2009 Regional Economic Outlook

2009 Regional Economic Outlook Grant D. Forsyth, Ph.D. gforsyth@ewu.edu Department of Economics College of Social and Behavioral Sciences + Institute for Public Policy and Economic Analysis My October Epiphanies 1. Gosh, I’m broke. 2. A positive net worth is for wimps and elitists. 3. I’m glad I’m not President. It’s not good… Picture Source: Courtesy of Puget Sound Maritime Historical Society, retrieved from U.W. Digital Library But it could be worse! Picture Source: Courtesy of Puget Sound Maritime Historical Society, retrieved from U.W. Digital Library Annual Population Growth in Spokane and Kootenai 2007, 2008 National Growth Spokane+Kootenai (2007 Census) 2.2% Kootenai (2007 Census) 2.8% Spokane (2008 OFM) 1.7% 7 Border Counties (2007 Census) 0.7% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Source: U.S. Census, Washington’s OFM, and author’s calculations. 7 border counties = Benewah, Bonner, Shoshone, Lincoln, Pend Oreille, Stevens, and Whitman. Annual Population Growth, 2003 - 2007/08 4.5% 4.0% 3.5% Annual Growth 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2003 2004 Kootenai 2005 Spokane 2006 2007 2008 OFM 7 Border Counties Source: U.S. Census, Washington’s OFM, and author’s calculations. City Population Growth: Kootenai 2007, Spokane 2008 Hayden Lake Coeur d'Alene Hayden Post Falls Cheney Spokane Valley Spokane City Medical Lake Airway Heights Liberty Lake -1% 0.0% 2.9% 3.0% 4.1% -0.3% 0.7% 0.7% 2.4% 4.2% 6.1% 0% 1% 2% 3% 4% 5% 6% 7% Source: U.S. Census, Washington’s OFM, and author’s calculations. Unemployment Rates, 2006-2008 7.0% 6.5% 6.0% 6.0% 5.0% 5.5% 4.0% 5.0% 3.0% 4.5% 2.0% 4.0% 2006 2007 2008 (Summer) 2006 2007 2008 (Summer) 1.0% 7 Border Counties Spokane U.S. Kootenai U.S. Spokane+Kootenai Source: BLS and author’s calculations. Non-Farm Employment Growth and Forecasts, 2007 - 2009 8% 7% 6% Year-over-Year, Same Month Spokane + Kootenai Range 2008 2009 5% 4% 3% 2% 1% 0% Mar-07 Mar-08 Jul-07 May-07 Nov-07 May-08 Sep-07 Jul-08 High 0.7% 2.5% Point Sep-08 Jan-07 Jan-08 0.4% (1.9%) 0.7% -1% -2% Low Kootenai Spokane+Kootenai Spokane U.S. 0.1% -1.0% Source: BLS and author’s calculations. C&I Lending Standards, 2Q 1990 - 4Q 2008 Net % = % tightening – % easing Net Percentage Tightening C&I Loan Standards (%) 100 80 60 40 20 0 1990.2 1991.1 1991.4 1992.3 1993.2 1994.1 1994.4 1995.3 1996.2 1997.1 1997.4 1998.3 1999.2 2000.1 2000.4 2001.3 2002.2 2003.1 2003.4 2004.3 2005.2 2006.1 2006.4 2007.3 -20 -40 Banks Tightening C&I Lending Standards on Large and Medium Firms (Sales > $50 mil.) Banks Tightening C&I Lending Standards on Small Firms (Sales < $50 mil.) Source: Board of Governors of the Federal Reserve. Large and medium firms = annual sales of $50 million or more. 2008.2 Real Per Capita Personal Income Growth and Forecasts, 2006 - 2009 3.0% 2.5% Spokane + Kootenai 2.3% 2.5% 2.0% Annural Growth 2.3% Range 1.6% 2008 2009 1.5% 1.0% 0.5% GI High 1.0% 0.4% -0.3% -0.9% 1.2% 4.2% 0.0% -0.5% -1.0% -1.5% U.S. Spokane+Kootenai Point -0.9% (0.8%) 1.0% 2006 2007P 2008F 2009F Low -2.9% -2.2% Source: BEA, BLS, WA Forecast Council, Global Insights, and author’s calculations. End of Month Wheat Prices, June 2007 – Oct. 2008 End of Month Prices on Nearby Contracts, KCBT Wheat Futures $13.50 $12.00 $10.50 Price Per Bushsel $9.00 $7.50 $6.00 $4.50 $3.00 $1.50 $Ju n07 Ju l-0 7 A ug -0 7 Se p07 O ct -0 7 N ov -0 7 D ec -0 7 Ja n08 Fe b08 M ar -0 8 A pr -0 8 M ay -0 8 Ju n08 Ju l-0 8 A ug -0 8 Se p08 O ct -0 8 Source: Kansas City Board of Trade Spokane Nominal Taxable Sales Growth and Forecasts, 2006 - 2009 14% 12% Year-over-Year, Same Quarter City of Spokane Range 2008 2009 Rest of County 2008 2009 10% 8% 6% 4% 2% 0% 2006.1 2006.2 2006.3 2006.4 2007.1 2007.2 2007.3 2007.4 2008.1 High 1% 10% 0% 13% Point 2008.2 -1% (5%) 3% -2% (8%) 5% -2% -4% -6% Low City County Less City CPI-West Inflation -3% -4% -4% -3% Source: Washington’s DOR, BLS, and author’s calculations. U.S. Quarterly Demand for Consumer Loans, 4Q 1991- 4Q 2008 80 60 Not good. 40 Net Percentage (%) 20 0 1996.1 1996.3 1997.1 1997.3 1998.1 1998.3 1999.1 1999.3 2000.1 2000.3 2001.1 2001.3 2002.1 2002.3 2003.1 2003.3 2004.1 2004.3 2005.1 2005.3 2006.1 2006.3 2007.1 2007.3 2008.1 -20 -40 -60 Banks Tightening Credit Card Standards Banks Reporting Stronger Demand For Consumer Loans Source: Board of Governors of the Federal Reserve. 2008.3 Nominal Existing Home Price Growth and Forecasts, 2005 - 2009 35% Spokane 30% Year-over-Year, Same Quarter Kootenai 2008 2009 Range 2008 2009 25% 20% 15% 10% 5% 0% 2005.4 2006.1 2006.2 2006.3 2006.4 2007.1 2007.2 2007.3 2007.4 2008.1 High 3% 5% 0% 8% Point 2008.2 2% (5%) 1% -2% (2%) -1% -5% U.S. Spokane Coeur d'Alene CPI-West Inflation Low 1% -4% -3% -10% Source: OFHEO, BLS, and author’s calculations. Foreclosures on Deeds of Trust in Spokane and Kootenai, Jan. 2007- Aug./Sept. 2008 160 140 Number of Forclosures 120 100 80 60 40 20 0 Mar-07 May-07 Mar-08 May-08 Jul-07 Sep-07 Jul-08 Kootenai Nov-07 Spokane Source: Spokane-Kootenai Real Estate Research Report and author’s calculations. Sep-08 Jan-07 Jan-08 Year-to-Date September Building Permits, 2004 - 2008 4,500 4,000 3,719 4,132 3,632 3,188 Total Permits for All Types of Units 3,500 3,000 2,500 1,989 2,000 2,041 1,500 1,000 500 Sept 2004 Sept 2005 Sept 2006 Year-to-Date Spokane + Kootenai Spokane 1,730 1,378 2,254 2,091 1,778 1,583 1,410 970 613 Sept 2007 Sept 2008 Kootenai Source: U.S. Census. Nominal Growth in Deposits of FDIC Institutions, 2000-2008 20% 15% Annual Growth 10% 5% 0% 2000 -5% 2001 2002 2003 2004 2005 2006 2007 2008 -10% Year as of June 30 Kootenai Spokane CPI-West Inflation Source: FDIC, BLS, and author’s calculations. Share of Non-current Loans to Total Loans, 1Q 2007 - 2Q 2008 3.0% % of Non-Current Loans to Loans 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2007.1 2007.2 Spokane U.S. 2007.3 2007.4 2008.1 2008.2 Kootenai City of Spokane/Valley CU Source: FDIC, NCUA, and author’s calculations. Hospital Operating Margins, 1Q 2004 - 2Q 2008 $30 $20 $10 Millions of Dollars $- 2004.1 2004.2 2004.3 2004.4 2005.1 2005.2 2005.3 2005.4 2006.1 2006.2 2006.3 2006.4 2007.1 2007.2 2007.3 2007.4 2008.1 $(10) $(20) $(30) Source: Washington State Department of Health and Mark Wagner. 2008.2 Source: Hart Index 100 = Dec. 31, 2002 100 150 200 250 300 350 50 0 Hart Index Regional Company Hart Index, 4Q 2002 - 3Q 2008 , Standard and Poor’s, and author’s calculation. +200% S&P 500 20 02 .4 20 03 .1 20 03 .2 20 03 .3 20 03 .4 20 04 .1 20 04 .2 20 04 .3 20 04 .4 20 05 .1 20 05 .2 20 05 .3 20 05 .4 20 06 .1 20 06 .2 20 06 .3 20 06 .4 20 07 .1 20 07 .2 20 07 .3 20 07 .4 20 08 .1 20 08 .2 20 08 .3 +100% -33% Regional Company Market Values by Firm, 3Q 2007 - 3Q 2008 Company % Change AmericanWest Bancorp. Idaho Independent Bank Financials Intermountain Community Bank Northwest Bancorp. Sterling Financial Avista Coeur d’Alene Mines Hecla Mining Itron Key Tronic Potlatch Ambassadors Group Services Coldwater Creek NightHawk Radiology Red Lion Hotels Source: -90% -27% -58% -43% -46% +7% -60% -48% -5% -51% +3% -58% -47% -71% -22% Industrials Sector Focus: Regional Exports Real GDP Growth With and Without Export Growth, 1Q 2007- 3Q 2008 6% Neener, neener, you trade haters! 5% Annualized, Quarter-to-Quarter Change 4% 3% 2% 1% 0% 2007.1 -1% 2007.2 2007.3 2007.4 2008.1 2008.2 2008.3 -2% Real GDP Growth Real GDP Growth Less Export Contribution Average Contribution Source: BEA and author’s calculations. Real Per Capita Exports, 2000 - 2007 $10,000 Real Per Capita Exports (2000 = Base Year) $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $2000 2001 2002 WA 2003 2004 U.S. 2005 2006 2007 Source: ITA, BLS, and author’s calculations. Merchandise Exports as a Share of County GDP, 2005 U.S. 7% Spokane 4% Kootenai 1% 0% 1% 2% 3% 4% Share 5% 6% 7% 8% Source: ITA and author’s calculations. Rural vs. Urban Merchandise Export Shares, 2006-1H 2007 Washington Export Shares, 2006-1H 2007 Non-MSA 6% Idaho Export Shares, 2006-1H 2007 Non-MSA 9% MSA 94% MSA 91% Source: ITA and author’s calculations. Nominal Merchandise Export Growth, 2005-2007 U.S. U.S. Actual 15% 12% WA Non-MSA 18% 9% ID Non-MSA 25% 22% 2005-2006 Projected 2006-07 WA MSA 47% 8% ID MSA 14% 16% 0% 10% 20% 30% 40% 50% Annual Growth Source: ITA and author’s calculations. Nominal Merchandise Export Growth in Spokane and Kootenai 15% U.S. U.S. Actual 12% 19% Spokane 30% 2005-06 Projected 2006-07 31% Kootenai 10% 0% 5% 10% 15% 20% 25% 30% 35% Annual Growth Source: ITA and author’s calculations. Share of County Exports by Trade Area NAFTA 90% EU Asia Kootenai Spokane South America OPEC Africa 0% 5% 10% 15% 20% 25% Share 30% 35% 40% 45% 50% 2009 Outlook Summary We are in a recession until 4Q 2009: 1. The region should do better than the U.S., but the regional decline could still be worse than the last recession. 2. The region will likely see zero or negative growth in real income, employment, and taxable sales activities. 3. Home price growth will be close to zero or modestly negative in nominal terms, and negative in real terms. Banks will continue with risk averse lending practices. 4. The growth cushion of exports will weaken as our trading partners fall into weaker growth. Have a Day !!