0 3.1 13.5 22.3 2.7 19.6

Employment (Millions) 138.3 138.6 139.0 115.9 116.2 116.6 0.6 0.6 0.6 7.5 7.5 7.4 14.0 13.9 13.9 26.6 26.7 26.8 4.6 4.6 4.6 8.4 8.4 8.4 18.5 18.5 18.6 18.1 18.3 18.4 3.0 3.0 3.0 13.6 13.7 13.8 22.3 22.4 22.4 2.7 2.7 2.7 19.6 19.6 19.7

Total Nonfarm Employment Private Nonfarm Mining Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities Education & Health Professional & Business Services Information Leisure & Hospitality Government Federal State & Local

1.56 1.55 8.29 1.02 -0.25 0.49 2.21 1.84 2.66 2.66 -0.26 3.45 1.59 0.24 1.78

1.49 1.51 6.42 -1.26 -2.00 1.16 2.76 1.91 2.90 2.54 1.66 4.06 1.40 -2.00 1.88

1.45 1.51 5.19 -0.42 -0.96 1.42 1.32 0.90 2.74 2.33 2.26 3.12 1.13 -0.20 1.32

0.98 0.92 4.80 -1.30 -1.24 0.21 -0.45 -0.14 3.08 1.42 1.52 2.25 1.31 0.16 1.47

0.57 0.50 -1.79 -4.78 -0.97 0.51 0.90 -0.46 3.30 2.15 -4.54 0.79 0.98 0.23 1.08

0.81 0.79 -1.01 -2.50 -0.94 1.64 3.39 -0.39 1.10 3.14 -6.88 1.68 0.93 1.32 0.88

Growth Rates 0.94 1.20 1.01 1.35 0.72 -2.22 -2.81 -0.93 -1.85 -1.93 2.19 1.74 3.50 2.87 -0.12 0.59 0.42 1.75 2.75 3.87 0.15 2.74 3.45 2.45 0.59 0.46 0.32 -0.01 0.62 0.52

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

139.5 117.1 0.6 7.5 13.8 26.9 4.7 8.5 18.7 18.7 3.0 13.8 22.4 2.7 19.7

140.0 117.6 0.6 7.5 13.8 27.1 4.7 8.5 18.8 18.9 3.0 13.8 22.4 2.7 19.7

140.5 118.1 0.6 7.5 13.8 27.1 4.8 8.5 18.9 19.2 3.0 13.9 22.4 2.7 19.7

141.1 118.6 0.6 7.6 13.8 27.2 4.8 8.6 19.0 19.4 3.0 13.9 22.5 2.7 19.8

141.6 119.1 0.6 7.6 13.8 27.3 4.9 8.6 19.0 19.6 3.0 13.9 22.5 2.7 19.8

142.2 119.6 0.6 7.7 13.8 27.4 4.9 8.6 19.0 19.8 3.0 14.0 22.6 2.7 19.9

1.40 1.62 -3.06 0.87 -1.21 1.89 3.87 1.15 2.45 5.68 1.55 -0.69 0.28 -0.88 0.44

1.45 1.68 -4.10 1.07 -0.59 1.66 3.43 1.28 2.01 5.20 -0.77 1.22 0.22 -1.58 0.47

1.49 1.73 -4.17 1.38 -0.07 1.02 3.28 1.95 1.95 4.96 -1.31 2.09 0.21 -1.58 0.46

1.56 1.77 -4.02 2.29 0.10 1.65 3.89 1.49 1.70 4.95 1.01 0.54 0.45 -0.53 0.58

1.60 1.72 -4.38 3.40 0.06 1.38 3.80 2.01 0.96 4.82 1.44 0.69 0.92 1.32 0.87

1.53 1.59 -4.12 3.44 0.23 1.26 3.72 1.94 0.58 3.79 1.31 1.46 1.21 3.23 0.93

Table 7. Quarterly Implicit Price Deflators (2000=100) Table 7. Quarterly Implicit Price Deflators (2000=100) 2006Q3 GDP Consumption Durables Motor Vehicles Furniture Other Durables Nondurables Food Clothing & Shoes Gasoline & Oil Fuel Services Housing Household Operations Electricity Natural Gas Water & Sewer Telephone Domestic Service Other Household Transportation Other Services

116.4 115.2 89.0 99.6 73.0 99.0 116.4 115.7 91.3 185.4 187.5 121.0 121.1 121.4 133.3 157.7 129.7 95.2 120.4 127.1 117.7 128.1

2006Q4 116.9 115.0 88.4 99.0 72.3 99.0 114.1 116.3 91.5 153.0 176.7 121.8 122.3 121.9 133.7 156.0 130.9 95.9 123.9 128.0 117.7 129.9

2007Q1 118.1 115.9 88.0 98.6 71.5 99.4 115.6 117.7 91.7 159.9 175.7 122.9 123.3 124.2 136.6 165.6 133.0 96.3 124.7 128.5 118.1 130.9

2007Q2 118.8 117.1 87.8 98.5 71.1 99.6 117.9 118.8 91.0 184.3 184.6 123.8 124.3 125.5 137.9 171.3 134.4 96.8 125.4 129.2 118.9 131.9

2007Q3 119.2 117.4 87.6 98.9 70.3 99.8 117.3 119.8 91.0 168.2 171.9 124.7 125.1 126.6 137.5 180.9 135.8 96.7 126.0 130.1 119.8 132.7

2007Q4 119.8 117.8 87.5 99.5 69.6 99.9 117.2 120.3 91.0 161.4 165.1 125.5 125.8 127.1 137.4 183.4 137.2 96.6 126.6 130.9 120.6 133.7

2008Q1 120.4 118.3 87.4 100.1 69.0 100.1 117.4 120.8 91.0 158.9 161.5 126.4 126.6 127.8 137.6 188.1 138.5 96.4 127.2 131.8 121.5 134.8

2008Q2 121.0 118.9 87.3 100.6 68.4 100.2 117.7 121.2 90.8 158.2 159.0 127.2 127.4 128.0 137.8 187.3 139.8 96.2 127.7 132.7 122.2 135.7

2008Q3 121.6 119.4 87.3 101.1 67.8 100.3 118.0 121.6 90.8 157.6 158.6 128.1 128.2 128.4 138.0 189.1 141.1 95.9 128.3 133.5 123.0 136.8

2008Q4 122.2 120.0 87.2 101.5 67.3 100.4 118.4 122.0 90.8 157.7 158.6 128.9 128.9 128.7 138.1 190.1 142.4 95.6 128.8 134.3 123.8 137.8

2009Q1 122.8 120.7 87.1 101.9 66.8 100.6 119.0 122.4 90.8 159.8 160.3 129.7 129.7 129.0 138.2 192.0 143.6 95.3 129.2 135.1 124.7 138.8

2009Q2 123.4 121.2 87.1 102.3 66.4 100.8 119.5 123.0 90.8 158.8 159.7 130.6 130.5 128.9 138.4 188.9 144.9 95.0 129.7 135.9 125.6 139.8

2009Q3 124.0 121.9 87.1 102.7 66.0 101.0 120.0 123.7 90.8 158.4 159.5 131.4 131.3 128.9 138.6 186.2 146.2 94.7 130.2 136.7 126.5 140.9

Institute for Economic Competitiveness

2009Q4 124.7 122.5 87.0 102.9 65.6 101.1 120.5 124.4 90.8 158.6 159.9 132.2 132.2 128.9 138.8 183.6 147.4 94.4 130.7 137.5 127.3 142.0 23

U . S . F o r eca s t Tab l e s Table 8. Percent Change in Implicit Price Deflators Table 8. Percent Change in Implicit Price Deflators

2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 GDP Consumption Durables Motor Vehicles Furniture Other Durables Nondurables Food Clothing & Shoes Gasoline & Oil Fuel Services Housing Household Operations Electricity Natural Gas Water & Sewer Telephone Domestic Service Other Household Transportation Other Services

1.9 2.3 -1.1 0.4 -4.6 2.4 2.3 2.9 -1.3 6.0 14.9 3.0 4.5 1.2 2.8 -10.6 5.2 2.5 2.3 2.3 2.9 4.6

1.7 -1.0 -2.7 -2.6 -4.3 0.1 -7.9 1.9 0.8 -69.9 -22.9 2.9 4.0 1.8 1.1 -4.5 3.7 2.9 11.7 2.6 0.0 5.6

3.9 3.3 -1.9 -1.7 -4.0 1.8 5.0 4.7 0.6 18.2 -2.3 3.5 3.5 7.3 8.7 24.7 6.6 1.6 2.6 1.7 1.5 3.0

2.4 4.0 -0.9 0.0 -2.5 0.5 8.2 3.8 -3.2 61.0 20.3 2.9 3.0 4.4 4.0 13.8 4.2 2.1 2.2 2.0 2.7 3.0

1.4 1.0 -0.9 1.6 -4.5 0.9 -2.0 3.5 0.4 -34.9 -27.6 2.8 2.5 3.6 -1.1 22.5 4.0 -0.2 1.8 2.8 3.1 2.4

1.9 1.4 -0.5 2.4 -4.1 0.6 -0.5 1.7 -0.2 -16.3 -15.9 2.6 2.5 1.4 -0.3 5.4 4.1 -0.7 1.9 2.6 2.6 3.0

2.3 1.9 -0.2 2.3 -3.5 0.6 0.7 1.5 -0.2 -6.0 -8.7 2.8 2.5 2.3 0.4 10.4 3.8 -0.5 1.8 2.7 2.8 3.3

2.0 1.9 -0.3 2.1 -3.4 0.4 1.1 1.5 -0.5 -1.7 -6.2 2.6 2.5 0.5 0.6 -1.7 3.8 -1.1 1.8 2.6 2.5 2.9

1.9 1.9 -0.4 1.9 -3.3 0.4 1.0 1.1 -0.2 -1.5 -0.9 2.7 2.4 1.2 0.5 3.9 3.7 -1.1 1.7 2.5 2.6 3.1

1.9 1.9 -0.4 1.7 -3.2 0.6 1.3 1.3 -0.1 0.0 -0.1 2.6 2.4 0.8 0.5 2.0 3.5 -1.4 1.5 2.4 2.6 2.8

2.1 2.2 -0.3 1.6 -2.9 0.7 2.1 1.4 0.1 5.4 4.4 2.6 2.4 1.1 0.3 4.1 3.5 -1.3 1.5 2.3 2.8 2.9

2.0 1.9 -0.1 1.5 -2.4 0.7 1.5 2.0 0.0 -2.4 -1.6 2.5 2.5 -0.3 0.5 -6.6 3.6 -1.2 1.6 2.4 2.7 3.0

2.0 2.0 -0.1 1.4 -2.4 0.7 1.7 2.3 0.1 -1.2 -0.4 2.5 2.5 -0.1 0.6 -5.6 3.5 -1.1 1.5 2.4 2.9 3.1

2.1 2.0 -0.3 1.1 -2.4 0.5 1.8 2.1 -0.2 0.6 0.9 2.5 2.5 -0.1 0.6 -5.6 3.5 -1.1 1.5 2.3 2.7 3.2

Table 9.9.Annual Implicit Price Deflators (2000=100) (2000=100) Table Annual Implicit Price Deflators

GDP Consumption Durables Motor Vehicles Furniture Other Durables Nondurables Food Clothing & Shoes Gasoline & Oil Fuel Services Housing Household Operations Electricity Natural Gas Water & Sewer Telephone Domestic Service Other Household Transportation Other Services

24

U.S. Forecast

1998

1999

2000

2001

History 2002

2003

2004

2005

2006

2007

Forecast 2008

2009

96.5 96.0 104.2 99.2 111.6 102.5 93.8 95.9 103.0 71.9 71.8 95.3 94.3 98.1 99.1 84.5 95.5 106.1 93.1 93.3 95.4 93.5

97.9 97.6 101.6 99.6 104.7 100.8 96.2 97.7 101.3 78.2 72.7 97.4 96.9 98.1 98.4 84.9 97.6 103.5 95.8 96.3 97.5 96.5

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.1 100.0 100.0 100.0 100.0 100.0 100.0

102.4 102.1 98.1 100.5 94.1 100.3 101.5 102.9 98.0 96.3 101.7 103.3 103.9 104.6 108.1 118.8 102.9 98.0 103.8 104.9 101.7 104.0

104.2 103.5 95.8 100.1 88.7 99.5 102.1 105.0 95.4 90.4 91.7 106.0 107.8 103.7 106.8 101.1 106.2 98.1 107.6 109.5 102.9 108.3

106.4 105.6 92.4 97.7 83.3 97.9 104.1 107.0 93.0 105.2 109.7 109.4 110.4 107.7 109.3 123.8 110.2 97.2 110.3 114.8 106.0 113.1

109.4 108.4 90.8 97.2 79.9 98.0 107.6 110.3 92.7 123.9 125.4 112.9 113.2 109.9 111.4 134.2 116.7 95.2 112.8 117.8 108.4 117.8

112.7 111.5 90.2 99.0 76.9 97.7 111.5 112.7 91.7 150.8 159.5 116.5 116.2 115.6 118.3 160.3 122.9 94.4 116.6 122.1 112.7 122.6

116.1 114.6 89.0 99.4 73.5 98.5 115.0 115.3 91.3 170.3 179.3 120.5 120.3 121.7 132.7 164.6 128.9 95.1 120.8 126.8 116.9 127.6

118.9 117.0 87.7 98.9 70.6 99.7 117.0 119.2 91.2 168.5 174.3 124.2 124.6 125.8 137.4 175.3 135.1 96.6 125.7 129.7 119.4 132.3

121.3 119.2 87.3 100.8 68.1 100.3 117.9 121.4 90.8 158.1 159.4 127.6 127.8 128.2 137.9 188.7 140.4 96.0 128.0 133.0 122.6 136.3

123.7 121.6 87.1 102.5 66.2 100.9 119.8 123.4 90.8 158.9 159.8 131.0 130.9 128.9 138.5 187.7 145.5 94.8 130.0 136.3 126.0 140.4

U . S . F o r eca s t Tab l e s Table 10. Percent Change in Implicit Price Deflators

Table 10. Percent Change in Implicit Price Deflators

GDP Consumption Durables Motor Vehicles Furniture Other Durables Nondurables Food Clothing & Shoes Gasoline & Oil Fuel Services Housing Household Operations Electricity Natural Gas Water & Sewer Telephone Domestic Service Other Household Transportation Other Services

1998

1999

2000

2001

History 2002

2003

2004

2005

2006

2007

Forecast 2008

2009

1.1 0.9 -2.7 -1.0 -5.8 -0.7 0.0 1.8 -1.9 -13.0 -8.7 2.2 3.2 -0.9 -3.9 -1.9 3.2 -1.3 2.8 2.1 2.2 2.2

1.4 1.7 -2.4 0.4 -6.2 -1.6 2.5 1.9 -1.6 9.1 1.4 2.2 2.8 -0.1 -0.7 0.6 2.2 -2.4 2.9 3.3 2.2 3.3

2.2 2.5 -1.6 0.4 -4.5 -0.8 4.0 2.3 -1.3 28.6 37.8 2.7 3.2 1.9 1.6 16.5 2.5 -3.4 4.4 3.8 2.5 3.6

2.4 2.1 -1.9 0.5 -5.9 0.3 1.5 2.9 -2.0 -3.5 2.2 3.3 3.9 4.6 8.1 22.3 2.9 -2.0 3.8 4.9 1.7 4.0

1.7 1.4 -2.4 -0.4 -5.7 -0.8 0.6 2.0 -2.7 -5.0 -9.4 2.7 3.8 -0.9 -1.1 -13.5 3.2 0.2 3.7 4.3 1.2 4.1

2.1 2.0 -3.6 -2.4 -6.0 -1.6 2.0 1.9 -2.5 17.0 20.0 3.2 2.5 3.9 2.4 22.5 3.7 -0.9 2.5 4.9 2.9 4.4

2.8 2.6 -1.6 -0.4 -4.1 0.1 3.3 3.1 -0.4 18.1 14.7 3.2 2.5 2.1 1.9 8.4 6.0 -2.0 2.2 2.6 2.3 4.2

3.0 2.9 -0.7 1.8 -3.8 -0.4 3.6 2.2 -1.0 21.5 27.2 3.2 2.6 5.1 6.1 19.1 5.3 -0.9 3.4 3.6 4.0 4.1

2.9 2.8 -1.3 0.4 -4.4 0.8 3.1 2.3 -0.4 13.9 13.1 3.4 3.6 5.4 12.3 4.6 4.9 0.8 3.6 3.9 3.8 4.0

2.5 2.2 -1.5 -0.5 -3.9 1.2 1.8 3.3 -0.2 -0.8 -2.7 3.1 3.6 3.4 3.5 7.1 4.8 1.6 4.1 2.3 2.1 3.7

2.0 1.8 -0.4 2.0 -3.6 0.6 0.8 1.9 -0.4 -5.8 -8.4 2.8 2.5 1.9 0.4 7.8 3.9 -0.6 1.8 2.6 2.7 3.0

2.0 2.0 -0.3 1.6 -2.8 0.6 1.6 1.6 -0.1 0.5 0.3 2.6 2.5 0.6 0.5 -0.5 3.6 -1.2 1.6 2.4 2.8 3.0

Forecast 2008

2009

Table 11. Personal Income and its Components

Table 11. Personal Income and its Components 1998

Personal Income Wages & Salaries Other Labor Income Nonfarm Income Farm Income Rental income Dividends Interest Income Transfer Payments Personal Social Insurance Tax

Personal Income Wages & Salaries Other Labor Income Nonfarm Income Farm Income Rental income Dividends Interest Income Transfer Payments Personal Social Insurance Tax

7423.0 5019.4 529.7 598.4 29.4 137.5 350.0 933.3 978.6 317.2

7.3 7.7 6.5 10.4 -13.4 6.8 5.2 10.0 2.9 6.6

1999

7802.4 5357.1 562.4 649.7 28.6 147.4 335.6 928.6 1022.1 338.1

5.1 6.7 6.2 8.6 -2.0 7.3 -4.1 -0.5 4.4 6.6

2000

8429.7 5782.7 609.9 705.7 22.7 150.3 376.1 1011.0 1084.1 359.2

8.0 8.0 8.5 8.6 -19.6 2.0 12.1 8.9 6.1 6.2

2001

History 2002

2003

2004

2005

2006

Personal Income Billions Current Dollars 8724.1 8881.9 9163.6 9731.4 10239.2 10883.4 5942.1 6091.2 6325.4 6650.3 7030.3 7489.5 642.7 745.1 815.6 866.1 933.2 992.8 752.2 757.8 782.1 874.9 940.5 992.5 19.7 10.6 29.2 36.2 30.3 22.6 167.4 153.0 133.0 127.1 72.8 77.4 369.0 397.2 422.6 537.1 574.4 639.6 1011.0 936.1 914.1 890.8 945.0 1016.7 1193.9 1286.2 1351.0 1426.5 1526.6 1602.2 374.5 384.8 396.5 419.3 448.3 483.0

3.5 2.8 5.4 6.6 -12.8 11.5 -1.8 0.0 10.1 4.3

1.8 2.5 15.9 0.7 -46.1 -7.8 7.7 -7.4 7.8 2.7

Growth Rates 3.2 6.2 3.8 5.1 9.6 6.2 3.2 11.9 269.0 28.1 -11.7 -4.1 6.4 26.8 -2.3 -2.5 5.0 5.6 3.0 5.7

5.2 5.7 7.7 7.5 -16.1 -45.4 8.1 6.1 7.0 6.9

6.3 6.5 6.4 5.6 -25.1 179.3 11.3 7.6 5.0 7.8

2007

11504.6 12107.1 12816.5 7836.0 8186.6 8603.7 1043.4 1073.4 1107.8 1019.4 1075.9 1148.5 30.7 24.4 22.6 85.9 74.0 59.0 721.0 804.8 882.1 1069.7 1153.2 1270.5 1723.0 1826.2 1923.7 510.4 533.3 562.0

5.7 4.6 5.1 2.7 41.0 11.3 12.7 5.2 7.5 5.7

5.2 4.5 2.9 5.5 -20.2 -13.9 11.6 7.8 6.0 4.5

Institute for Economic Competitiveness

5.9 5.1 3.2 6.7 -7.3 -20.0 9.6 10.2 5.3 5.4 25

U . S . F o r eca s t Tab l e s Table 12. Personal Consumption Expenditures Table 12. Personal Consumption Expenditures (Current Dollars)

(Current Dollars)

2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 Consumer Expenditures by Type Billions Current Dollars 9813.5 9909.8 10024.9 10139.1 10264.0 10388.8 10520.5 10652.8 10784.6 10926.0 1168.7 1187.9 1090.6 1089.2 1099.5 1105.5 1119.0 1130.1 1139.7 1156.6 432.5 415.7 411.0 408.8 408.7 410.6 414.5 419.7 425.5 438.7 74.5 67.1 67.4 68.1 69.1 70.0 71.1 72.1 73.4 75.8 480.5 444.9 447.3 456.5 460.5 468.4 472.4 472.8 479.7 489.9 223.0 200.8 201.3 204.2 205.8 209.1 212.0 215.4 219.2 226.0 3087.3 3121.7 2848.0 2870.5 2898.2 2926.9 2955.6 2985.4 3022.0 3053.9 395.5 373.0 374.9 377.7 379.1 381.7 383.9 387.6 391.5 398.9 21.6 22.5 22.0 21.7 21.6 21.5 21.5 21.6 21.6 21.6 317.7 314.4 308.8 309.2 311.0 311.4 312.5 317.7 317.8 319.5 1478.6 1494.6 1358.9 1374.4 1389.4 1404.6 1418.7 1432.7 1446.9 1462.5 873.9 779.2 790.4 800.2 810.6 822.3 834.7 848.1 860.6 887.2

Consumer spending on‌ all goods & services durable goods furniture & appliances computers & software motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil food other nondurable goods

9346.7 1075.5 403.2 59.9 451.3 194.0 2747.7 358.7 23.2 346.3 1280.7 738.9

9421.8 1079.8 411.4 62.5 443.3 197.8 2732.1 365.3 23.1 285.5 1307.5 750.8

9589.8 1093.8 414.5 62.8 453.4 198.1 2785.9 372.0 25.8 302.7 1325.7 759.7

9726.7 1090.1 413.7 63.1 448.8 199.6 2844.0 370.3 24.3 342.3 1342.1 764.9

all goods & services durable goods furniture & appliances computers & software motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil food other nondurable goods

8111.2 1208.8 551.7 187.5 452.9 199.7 2360.1 392.6 12.3 186.6 1106.8 671.5

8195.9 1221.9 569.1 199.6 447.8 203.9 2394.0 399.1 13.0 186.4 1124.5 682.2

8273.6 1243.5 579.2 202.5 460.1 203.5 2411.2 405.7 14.6 189.0 1126.8 685.7

8307.3 1242.2 581.9 206.9 455.4 204.9 2411.6 407.2 13.1 185.7 1129.9 689.1

Consumer Expenditures by Type Billions 2000 Dollars 8360.9 8414.0 8472.3 8529.0 8593.3 8656.0 1245.5 1245.4 1257.8 1265.6 1282.3 1296.2 591.5 590.8 592.8 597.8 605.6 616.2 226.8 234.8 244.0 254.6 265.5 277.2 449.6 449.4 456.1 457.6 463.3 465.3 205.7 206.1 208.8 210.5 213.8 216.6 2427.4 2449.4 2468.7 2486.2 2504.1 2521.0 409.6 411.9 415.2 417.3 420.4 423.0 13.1 13.4 13.4 13.6 13.6 13.6 186.9 191.4 194.6 196.5 197.5 198.2 1134.0 1142.1 1150.1 1158.5 1166.8 1174.6 697.6 703.1 707.3 711.9 717.6 723.8

8718.6 1308.1 628.6 289.2 463.9 219.8 2538.8 427.0 13.5 198.8 1182.0 730.4

8786.3 1327.9 641.1 302.6 468.9 223.4 2556.3 431.2 13.5 200.0 1188.8 736.2

8850.4 1342.3 655.5 316.2 468.1 227.0 2573.1 435.6 13.5 200.6 1195.0 742.5

8921.7 1365.4 669.0 330.5 475.9 230.1 2590.1 439.5 13.5 201.4 1201.5 749.0

all goods & services durable goods furniture & appliances computers & software motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil food other nondurable goods

2.8 6.2 6.5 17.6 8.3 2.9 1.5 5.4 -19.8 6.7 -0.7 1.9

4.2 4.3 12.6 25.9 -4.5 8.4 5.8 6.6 22.4 -0.4 6.4 6.4

3.8 7.1 7.1 5.7 10.9 -0.9 2.9 6.7 50.1 5.7 0.8 2.1

1.6 -0.4 1.9 8.7 -4.0 2.8 0.1 1.4 -40.4 -7.0 1.1 2.0

Real Consumer Expenditures Annual Growth Rate 2.6 2.5 2.8 2.7 3.0 2.9 1.1 0.0 4.0 2.5 5.3 4.4 6.6 -0.4 1.3 3.4 5.2 7.0 38.6 14.1 15.6 17.4 17.1 17.7 -5.1 -0.2 5.9 1.3 5.0 1.7 1.7 0.7 5.3 3.2 6.3 5.2 2.6 3.6 3.1 2.8 2.9 2.7 2.4 2.3 3.2 2.0 3.0 2.5 -0.7 7.2 2.5 3.8 0.5 0.0 2.5 9.6 6.6 4.1 2.0 1.4 1.4 2.9 2.8 2.9 2.9 2.7 4.9 3.2 2.4 2.6 3.2 3.4

2.9 3.6 8.0 17.3 -1.2 6.1 2.8 3.8 -2.6 1.2 2.5 3.7

3.1 6.1 8.0 18.6 4.3 6.6 2.8 4.0 0.9 2.5 2.3 3.1

2.9 4.3 9.0 17.9 -0.7 6.4 2.6 4.1 0.3 1.2 2.1 3.5

3.2 6.9 8.2 18.1 6.7 5.3 2.6 3.6 -0.5 1.5 2.2 3.5

26

U.S. Forecast

U . S . F o r eca s t Tab l e s Table Personal Consumption Expenditures Table 13.13.

Personal Consumption Expenditures (2000 Dollars) (2000 Dollars) History

Consumer spending on‌ all goods & services durable goods furniture & appliances computers & software motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil food other nondurable goods

1998

1999

2000

5879.5 750.2 273.1 37.0 336.1 121.0 1683.6 270.9 11.5 122.4 829.8 449.0

6282.5 817.7 293.9 40.4 370.8 132.1 1804.8 286.3 11.9 137.9 873.1 495.6

6739.4 863.3 312.9 43.8 386.5 141.8 1947.2 297.7 15.8 175.7 925.2 532.9

2001

2002

Forecast 2003

2004

2005

2006

2007

2008

2009

Consumer Expenditures by Type Billions Current Dollars 7055.0 883.7 312.1 42.0 407.9 143.0 2017.1 297.7 15.4 171.6 967.9 564.4

7350.7 923.9 323.1 44.6 429.3 149.7 2079.6 303.5 14.2 164.5 1001.9 595.5

7703.6 942.7 331.5 46.6 431.7 157.1 2190.2 310.9 16.9 192.7 1046.0 623.7

8211.5 986.3 356.5 51.6 437.9 168.5 2345.2 325.1 18.4 230.4 1114.8 656.5

8742.4 1033.1 377.2 55.4 448.2 182.7 2539.3 341.8 21.9 280.2 1201.4 694.0

9268.9 1070.3 404.6 60.0 444.7 193.8 2714.9 358.6 22.7 315.6 1281.1 736.8

9759.9 10204.2 10721.0 1090.9 1113.5 1163.3 413.7 410.6 429.1 65.1 69.6 73.9 448.6 464.5 480.7 199.9 207.8 220.9 2837.1 2941.5 3071.2 372.6 380.6 393.4 23.7 21.6 21.6 317.1 311.0 318.2 1350.3 1411.3 1470.7 773.5 817.0 867.4

Consumer Expenditures by Type Billions 2000 Dollars all goods & services durable goods furniture & appliances computers & software motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil food other nondurable goods

6125.8 720.3 244.7 22.0 339.0 116.9 1794.4 263.1 16.0 170.3 865.6 481.1

6438.6 804.5 280.8 32.9 372.4 130.3 1876.6 282.7 16.4 176.3 893.6 508.6

6739.4 863.3 312.9 43.8 386.5 141.8 1947.2 297.7 15.8 175.7 925.2 532.9

all goods & services durable goods furniture & appliances computers & software motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil food other nondurable goods

5.0 11.3 13.1 59.9 11.2 8.5 4.0 7.0 -5.3 4.6 2.4 5.4

5.1 11.8 14.7 50.9 10.2 11.5 4.6 7.5 2.3 3.5 3.2 5.7

4.7 7.4 11.6 33.6 3.9 8.9 3.8 5.3 -3.4 -0.3 3.5 4.8

6910.4 900.7 331.8 55.4 405.8 143.1 1986.7 303.7 15.2 178.3 940.2 549.2

7099.3 964.8 364.3 74.1 429.0 151.3 2037.1 318.3 15.5 181.9 954.6 567.1

7295.4 1020.6 397.8 94.8 442.1 161.9 2103.0 334.2 15.4 183.2 977.7 593.2

7577.1 1085.7 446.0 118.5 450.4 173.9 2179.2 350.9 14.6 186.0 1011.0 618.5

7841.2 1145.3 490.6 147.4 452.9 190.0 2276.8 372.7 13.7 185.9 1065.7 643.9

8091.4 1202.9 550.5 184.3 447.4 200.6 2362.0 392.5 12.6 185.1 1110.9 671.1

8338.9 1244.1 585.9 217.8 453.6 205.0 2424.9 408.6 13.6 188.3 1133.2 693.9

8562.6 1275.5 603.1 260.3 460.6 212.4 2495.0 419.0 13.5 196.7 1162.5 715.2

8819.3 1335.9 648.6 309.6 469.2 225.1 2564.6 433.3 13.5 200.2 1191.9 739.5

3.1 3.4 6.4 18.2 1.4 2.2 2.7 4.1 7.6 1.7 2.0 3.4

2.7 2.5 2.9 19.7 1.5 3.6 2.9 2.5 0.1 4.5 2.6 3.1

3.0 4.7 7.5 18.9 1.9 6.0 2.8 3.4 -0.2 1.8 2.5 3.4

Real Consumer Expenditures Annual Growth Rate 2.5 4.3 6.0 26.2 5.1 0.9 2.0 2.0 -3.9 1.5 1.6 3.1

2.7 7.2 9.8 34.1 6.1 5.8 2.5 4.8 2.7 2.1 1.5 3.3

2.8 5.8 9.1 27.6 3.1 7.0 3.2 5.0 -0.6 0.7 2.4 4.6

3.9 6.4 12.2 25.4 1.9 7.5 3.6 5.0 -5.0 1.5 3.4 4.3

3.5 5.5 10.0 24.4 0.6 9.3 4.5 6.2 -6.2 0.0 5.4 4.1

3.2 5.1 12.3 25.0 -1.1 5.6 3.7 5.3 -7.9 -0.4 4.3 4.2

Institute for Economic Competitiveness

27

U . S . F o r eca s t Tab l e s Table 14.

Business Investment Table 14.

Business Fixed Fixed Investment

2005

2006

2007

Forecast 2008

2009

1176.8 854.2 322.6 216.4 118.2 29.5 68.7 54.4 39.2

Billions Current Dollars 1066.3 1077.4 1155.3 1265.7 787.1 800.2 854.5 927.1 279.2 277.2 300.8 338.6 180.6 174.7 188.6 204.4 97.0 91.7 101.3 109.9 17.8 16.7 18.5 24.1 65.8 66.2 68.9 70.3 54.6 49.2 47.2 47.2 35.6 45.7 54.9 76.4

1396.2 985.0 411.2 240.8 124.1 29.1 87.6 51.5 107.4

1461.6 1010.8 450.8 274.8 139.8 33.9 101.1 56.7 106.9

1519.2 1064.6 454.6 274.4 132.0 38.1 104.3 63.3 102.8

1601.7 1147.5 454.2 285.5 133.4 44.7 107.4 66.6 86.2

1232.1 918.9 313.2 222.8 121.3 31.8 69.7 51.5 27.2

1180.5 874.2 306.1 208.4 114.2 28.5 65.6 52.8 32.0

1071.5 820.2 253.8 170.0 91.2 16.7 62.1 51.8 24.5

Billions 2000 Dollars 1081.8 1145.8 1223.8 843.1 904.2 984.9 243.5 248.7 251.5 160.3 163.4 163.0 83.9 87.1 86.2 15.4 16.2 19.6 61.0 60.0 57.1 45.6 40.8 38.7 29.0 32.8 36.4

1312.4 1048.6 274.0 178.7 90.4 22.0 66.4 40.4 40.5

1353.1 1065.3 292.4 194.5 96.9 24.4 73.4 42.8 41.7

1400.4 1115.2 294.8 191.9 90.6 26.6 75.0 45.7 42.7

1473.2 1200.1 293.4 195.7 90.0 30.1 75.9 46.3 38.6

8.7 7.9 10.9 7.4 11.2 -1.9 6.0 15.8 31.9

-4.4 -7.0 3.2 -2.7 -2.3 -7.0 -1.5 5.5 45.3

-9.3 -7.7 -13.4 -16.5 -17.8 -39.5 -4.2 1.3 -8.8

Annual Growth Rate 1.1 7.2 9.6 1.7 6.8 8.5 -0.6 8.5 12.6 -3.1 8.0 8.4 -5.1 10.5 8.6 -4.6 10.4 31.0 0.6 4.0 2.3 -9.6 -3.9 0.2 28.8 20.2 38.8

10.3 6.3 21.4 17.8 12.9 20.7 24.5 9.4 41.3

4.7 2.6 9.8 14.3 12.9 16.6 15.7 10.1 0.0

3.9 5.3 0.9 -0.1 -5.5 12.6 3.2 11.8 -3.9

5.4 7.8 -0.1 4.1 1.2 17.2 3.0 5.2 -16.1

1998

1999

2000

2001

Business Fixed Investment Producers Dur. Equipment Nonresidential Structures Non-Farm Buildings Commercial Industrial Other Buildings Utilities Mines & Wells

1052.5 777.3 275.2 203.1 100.0 40.5 62.6 39.5 23.4

1133.9 851.7 282.2 207.6 109.1 32.6 65.8 44.5 20.6

1232.1 918.9 313.2 222.8 121.3 31.8 69.7 51.5 27.2

Business Fixed Investment Producers Dur. Equipment Nonresidential Structures Non-Farm Buildings Commercial Industrial Other Buildings Utilities Mines & Wells

1037.8 745.6 294.5 221.2 108.7 43.7 68.8 41.0 23.3

1133.3 840.2 293.2 216.6 113.5 33.9 69.2 45.9 21.3

Business Fixed Investment Producers Dur. Equipment Nonresidential Structures Non-Farm Buildings Commercial Industrial Other Buildings Utilities Mines & Wells

8.7 8.3 10.0 10.1 12.2 7.7 8.3 16.8 5.0

7.7 9.6 2.6 2.3 9.2 -19.4 5.4 12.6 -11.9

28

U.S. Forecast

History 2002

2003

2004

U . S . F o r eca s t Tab l e s Table Government Receipts and Table 15.15.

Government Receipts and Expenditures

Expenditures

2006

2007

Forecast 2008

2009

2053.9 999.1 219.5 87.8 691.7

Federal Government Receipts and Expenditures 2016.2 1853.2 1879.9 2001.0 2246.8 2538.2 994.5 830.5 774.5 801.4 927.9 1060.0 164.7 150.5 197.8 244.5 326.4 388.5 85.8 87.3 89.7 94.6 101.1 100.8 717.5 734.3 758.9 802.2 855.4 919.7

2687.4 1145.2 401.8 101.7 968.2

2794.5 1190.4 412.2 104.7 1011.7

2949.1 1263.3 431.2 108.7 1066.3

1864.4 578.8 370.3 208.5 1038.1 770.0 18.3 247.3 263.2 46.1 189.5

1969.5 612.9 392.6 220.3 1131.4 838.7 14.0 276.1 240.2 53.1 46.7

2859.4 971.2 656.4 314.8 1656.1 1246.1 27.5 379.3 288.3 51.3 -172.1

3013.8 1013.7 684.9 328.9 1755.6 1322.2 29.6 400.3 305.5 50.7 -219.4

3140.6 1035.6 693.7 341.9 1843.8 1387.7 30.6 421.9 324.3 51.3 -191.5

State and Local Government Receipts and Expenditures 893.2 915.8 929.0 979.5 1060.9 1154.4 1233.6 1287.7 236.6 242.7 221.3 226.6 248.4 275.2 300.6 321.4 35.6 30.2 32.2 35.3 43.1 58.0 68.7 70.3 621.1 642.8 675.5 717.5 769.4 821.2 864.2 896.0 11.0 13.7 15.8 19.8 24.3 25.3 24.8 25.5 247.3 276.1 304.6 338.5 349.0 361.1 358.0 379.3

1344.4 340.5 71.3 932.6 26.3 400.3

1409.7 363.6 73.1 973.1 27.3 421.9

1975.4 1765.0 467.7 31.6 4.5 2.8 0.0 -8.3

2055.1 1826.0 499.0 31.9 3.5 2.9 0.0 12.0

1998

1999

2000

Receipts Personal Tax and Nontax Receipts Corp. Profits Tax Accruals Indirect Business Tax and Nontax Accruals Contributions for Social Insurance

1773.8 825.8 204.3 81.1 613.8

1891.2 893.0 213.0 83.9 651.7

Expenditures Purchases Goods & Services National Defense Other Transfer Payments To Persons To Foreigners Grants in Aid to State & Local Gov't Net Interest Subsidies less Surplus of Gov't Entities Surplus (+) or Deficit (-)

1735.0 530.5 345.7 184.7 946.5 716.9 14.6 212.8 281.2 34.9 38.8

1787.6 555.8 360.6 195.2 986.1 735.7 15.2 232.9 264.7 44.1 103.6

794.9 201.2 34.9 558.8 10.4 212.8

840.4 214.5 35.8 590.2 9.8 232.9

1111.2 987.9 235.8 -1.0 -9.8 1.7 0.0 52.0

1186.3 1065.0 252.4 -3.8 -10.0 1.8 0.0 50.4

Receipts Personal Tax/Nontax Receipts Corporate Profits Indirect Business Tax and Nontax Accruals Contributions for Social Insurance Federal Grants-In-Aid Expenditures Purchases Goods & Services Transfer Payments Interest Received Net Subsidies Dividends Received Net Wage Accruals Surplus (+) or Deficit (-)

1269.5 1142.8 271.7 -4.5 -7.1 1.9 0.0 50.0

2001

1368.2 1212.8 305.2 5.2 3.6 2.0 0.0 4.8

History 2002

2101.1 679.7 437.1 242.5 1243.0 916.9 18.8 304.6 213.7 39.1 -248.0

1444.3 1281.5 332.0 16.5 -1.6 2.0 0.0 -34.2

2003

2252.1 756.4 497.2 259.2 1328.7 963.7 23.6 338.5 196.5 45.4 -372.2

1514.6 1336.0 353.0 24.8 0.7 2.2 0.0 -20.4

2004

2383.0 825.9 551.3 274.7 1393.3 1015.4 25.9 349.0 205.3 45.5 -382.0

1605.5 1400.4 382.9 29.7 4.1 2.4 0.0 -12.9

2005

2555.9 878.3 589.3 289.0 1476.7 1078.6 33.9 361.1 238.0 61.8 -309.2

1703.9 1494.5 402.3 30.7 10.8 2.4 0.0 -3.3

2691.8 926.6 621.0 305.6 1551.1 1167.3 22.7 358.0 264.4 53.5 -153.6

1785.1 1601.1 399.6 32.1 8.9 2.6 0.0 2.6

1903.7 1703.5 440.5 32.4 8.3 2.7 0.0 -29.3

Institute for Economic Competitiveness

29

U . S . F o r eca s t Tab l e s Table 16.

U.S.U.S. Exports and Imports Goods andof Services Table 16.

Exports andofImports Goods and Services

1998

1999

2000

2001

History 2002

-160.0 -213.5 955.9 -246.7 46.43 142.9 72.4 299.9 45.3 201.1 80.3 39.1 275.1

-260.5 -299.8 991.3 -346.0 45.98 142.4 75.3 311.3 46.8 211.6 80.9 41.4 294.1

-379.5 -415.2 1096.3 -452.4 47.85 166.7 80.4 357.0 55.5 253.4 89.4 43.1 312.0

-367.0 -389.0 1032.8 -427.2 49.43 155.3 75.4 321.7 47.6 221.6 88.3 41.0 301.6

-424.4 -472.4 1005.9 -482.3 49.60 153.5 78.9 290.5 38.6 201.5 84.4 40.7 308.4

Imports - Goods & Services 1115.9 Merchandise 928.9 Food, Feed & Beverage 41.2 Petroleum & Products 50.6 Industrial Supplies Excl Petroleum 142.5 Motor Vehicles & Parts 148.7 Capital Goods, Excl. MVP 269.5 Computer Equipment 72.5 Other 175.2 Consumer Goods, Excl. MVP 217.2 Other Consumer 59.3 Services 186.9

1251.8 1045.5 43.6 67.8 147.9 179.0 295.7 81.5 190.5 242.1 69.5 206.3

1475.8 1243.5 46.0 120.2 172.8 195.9 347.0 89.8 230.9 282.0 79.6 232.3

1399.9 1168.0 46.6 103.6 164.8 189.8 298.0 74.0 192.7 284.5 80.7 231.9

1430.3 1189.4 49.7 103.5 158.4 203.8 283.3 75.2 182.7 308.0 82.8 241.0

Net Exports Goods & Services Exports G & S Imports G & S

-203.8 966.5 1170.3

-296.2 1008.2 1304.5

-379.5 1096.3 1475.8

-399.1 1036.7 1435.8

-471.4 1013.3 1484.6

0.1 5.6 2.5 11.7

3.7 12.1 4.3 11.4

10.6 18.0 8.8 13.2

-5.6 -4.9 -5.3 -2.6

Net Exports Goods & Services Current Account Exports - Goods & Services Merchandise Balance Food, Feed & Beverage Industrial Supplies Excl Petroleum Motor Vehicles & Parts Capital Goods, Excl. MVP Computer Equipment Other Consumer Goods, Excl. MVP Other Consumer Services

Exports G & S Imports G & S Real Exports G & S Real Imports G & S

30

U.S. Forecast

2005

2006

2007

Forecast 2008

2009

Billions of Dollars -499.4 -613.3 -527.5 -665.3 1040.8 1178.1 -547.3 -665.4 55.03 56.60 168.3 199.5 80.7 89.2 293.7 331.6 39.9 42.8 207.1 238.8 89.9 103.1 36.9 38.9 316.4 359.3

-716.7 -791.5 1303.2 -782.7 58.95 227.5 98.6 362.7 45.6 256.4 115.7 44.0 395.6

-762.5 -856.7 1466.2 -836.0 66.80 267.2 107.8 415.1 47.6 291.9 129.7 48.9 430.8

-719.3 -818.2 1600.6 -796.7 75.98 293.8 115.0 448.4 48.0 311.3 152.0 53.1 462.4

-655.2 -783.6 1768.8 -766.4 74.11 318.1 128.7 501.6 53.1 346.9 175.7 58.0 512.5

-638.0 -804.4 1944.7 -781.0 75.78 339.9 145.9 557.2 59.1 384.8 197.5 62.6 566.0

Billions of Dollars 1540.2 1791.4 1284.0 1495.2 55.8 62.1 133.1 180.5 174.4 225.2 210.1 228.2 295.9 343.5 76.5 88.6 195.3 230.6 334.0 373.1 80.6 82.7 256.2 296.2

2019.9 1699.0 68.1 251.8 264.9 239.5 379.2 93.3 260.2 407.3 88.1 320.9

2228.7 1879.5 75.3 301.8 291.5 257.3 419.3 101.6 289.0 443.4 91.0 349.2

2319.8 1950.3 82.1 296.4 289.7 258.2 442.4 108.8 300.6 482.2 99.1 369.6

2424.0 2037.3 86.9 285.7 307.4 272.9 477.3 116.4 321.4 501.9 105.4 386.7

2582.7 2174.4 90.7 291.2 325.3 294.0 520.1 126.5 348.5 536.8 116.3 408.3

Billions 2000 Dollars -518.9 -590.9 -619.2 1026.1 1120.4 1196.1 1545.0 1711.3 1815.3

-618.1 1302.8 1920.9

-577.4 1385.5 1962.9

-527.7 1512.7 2040.4

-512.5 1648.7 2161.2

Exports & Imports % Change -2.3 3.5 13.2 10.6 2.6 7.8 16.3 12.8 -2.0 1.3 9.2 6.8 3.5 4.1 10.8 6.1

12.5 10.4 8.9 5.8

9.2 4.1 6.3 2.2

10.5 4.5 9.2 3.9

9.9 6.5 9.0 5.9

2003

2004

Director, Institute for Economic Competitiveness.

Ph.D., Pennsylvania State University 1996; M.A., Pennsylvania State University 1994; B.S., Allegheny College 1989.

Sea n M . S n ait h , P h . D .

Sean Snaith is Director of the Institute for Economic Competitiveness in the College of Business Administration at the University of Central Florida.

Dr. Snaith received his B.S. in Economics from Allegheny College and his M.A. and Ph.D. in Economics from Pennsylvania State University. He has taught at Penn State, the American University in Cairo, the University of North Dakota and the University of the Pacific. While at the University of North Dakota, he served as the Director of the Bureau of Business and Economic Research and as Director of the Business Forecasting Center at the University of the Pacific.

Snaith also served with International Planning and Research, a Boston area consulting firm, where his work included forecasting, market sizing, economic analyses, and econometric modeling for a variety of clients including IBM, Dell, Compaq, and HewlettPackard.

We would like to recognize the following organizations for their support of the Institute for Economic Competitiveness:

Snaith is a director of the Association of University Business of Economic Research, a member of the National Association of Business Economics, and the American Economics Association. He is also a member of the Western Blue Chip Economic Forecast Panel, the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters, Livingston Survey, Bloomberg U.S. Economic Indicator Survey and USA Today’s Quarterly Survey of Top Economists. He is frequently quoted in the media and has published articles on a variety of topics including exchange rate modeling, predicting educational outcomes, the economics of information technology, and telemedicine.

For more information Sean Snaith, Director Institute for Economic Competitiveness College of Business Administration University of Central Florida P.O. Box 161400 Orlando, FL 32816 PH: 407.823.1451 FAX: 407.823.1454 EMAIL: ssnaith@bus.ucf.edu www.iec.ucf.edu

U n i v e r s it y o f C e n t r al F l o r ida College of Business Administration Institute for Economic Competitiveness P. O . B o x 1 6 1 4 0 0 , O r l a n d o , F l o r i d a 3 2 8 1 6 PH 407.823.1453

FAX 407.823.1454

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