U.S. Forecast August 2007

U.S. Forecast August 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

As you read this U.S. Forecast, you will notice that Dr. Sean Snaith uses musical lyrics to help illustrate his research. Following his lead, I’d like to include some lyrics of my own: “Won’t be long ‘til summer time is through,” All Summer Long - Beach Boys

serving its surrounding communities 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 and goals in providing intellectual

It is hard for me to believe that the summer of 2007 is almost over and fall is just around the corner. To many, the fall season means back to school…cooler weather…leaves turning colors… and football season. But what will this fall mean for our economy?

This comprehensive forecast addresses many of the economical issues affecting the U.S. beginning with this fall, the third quarter of 2007, through the year 2010. Among the many topics discussed in this three-year forecast are the Gross Domestic Product, housing market, consumer spending, inflation, and unemployment rates. The highlights for the next three years are included in a bulletpoint format in the beginning of this report.

Thank you for your interest in this forecast and supporting the innovative research that comes from our Institute for Economic Competitiveness in the College of Business Administration at the University of Central Florida.

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 fall season and I look forward to addressing you again next quarter!

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 2007 - 2010 August 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 3 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

• U .S. economy is still in for the soft landing, but the runway just got longer and takeoff has been delayed until the end of 2008.

• Th e expansion that was once belittled as the “jobless recovery” was, in reality, the careful construction of a foundation that would provide a solid base and give strength and stability to the U.S. economy. This quality construction has enabled the current expansion to weather multiple shocks over the past several years that would have driven a less robust expansion into the ground.

• R umors of the consumer’s demise have been greatly exaggerated.

The U.S. consumer remains steadfast through home equity wells gone dry, hurricanes, and elevated energy prices.

• I nflation is always on Ben Bernanke’s mind. Do not expect Federal Reserve rate cuts in response to the wailing and gnashing of teeth on Wall Street.

• U nemployment rates will drift upward. Job losses in construction and financial services tied to housing will add to the structural job losses being experienced in the manufacturing and information sectors.

• U nemployment peaks at 4.8% in 2008 before falling back to 4.3% in 2010.

• S ub-prime mortgage woes are a double-edged sword cutting housing two ways: more supply pushed back on the market due to foreclosures and curtailed demand as fewer buyers are qualified to get a mortgage.

• P ayroll job growth decelerates to 1.12% in 2008 before gaining steam and averaging 1.44% during 2009-2010.

• D epreciation of U.S. dollar continues through 2009. U.S. international trade to reach nearly $5 trillion in 2010.

U . S . F o r eca s t

The Anxious Index

of a decline in real GDP in the quarter after a survey is taken. In the survey taken in the 3rd quarter of 2007, the index stands at 16.95%, which means that forecasters believe there is a 16.95% chance that real GDP will decline in the 4th quarter of 2007.

Prior to each of the previous six recessions, the anxious index showed steep increases and surpassed the 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% for the 1st quarter of 2008. Thereafter, the probabilities remain elevated but begin drop off. It should be noted that the survey results were collected prior to the recent turmoil in financial markets due to the sub-prime mortgage woes and the subsequent actions taken by the Fed and other central banks around the world. It is a safe assumption that in light of this information, some economists would have raised their probabilities.

Does the real GDP growth of Here comes your 0.6% for the 1st nineteenth nervous quarter of 2007 breakdown and the ongoing 19th Nervous Breakdown pain in the housing sector have – Rolling Stones economic forecasters concerned that a recession is just around the corner? The most recent release (3rd quarter 2007) of the Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia suggests that the 44 forecasters surveyed for this publication, including the author, have a rising concern that a decline in real GDP could occur in the 4th 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

“

”

FIGURE 1

The Anxious Index Probability of Decline in Real GDP in the Following Quarter Quarterly, 1968:Q4 to 2007:Q3 100 90

70 60 50 40 30 20 10

2007

2006

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2000

1999

1998

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1981

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0 1968

Probability (percent)

80

Survey Date Institute for Economic Competitiveness

5

U . S . F o r eca s t

The Fed’s Nex t Move: S h o u l d t h e y c o me t o W a l l S t r ee t ’ s Re s cue ?

“Panic on the streets of London Panic on the streets of Birmingham I wonder to myself Could life ever be sane again?”

Panic – The Smiths

AND

“Don’t go changing to try and please me... I’ll take you just the way you are.”

Just the Way You Are – Bill Joel

Upcoming 2007 FOMC meetings: September 18, October 30-31, December 11 At eight consecutive 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 September 18.

What will the Fed do at these upcoming meetings? The recent turmoil in financial markets has raised anxiety levels, at least on Wall Street.

The loudest cries for a cut in the federal funds rate have been emanating from Wall Street. On Wall Street, the long run is a quarter long, while the Fed has a different, longer time horizon, as it should. Its

6

U.S. Forecast

focus has been on containing inflation, and I think this will remain the focus. This is an objective that requires looking beyond these short-tem episodes of volatility in financial markets. The press release from the last FOMC meeting contained the following text, which bolsters the view that the Fed is still on guard against inflation: “Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated.

Moreover, the high level of resource utilization has the potential to sustain those pressures.”

– Federal Reserve FOMC Press Release August 7, 2007 In a surprise move on August 17th, the Federal Reserve cut the discount rate (the interest rate that the Fed charges member banks and other depository institutions on short-term loans) from 6.25% to 5.75%. This decision was an assertion by the Fed of its role as lender of last resort, and it is largely a symbolic move designed to quell fear in financial markets (more on the sub-prime issue and the turmoil in financial markets later).

Should the Fed go further and lower the federal funds rate, its target interest rate for monetary policy?

Some are making this argument and referencing Alan Greenspan’s actions after the stock market crash of 1987. In the wake of that crash, the Fed lowered the federal funds rate target from 7.5% to 7.0%. However, comparing the recent turmoil in financial markets to what transpired in 1987 is truly comparing apples to oranges. From peak to trough, the stock market fell 36.7% in 1987, including Black Monday’s decline of 22.6%. If the market were to fall an equivalent percentage from its peak of roughly 14,000, this would put the Dow at 8,862. At this writing, the Dow is hovering around the 13,000 mark. This is hardly the same situation as 1987 and, therefore, simply does not merit the same level of response from the Fed. Regardless of what analysts in financial markets are calling for, the Fed will, and should, keep its eye on the ball — containing inflation.

U . S . F o r eca s t Ben Bernanke was an economics professor prior to taking the helm at the Federal Reserve, and a significant component of his research was on the topic of inflation targeting as an approach to the conduct of monetary policy. He is a believer that low and stable price inflation is the best way to keep the economy at full employment and on its highest sustainable growth path. I believe we will see the Central Bank make this its primary objective under Bernanke’s tenure. Capitulating to the whining on Wall Street by cutting the federal funds rate now will put a dent in Bernanke’s and the Fed’s credibility and could severely compromise its ability to roll out an inflation-targeting regime in the future.

A simple expected cost/benefit analysis of a cut in the federal funds rate quickly demonstrates that it is not a wise move at this point in time. The potential costs of such a move include the Fed losing credibility, a surge in inflation and in inflationary expectations and the ramifications that would exist for interest rates. Higher inflationary expectations cause higher interest rates and would exacerbate the housing woes as resetting ARMS would jump to a higher interest rate, leading to even more foreclosures and defaults. The potential benefits are unclear.

Would a 25 basis point (0.25%) cut in the federal funds rate have any impact on the number of bad mortgages that have been underwritten in the past few years? Lowering the federal funds rate target is not going to be a panacea for the problems that exist in financial markets as a result of sub-prime mortgages, and the potential side effects make this a very bad move.

Imagine if you went to your family doctor because of a problem with indigestion and she wrote you a prescription. As you dressed to leave, she told you that the prescription she just gave you wouldn’t necessarily help with your gastrointestinal problem, and it doubles your chances of having a heart attack or stroke. How would you respond? Would you rush to the pharmacist to have it filled or would you throw it in the garbage and look for a new doctor?

Those advocating a cut in the federal funds rate are suggesting such a prescription for what ails the economy.

T h e H o u s in g M a r k e t

“Get sick, get well

Hang around a ink well Ring bell, hard to tell If anything is goin’ to sell” Subterranean Homesick Blues – Bob Dylan

The housing market needed the sub-prime meltdown like the NFL needs another dog fighting scandal. Things were tough enough in the housing market; inventories in many markets are so high that it is hard for sellers to make their property stand out from the plethora of houses from which buyers now have to choose. At the peak of the housing boom, time on the market was measured in days; now, it can be longer than a year.

The spike in foreclosures tied to the sub-prime mortgage market has added unneeded inventory to the already burgeoning supply of new and existing homes for sale. The rise in foreclosures will likely continue for several quarters. A second impact is the tightening of credit standards, particularly in the sub-prime segment. The tightening of lending standards will lead to fewer potential buyers being qualified to take out a mortgage. The reduction in the number of potential buyers will restrain demand, put additional downward pressure on prices, and lengthen the time it takes for the market to soak up ten months inventory.

The credit crunch in mortgage markets is a new twist and an unexpected ingredient in the housing soufflé. It will weigh the soufflé down and likely cause more of a decline in prices than otherwise would have been the case. How much more will prices decline? Nationally, perhaps less than a percentage point. The decline in prices even with this new wrinkle will be far from what would happen if there were a true bubble in housing prices. The housing market is not NASDAQ, and houses are not dot com stocks. There will be pockets of pain around the nation, particularly in areas where the sub-prime scourge had a greater impact and where condominium construction was driven by more Institute for Economic Competitiveness

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U . S . F o r eca s t speculation than real ingredients, such as in parts of Florida and California. Will those areas see prices fall 50% like when the technology bubble burst? Not likely - unless one or more of the housing soufflé ingredients are taken out of the mix.

will begin to accelerate in the second half of 2008, and some light at the end of the housing tunnel will begin to show.

GD P O U TLOOK

Consumers appear to be acting out Mark I am, I am, I am Twain’s quip that Superman “rumors of my demise have been greatly And I can do exaggerated.” The U.S. anything. consumer has been Superman eulogized for several – R.E.M. reasons over the past two years, and it appears that reports that spending was going to decline have, in fact, been greatly exaggerated.

One of the purported reasons that consumer spending was going to collapse focused around the epicenter of most pessimistic economic outlooks these days — the housing market. The story went a little something like this. The record run up in housing prices created a windfall of wealth via home equity that many consumers were tapping into through home equity loans. Consumers were, in turn, using these loans to fund everything from home renovations to high-definition, flat-panel television sets to recreational boats and vehicles.

Once the fountain of rising equity was turned off, the consumer would severely curtail spending, and the end to this shopping spree would have severe repercussions for the economy. Well, the home equity fountain has been turned off since 2006 and, equity is actually declining in many parts of the country. How are consumers responding? Is the sound of wailing and gnashing of teeth emanating from Main Street as consumers tighten belts in response to falling home equity? Not quite. In fact, the Conference Board Consumer Confidence Index hit a six-year high at the end of July. Despite the sagging housing market, consumers are ebullient.

Why? The fundamentals of the economy are sound.

Most consumers feel secure about their employment prospects, incomes are rising, and other than housing-related positions, the number of jobs is growing.

Real GDP growth came in at just 0.6% for the 1st quarter of 2007. This paltry growth seemed to give some credence to the pessimists who claimed that the housing bust was going to pull the U.S. economy down into a recession. Admittedly, this figure made me weak in the knees and I began to doubt – just for a moment, mind you – whether my prognostications to the contrary had been overly optimistic. The weight of the housing correction seemed to have the economy buckling at the knees; was the economy headed toward the canvas and down for the count?

The answer came with the release of preliminary real GDP growth for the 2nd quarter of 2007. The 3.4% rate of growth will still be revised in subsequent data releases, but it clearly is a strong comeback from the 1st quarter growth. Whatever the final figure is, we expect this to be the strongest quarter of the year as far as GDP growth is concerned.

Where does the economy go from here? We are forecasting a flattening of economic growth for the next four quarters, with growth expected to hover around 2.4% through the 2nd quarter of 2008.

This below trend growth will last longer than we had previously forecasted. The soft landing we have consistently forecasted for the U.S. economy is still taking place, but the runway is longer, and it will take us some additional time to taxi before things take off again. The culprit is housing and the latest wrinkle to the housing hysteria, a credit crunch.

The extent to which the mortgage market will be constrained is still not clear, but what is clear is that the financial market problem will extend the time it takes for the housing surplus to be absorbed and, thereby, extend the downward drag this correction will have on economic growth.

Since it now seems unlikely that the housing market will return to normal before 2009, we do not think the economy will get back to 3.0%-plus growth until the 1st quarter of 2009. However, growth

8

U.S. Forecast

C o n s ume r Spen d in g

“

”

U . S . F o r eca s t A second reason for the doom and gloom scenarios related to consumer spending is the price of energy.

In the wake of hurricanes Katrina and Rita in 2005, consumer spending growth did, in fact, grind to a halt. That winter, higher gasoline prices, higher natural gas prices, and higher oil prices led to a pinch at the pump, the light switch, and the thermostat.

The prospect of such dramatically higher energy bills cut discretionary spending for most households as winter arrived. Since then, oil and gasoline prices have broken the records set in 2005, and, aside from a mild shift away from large trucks and SUVs, these spikes in energy prices have been met by consumers with a collective “whatever.�

It appears that many households didn’t employ home equity loans for the purpose of one-time purchases but, instead, used them as a way to consolidate debt at a lower interest rate, thus freeing up disposable income each month that could fuel continued levels of higher consumption. The post2005 spikes in energy price did not seem to carry the same psychological weight as when gasoline first hit $3.00 a gallon and oil hit $70 per barrel. Consumers seem to be able to accept this new higher level of energy prices.

Continuing volatility of prices, however, has the potential to cause a cumulative effect of lowering the average consumer confidence by wearing down the consumer and dragging down spending. Another risk is that a hurricane could still occur and hit key infrastructure in the Gulf of Mexico, given that there are three months left in the hurricane season.

The possible disruption from the ubiquitous threat of political unrest or terrorism in the Middle East or elsewhere is also an ongoing concern.

The potential for a supply-induced surge in prices coupled with existing global demand could lead to a surge in energy prices with economic repercussions much more far-reaching than what we have experienced to date. One-hundred dollar per barrel oil would certainly bring consumer spending growth to a screeching halt.

I n v e s t men t Corporate profit growth has slowed significantly after five years of double-digit growth and is projected to be in the low single digits for the next couple of years. Low interest rates will result in

continued investment growth as many firms still have war chests of retained earnings from the years of higher profit growth. Investment in information technology continues to grow at a double-digit pace throughout the duration of our forecast horizon.

Overall investment will be slower in 2007 than in 2006 with growth at about half the level it was a year ago. Commercial construction is still playing catch-up with the housing boom. All of the new rooftops around the country need retail and medical office space to provide consumers with dry cleaners and groceries near these new developments. However, the commercial side will not escape the pain of the residential housing market, and in 2008, investment in structures growth will come to a near standstill.

In 2009, the party ends with a decline in business spending on structures.

Residential fixed investment growth, on the other hand, is already in turmoil, and double-digit declines in 2007 will be echoed once again in 2008.

By the end of 2008, the housing hangover should be subsiding. 2007 will be the worst year, with a double-digit decline of nearly 15% as developers have severely cut back on projects in the wake of large inventories and demand hampered by the sub-prime woes. In 2009, the housing sector should be out of the doldrums and residential fixed investment should return to a more sustainable growth rate of 6.5%.

G o v e r nmen t Spen d in g Unfortunately as the economy slows, tax 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 since 2004, primarily as a result of the surge in receipts that economic growth generated, 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. Democrats control Congress, and Republicans control the White House, which is a recipe for fiscal gridlock. It is highly unlikely that any major change in the course of discretionary fiscal policy could transpire prior to the election, so any changes in spending and receipts will reflect the underlying cyclical movements in the economy.

We expect real government spending growth to slow to less than 1.5% in 2008. The reduction Institute for Economic Competitiveness

9

U . S . F o r eca s t of military expenditures in Iraq will help slow spending growth. In 2009 and 2010, we anticipate real government spending growth to slow to a near standstill for the first time in over a decade.

The deficits will require the attention of the new administration in the White House, and some attempt to curtail deficits will be made in part by lowering spending. The other side of the corrective action will entail higher tax rates, which are more likely if a Democrat occupies the Oval Office.

State and local government spending will expand at a decreasing rate from 2.1% growth in 2007 to 1.2% growth in 2010. 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 that provided a cornucopia of funds during the housing boom.

Net Exports International trade continues to exhibit strong growth. In 2005, the level of total trade that the United States engaged in (defined as the sum of the value exports and imports) was $3 trillion. In 2010, the value of total trade will reach nearly $5 trillion.

This represents nearly a 52% increase in just five years.

Domestic demand for goods and services has cooled along with the housing sector, but foreign demand for our goods and services will help ease the slowdown in domestic markets. For the first time since 2001, net exports show an increase (a shrinking of the deficit) in the 2007-2010 time frame. Strong growth overseas, coupled with a declining dollar, will fuel export growth and help curtail growth in imports. While the overall trade balance will still be at 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 downside of the J-curve), has now started to affect trade flows. We are forecasting that this depreciation will continue through 2009.

The weakening dollar and the slowing U.S economy will cause import growth to decelerate from the double-digit growth of the past three years to an average of 6% from 2007 to 2010. Export growth 10

U.S. Forecast

will average nearly 10% over 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 show that foreigners were holding almost $2 trillion worth of marketable U.S. Treasury debt. This represents in excess of 50% of the total outstanding.

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 the Federal Reserve Bank within the past 8 months has ended a two-year campaign of interest rate hikes, yet interest rates remain at very low levels historically.

Well-contained expectations about inflation are part of the story (and why a cut in response to the sub-prime crunch is ill-advised). The bigger piece of the puzzle is foreign purchases of Treasury bonds (Japan and China hold nearly $1 trillion worth of marketable U.S. Treasury bonds); this has kept bond prices high and yields much lower than they would be in absence of these purchases.

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 to offset the trade deficit several times over. If interest rates had recently risen to the same levels witnessed in the 1980’s (10-year treasury yield: 13-14% in 1984), the housing boom would have never taken place, investment spending by firms would have been drastically lower, and the current slowing of growth we are now experiencing would seem blazing by comparison.

I nf l a t i o n Willie Nelson did a version of this song that was not too shabby. When it comes to inflation, Ben Bernanke might be able to sing his own version of this song, though I doubt it would hold a candle to Willie’s, when it comes to inflation. As we discussed earlier, the specter of inflation still haunts the U.S.

U . S . F o r eca s t economy despite the housing slowdown, two years of monetary policy tightening, and recent financial market headaches.

Labor markets remain tight, and Always on my mind the unemployment rate is still at a – Elvis Presley very low level by historical standards. Labor costs continue to be pushed upward, and coupled with evidence of slowing productivity, this leaves the possibility of a wage-price inflation spiral taking hold.

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 as a marketbased measure of inflationary expectations.

The continued 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 imparted a downward bias into 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 3rd quarter of 2007 shows that the expected average rate of CPI inflation is 2.46% for the next ten 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 less than 2.0% in 2010. Core inflation should stabilize around 2.1% looking forward. This level of core inflation is above the reported 1-2% comfort range for the Federal Reserve.

It seems unlikely that any action would be taken to bring down core inflation by 0.1%, but if it does rise any further above these levels, the Fed may have to take action.

Given these pressures on prices and inflation

“If I made you feel second best...

I’m sorry I was blind You were always on my mind You were always on my mind.”

already at the upper end of the Fed’s so-called comfort zone, it seems unlikely that a rate cut is forthcoming. If inflation is truly always on Bernanke’s mind, then holding rates steady for now seems the right course to take. A cut to interest rates just might make inflation feel second best, and this is a scorn that the economy cannot afford to endure.

U nemp l o y men t Unemployment rates have been steadily falling since 2003 and appear to have bottomed out around 4.5%. This downward trend has come to a close.

Given the extremely low level of unemployment, a reversal of trend is not something to necessarily be alarmed about. In this case, that proves true.

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 once again unemployment will begin to decline as the economy regains momentum, and in 2010 unemployment is expected to fall further to 4.3%.

The increases in the federal minimum wage will likely pass but have no perceivable impact on unemployment rates. Even though this minimum wage will rise to $7.25/hour by the summer of 2009, 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 reality is that the market raised the minimum wage long before legislators even thought of it, though the latter will take all the credit.

We expect that the unemployment rate will rise through 2007 and hit 4.8% 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 4.3% in the 4th quarter of 2010. The decline in the unemployment rate will be driven by stronger GDP growth in the second half of 2008 and 2009. The slight increase in unemployment during the intervening quarters will be fueled by job losses in the manufacturing and information sectors as well as growing layoffs in the financial and construction sectors. Job losses in the latter two sectors are a growing part of the fall-out from the cooling housing sector and related financial market melee.

Institute for Economic Competitiveness

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tomobile and Light Truck Sales August 2007 (Millions Vehicles)

Charts

99 00 01 02 03 04 05 06 07 08 09 10 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 10 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 10 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 10 Consumer Price Index Core Consumer Price Index Institute for Economic Competitiveness

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

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 10 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 10 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

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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 130.0

(2002=100)

120.0 110.0 100.0 90.0 80.0

97 98 99 00 01 02 03 04 05 06 07 08 09 10 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 10 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 10 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

(% Change Year Ago)

6.0 5.0 4.0 3.0 2.0 1.0 0.0

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 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 10 Unemployment Rate

Yield Curve 7.0

(%)

6.0 5.0 4.0 3.0 2.0 1.0

16

U.S. Forecast

97 98 99 00 01 02 03 04 05 06 07 08 09 10 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 10 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 10 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 10 Change in Real Business Inventories Institute for Economic Competitiveness

17

2001

History 2002 2003

2004

August 2007

2005

2006

2007

Forecast 2008 2009

2010

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

Federal Government Receipts and Expenditures 2016.2

1853.2

1879.9

2008.9

2243.4

2495.8

2669.3

2768.8

2902.4

3061.5

994.5 164.7

830.5 150.5

774.5 197.8

797.4 250.3

932.4 319.8

1053.2 373.1

1170.6 368.0

1217.7 368.4

1271.2 386.9

1368.5 383.5

85.8 717.5

87.3 734.3

89.7 758.9

94.6 805.2

99.0 849.3

98.6 901.7

98.2 959.8

101.5 1003.0

105.5 1056.4

109.1 1114.1

612.9 392.6 220.3 1131.4 838.7 14.0

679.7 437.1 242.5 1243.0 916.9 18.8

756.4 497.2 259.2 1328.7 963.7 23.6

825.6 550.7 274.9 1390.6 1012.3 26.2

878.5 588.7 289.8 1479.1 1079.3 35.6

932.5 624.3 308.2 1576.1 1184.6 29.7

972.8 656.9 316.0 1686.9 1272.8 30.8

1021.5 693.5 328.0 1786.4 1347.7 30.6

1047.7 706.7 340.9 1875.2 1415.1 31.6

1073.3 716.0 357.3 1955.0 1475.6 32.6

14.0 276.1

18.8 304.6

23.6 338.5

26.2 349.1

240.2 53.1

213.7 39.1

196.5 45.4

203.8 45.5

35.6 361.2 238.4 62.9

29.7 358.6 260.5 52.6

30.8 379.8 282.7 50.4

30.6 404.2 297.6 51.0

31.6 424.5 319.0 52.8

32.6 442.6 324.2 53.2

46.7

-248.0

-372.2

-370.6

-318.3

-220.1

-216.8

-275.6

-277.1

-226.9

341.1 60.6 949.8 26.9

364.3 62.2 992.9 28.0

388.5 60.7 1034.8 29.3

State and Local Government Receipts and Expenditures 242.7 30.2 642.8 13.7

221.3 32.2 675.5 15.8

226.6 35.3 717.5 19.8

249.0 43.0 769.2 23.6

276.7 56.7 822.6 25.5

301.2 62.5 868.8 26.0

323.3 61.4 909.1 26.1

304.6

338.5

349.1

361.2

358.6

379.8

404.2

424.5

442.6

304.6

338.5

349.1

361.2

358.6

379.8

404.2

424.5

442.6

1212.8 305.2 5.2

1281.5 332.0 16.5

1336.0 353.0 24.8

1391.3 383.8 24.1

1485.0 403.8 21.4

1590.5 400.8 21.6

1706.5 433.8 22.4

1786.7 462.5 21.8

1858.5 493.0 22.1

1928.7 523.8 26.4

3.6 2.0 0.0

-1.6 2.0 0.0

0.7 2.2 0.0

3.4 2.4 0.0

10.7 2.5 0.0

11.1 2.6 0.0

12.0 2.5 0.0

9.3 2.6 0.0

8.3 2.6 0.0

7.5 2.7 0.0

0.0 -34.2

0.0 -20.4

0.0 1.6

0.0 15.2

0.0 24.6

0.0 -3.0

0.0 2.4

0.0 14.6

0.0 17.0

0.0 4.8

t ab l e s

276.1 276.1

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

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.

Forecast of the U.S.

1999

2000

2001

History 2002 2003

4.4 4.5 5.1 11.8 4.6 4.0 9.2 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 8.7 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 -4.1 -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

Composition of Real GDP, Percent Change 1.6 2.5 3.6 3.1 2.9 1.2 2.5 3.3 3.3 2.8 2.7 2.8 3.6 3.2 3.1 7.2 5.8 6.4 4.9 3.8 2.5 3.2 3.6 3.6 3.6 1.9 1.9 3.2 2.7 2.7 -9.2 1.0 5.8 7.2 6.6 -6.1 2.8 7.3 9.6 6.0 -4.6 5.8 9.4 9.6 7.5 5.4 13.1 11.4 26.4 17.8 -21.0 1.4 9.9 3.3 10.1 -7.3 2.9 -3.0 7.7 3.7 -10.9 -6.2 20.5 12.4 7.9 -26.6 -22.3 -3.5 -22.8 -21.7 -0.4 -8.7 30.4 17.3 5.7 -17.0 -3.9 1.3 0.5 8.4 -15.6 -6.4 2.5 -0.6 7.3 5.0 17.9 7.7 -41.2 -6.0 -1.5 -12.6 -17.6 -2.9 7.7 -23.1 18.2 14.9 5.6 13.5 -15.4 -4.3 2.2 -4.8 5.2 4.8 8.4 10.1 6.6 -4.5 -2.0 1.3 9.8 6.9 8.4 3.5 4.1 11.3 5.9 5.9 7.0 6.8 4.2 1.5 2.2 3.1 0.2 -0.2 0.3 1.6

9470.4 9268.4

2005

2006

Billions of Dollars 9817.0 9890.7 10048.9 10301.1 10675.7 11003.5 11319.4 9817.0 10128.0 10469.6 10960.8 11685.9 12433.9 13194.7 Prices & Wages, Percent Change, Annual Rate 1.7 2.2 3.2 3.3 2.7 2.2 1.9 3.3 3.7 1.9 2.0 1.2 2.1 2.1 2.6 1.0 3.5 4.5 5.1 0.3 3.1 3.9 3.7 2.8 3.2

1.6 2.6 2.0 2.9 3.5

2.2 3.4 2.6 3.8 4.4

2.4 1.9 2.7 -1.1 4.0

19.3 2.9 4.7 80.8 71.5 105.8 16.888 1.647 4.636 4.2 2.4 122 -302

30.4 2.8 4.6 80.1 57.8 107.6 17.342 1.573 4.614 4.0 2.2 236 -417

26.0 2.6 -3.5 73.9 -31.8 89.2 17.115 1.601 4.727 4.7 0.0 127 -385

26.1 4.1 0.1 73.0 15.2 89.6 16.816 1.710 4.997 5.8 -1.1 -160 -460

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))

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)

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

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. $)

2004

2007

Forecast 2008 2009

2010

1.9 2.2 2.9 4.6 2.4 2.8 3.3 0.8 7.1 16.9 6.3 1.6 -8.3 47.8 -30.3 9.4 8.2 3.8 14.7 7.3 14.0 -14.9 6.8 2.3 1.5 2.1

2.6 2.4 2.7 2.2 3.0 2.6 4.0 5.3 6.5 17.4 4.5 -1.2 12.6 7.3 16.4 1.0 0.2 13.2 1.0 -2.5 3.3 -10.4 9.1 4.6 2.1 1.5

3.0 3.0 3.1 5.8 2.8 2.8 3.6 4.6 6.4 18.2 3.7 4.8 2.6 6.9 -6.1 1.1 4.4 14.8 3.3 -13.1 0.1 7.3 7.4 5.9 0.1 1.2

3.3 3.2 3.1 4.3 3.2 2.8 4.6 7.1 6.8 18.8 3.2 2.2 17.5 7.7 31.8 -1.3 -3.4 15.2 0.2 -5.7 0.3 6.5 8.6 5.8 0.1 1.4

11536.4 11835.5 12221.2 12582.3 13797.1 14439.4 15218.0 15984.6

2.4 3.0 2.1 4.9 3.0

2.2 2.1 2.1 2.5 3.0

2.0 1.8 2.1 1.2 3.2

2.0 1.7 2.0 0.9 3.4

66.1 1.0 4.0 80.4 41.7 87.3 16.504 1.812 5.707 4.6 1.9 -248 -811

67.2 1.0 1.8 80.1 2.8 89.8 16.241 1.400 5.117 4.6 1.4 -175 -779

73.3 1.9 2.2 80.5 26.6 91.1 16.474 1.340 4.677 4.8 1.1 -223 -765

72.4 2.1 2.8 80.9 40.6 93.6 16.691 1.599 4.975 4.5 1.5 -258 -769

71.2 1.9 2.3 80.6 39.4 94.3 16.955 1.729 5.199 4.3 1.4 -245 -774

Financial Markets, NSA 1.13 1.35 3.21 4.96 1.01 1.36 3.13 4.72 1.24 1.89 3.62 4.93 2.97 3.43 4.05 4.75 4.02 4.27 4.29 4.79 5.05 5.12 4.56 4.87 5.82 5.84 5.86 6.42 964 1131 1207 1311 -1.3 18.0 6.8 8.6 0.916 0.840 0.825 0.812 -1.8 -1.4 -12.3 -8.1

5.25 4.86 4.96 4.73 4.79 4.93 6.39 1475 12.6 0.776 -4.5

5.25 4.95 5.07 4.99 5.01 5.21 6.65 1540 4.5 0.740 -4.5

5.26 5.08 5.25 5.25 5.29 5.60 6.92 1618 5.1 0.721 -2.6

5.27 5.11 5.36 5.41 5.46 5.78 7.08 1698 4.9 0.728 0.9

Incomes 9727 10301 6.1 5.9 8681 9092 6.3 4.7 8009 8148 3.6 1.7 2.1 0.5 897 1187 35.3 32.4

11684 6.4 10190 5.8 8683 3.4 0.9 1373 1.6

12293 5.2 10735 5.3 8972 3.3 1.4 1391 1.3

12983 5.6 11348 5.7 9307 3.7 2.0 1418 2.0

13700 5.5 11943 5.3 9624 3.4 2.3 1400 -1.3

31.1 3.7 1.1 74.2 14.0 87.6 16.643 1.854 5.443 6.0 -0.3 -375 -522

9164 3.2 8163 4.2 7730 2.2 2.1 665 15.6

Other Measures 41.5 56.6 2.8 1.9 2.5 3.2 76.6 78.8 48.2 34.0 95.2 88.6 16.866 16.948 1.949 2.073 5.914 6.182 5.5 5.1 1.1 1.7 -411 -321 -640 -755

10983 6.6 9629 5.9 8397 3.1 0.4 1352 14.0

Institute for Economic Competitiveness

19

U . S . F o r eca s t Tab l e s Table Real Domestic Product Table 2. 2.

Annual RealGross Gross Domestic Product

9470.4

9817.0

9890.7 10048.9 10301.1 10675.7 11003.5 11319.4

11536.4 11835.5 12221.2 12582.3

9404.1

9760.5

9921.0 10036.5 10285.1 10619.8 10966.9 11275.9

11527.7 11806.2 12178.3 12540.4

6438.6

6739.4

6910.4

7099.3

7295.4

7561.3

7803.6

8044.1

8274.7

8497.2

8757.4

9030.0

804.5

863.3

900.7

964.8

1020.6

1084.8

1137.4

1180.5

1234.8

1262.5

1317.1

1393.6

Nondurables

1876.6

1947.2

1986.7

2037.1

2103.0

2177.6

2255.4

2337.6

2392.6

2463.8

2541.7

2613.3

Services

3758.1

3928.8

4023.2

4100.4

4178.8

4310.9

4427.3

4545.5

4672.5

4795.5

4929.6

5066.8

1133.3

1232.1

1180.5

1071.5

1081.8

1144.3

1225.8

1306.8

1349.9

1403.4

1467.8

1519.9

840.2

918.9

874.2

820.2

843.1

905.1

991.8

1050.6

1059.0

1115.4

1194.9

1249.2

398.5

467.6

459.0

437.4

462.7

505.7

554.3

595.9

638.1

679.8

725.8

772.6

Computers & Peripherals

83.9

101.6

103.7

108.9

123.2

137.2

173.5

203.9

238.4

280.1

332.7

393.3

Communications Equipment

95.4

124.1

114.7

90.5

91.4

100.1

103.4

113.8

120.8

126.2

130.2

135.1

Industrial Equipment

147.9

159.2

145.7

134.5

138.4

134.0

144.3

149.6

151.9

150.0

153.3

160.7

Transportation Equipment

167.6

160.8

141.7

126.3

118.3

142.9

159.5

171.9

157.7

177.3

208.3

213.5

31.7

32.6

33.5

23.9

17.8

17.3

12.8

10.1

14.5

15.5

16.7

17.9

45.7

40.9

30.4

30.1

27.4

35.8

41.7

44.0

30.7

35.2

46.3

43.4

293.2

313.2

306.1

253.8

243.5

246.7

247.8

268.6

293.9

296.7

292.9

296.1

129.4

137.6

130.3

109.8

102.6

105.1

104.3

111.9

120.9

121.1

116.9

122.1

Manufacturing

33.9

31.8

28.5

16.7

15.4

16.2

19.0

20.4

21.2

24.0

27.6

31.7

Power & Communication

40.8

46.8

48.2

47.1

41.0

33.7

32.7

35.2

40.4

40.7

40.8

42.1

Mining & Petroleum

21.3

27.2

32.0

24.5

29.0

33.3

35.1

39.8

42.7

41.6

39.2

34.0

Other

67.9

69.9

66.6

55.9

53.4

54.6

51.9

54.6

62.3

64.2

64.4

64.5

443.6

446.9

448.5

469.9

509.4

560.2

597.1

569.5

484.5

433.3

461.3

494.9

Exports

1008.2

1096.3

1036.7

1013.3

1026.1

1126.1

1203.4

1304.1

1393.2

1519.5

1649.5

1772.1

Imports

1304.5

1475.8

1435.8

1484.6

1545.0

1720.0

1821.5

1928.6

1972.1

2062.3

2182.9

2312.3

573.7

578.8

601.4

643.4

687.1

715.9

726.5

742.3

753.2

768.6

769.0

769.9

1113.2

1142.8

1179.0

1215.5

1217.8

1215.8

1219.7

1239.0

1264.6

1283.7

1302.1

1318.1

Final Sales of Domestic Product Total Consumption Durables

Nonresidential Fixed Investment Equipment & Software Information Processing Equipment

Aircraft Other Equipment Structures Commercial & Health Care

Residential Fixed Investment

Federal Government State & Local Government

20

U.S. Forecast

2004

2005

2006

2007

Forecast 2008 2009

2000

Gross Domestic Product

2001

History 2002 2003

1999

2010

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

of the Forecast of the U.S.

2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2010Q1 2010Q1 2010Q2 2010Q3 2010Q4 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.

2.4 2.2 2.5 3.6 1.9 2.6 2.8 3.8 4.7 12.4 10.9 1.9 9.4 0.2 10.2 0.6 3.1 -0.7 14.1 -20.1 14.8 -12.2 8.2 4.0 3.0 1.6

2.4 2.3 2.7 3.1 2.6 2.6 4.9 6.6 6.1 15.8 3.9 -4.3 25.1 -0.6 32.5 1.1 6.4 -1.6 -0.3 -6.4 1.8 -17.4 9.7 4.4 2.4 1.4

2.4 2.0 2.8 -0.2 4.2 2.6 3.7 6.1 6.7 18.3 3.2 -4.2 18.7 3.7 37.3 -1.5 2.8 21.2 -10.0 -8.6 -3.6 -18.3 9.4 5.8 1.7 1.5

Composition of Real GDP, Percent Change, Annual Rate 2.4 2.8 3.2 3.5 3.4 3.2 3.1 2.5 2.8 3.0 3.3 3.4 3.1 3.1 2.8 2.9 3.0 3.2 3.0 2.9 3.3 1.8 4.6 3.5 4.0 4.8 4.6 6.9 3.4 3.0 3.0 3.5 3.1 2.7 2.9 2.7 2.5 2.9 2.9 2.7 2.7 2.8 2.6 3.5 4.9 4.5 5.6 4.7 3.9 3.9 5.4 7.2 7.9 9.0 5.9 4.5 6.7 6.6 6.6 6.8 6.6 6.4 6.4 18.9 18.2 18.2 17.4 17.4 16.7 16.9 2.6 2.6 3.0 3.7 3.2 3.0 3.0 -3.0 -1.7 1.8 2.5 3.8 4.9 4.9 5.0 11.9 18.0 20.8 26.4 8.3 2.3 26.5 10.4 6.5 2.8 8.1 5.2 8.0 0.3 29.9 30.4 38.9 47.6 9.0 -7.7 -0.3 -0.9 -0.3 -3.7 -2.7 1.5 2.5 -2.7 -9.1 -5.2 -5.6 -3.6 3.3 8.1 14.1 19.0 19.9 12.9 5.0 21.5 9.1 -3.2 2.6 -3.5 -1.0 3.7 -0.3 5.7 1.8 3.2 2.4 -12.1 -11.1 -8.5 -10.5 -1.0 1.3 0.4 0.5 0.1 0.0 -0.9 -7.9 1.8 5.5 8.1 9.7 9.3 8.2 8.7 8.2 8.4 8.3 8.3 8.4 7.7 4.4 5.3 6.6 5.2 5.7 6.4 6.4 1.3 0.9 0.3 -0.5 -0.3 -0.3 0.4 1.1 1.5 1.6 1.5 1.4 1.4 1.2

2.8 2.9 3.1 5.1 2.9 2.8 3.2 4.1 6.0 17.2 4.3 4.8 1.7 5.5 -3.8 0.9 4.1 17.3 6.6 -19.9 -0.1 5.4 6.6 5.1 0.2 1.2

2.5 2.6 3.2 6.7 2.8 2.8 3.7 4.3 6.1 17.3 4.7 3.2 3.9 6.8 3.9 2.3 3.2 11.9 3.7 -7.7 2.4 3.2 6.4 6.2 -1.5 1.2

2.2 2.2 2.8 5.0 2.4 2.6 3.0 4.0 6.5 16.9 5.0 1.7 2.1 3.2 2.1 0.5 2.7 9.6 -4.0 -9.7 1.9 2.0 6.3 6.0 -1.2 1.1

Billions of Dollars 11577.4 11647.6 11717.0 11788.3 11870.2 11966.3 12072.3 12175.0 12270.9 12366.6 12459.6 12547.6 12626.9 12694.9 13865.5 14015.0 14184.4 14343.7 14518.7 14710.8 14924.6 15121.0 15315.3 15511.2 15710.8 15900.6 16079.1 16248.0 Prices & Wages, Percent Change, Annual Rate 2.1 2.0 2.3 1.8 2.0 2.0 2.6 1.5 1.7 2.1 2.0 1.5 2.2 2.2 2.1 2.1 2.2 2.0 4.1 0.0 1.8 1.2 1.4 0.2 3.0 3.1 3.1 3.2 3.5 3.1

0.7 1.4 2.1 2.0 3.3

1.9 0.9 2.0 1.5 3.1

2.4 1.9 2.1 2.5 3.0

2.0 2.2 2.1 3.3 2.8

74.3 1.6 1.8 80.2 7.3 90.0 15.970 1.379 4.914 4.7 1.1 -216 -798

71.4 2.3 1.9 80.3 11.6 90.3 16.519 1.300 4.773 4.8 1.0 -229 -783

70.9 1.9 2.0 80.5 25.6 89.8 16.392 1.269 4.617 4.8 1.0 -245 -768

73.5 1.6 2.4 80.5 25.2 91.0 16.451 1.303 4.615 4.8 1.2 -279 -760

76.7 1.8 2.6 80.5 24.3 90.8 16.502 1.361 4.698 4.8 1.3 -282 -768

Other Key Measures 72.0 71.2 73.1 73.7 2.2 2.3 2.0 1.9 2.9 2.9 3.0 2.6 80.5 80.7 81.0 80.9 31.5 38.0 39.9 42.3 92.6 92.7 93.3 93.9 16.549 16.605 16.660 16.720 1.428 1.501 1.575 1.638 4.776 4.874 4.938 5.010 4.8 4.7 4.6 4.5 1.4 1.6 1.6 1.5 -296 -284 -292 -272 -763 -757 -767 -777

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 4.84 4.93 4.69 4.76 4.92 6.48 1480 -4.4 0.760 -10.7

5.25 4.89 4.98 4.82 4.86 5.02 6.51 1497 4.5 0.755 -2.7

5.25 4.91 5.02 4.90 4.92 5.09 6.56 1508 3.1 0.749 -3.4

5.25 4.93 5.05 4.96 4.98 5.16 6.62 1526 4.8 0.744 -2.7

5.25 4.97 5.09 5.03 5.05 5.25 6.69 1551 6.5 0.738 -3.1

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)

11754 5.4 10248 5.4 8701 3.9 0.9 1362 -15.1

11900 5.0 10375 5.0 8781 3.7 1.1 1352 -3.0

12061 5.4 10514 5.3 8857 3.5 1.2 1368 4.8

12216 5.1 10665 5.8 8939 3.7 1.4 1384 4.5

12365 4.9 10803 5.2 9002 2.8 1.4 1403 5.6

12531 5.4 10956 5.6 9092 4.0 1.6 1407 1.1

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. $)

3.0 3.0 3.0 5.6 2.7 2.8 2.4 3.2 6.3 17.2 3.2 6.3 -5.8 8.0 -33.8 0.4 5.2 16.1 2.4 -19.0 -0.4 9.1 7.2 5.4 1.3 1.2

2.1 1.8 2.0 0.9 3.4

2.0 1.6 1.9 0.6 3.3

2.0 1.8 2.0 0.9 3.5

2.0 1.8 2.0 1.0 3.5

71.6 2.0 2.3 80.8 42.4 94.6 16.781 1.684 5.080 4.4 1.5 -261 -774

72.2 1.9 2.2 80.8 42.1 94.6 16.830 1.714 5.102 4.4 1.5 -229 -774

70.9 1.8 2.5 80.8 40.6 94.9 16.906 1.724 5.152 4.3 1.3 -236 -765

70.9 1.6 1.8 80.7 38.8 94.4 16.992 1.740 5.215 4.3 1.1 -223 -775

70.6 1.5 1.6 80.3 36.0 93.5 17.093 1.740 5.329 4.3 0.9 -219 -781

Financial Markets, NSA 5.26 5.26 5.26 5.26 5.00 5.05 5.07 5.10 5.12 5.19 5.23 5.28 5.07 5.16 5.21 5.28 5.10 5.20 5.25 5.32 5.33 5.48 5.55 5.65 6.72 6.83 6.88 6.94 1576 1597 1609 1624 6.4 5.5 2.9 3.7 0.731 0.724 0.716 0.720 -3.6 -4.5 2.6 -4.0

5.27 5.11 5.31 5.34 5.39 5.72 7.02 1641 4.2 0.724 2.2

5.27 5.11 5.34 5.38 5.43 5.75 7.05 1663 5.5 0.725 0.5

5.27 5.11 5.35 5.40 5.45 5.78 7.08 1686 5.5 0.727 1.1

5.27 5.11 5.36 5.43 5.48 5.80 7.10 1709 5.6 0.729 0.9

5.28 5.11 5.37 5.43 5.48 5.80 7.10 1733 5.6 0.730 0.8

Incomes 12712 12896 5.8 5.8 11110 11276 5.6 6.0 9180 9270 3.9 3.9 1.8 2.0 1422 1423 4.3 0.3

13253 5.5 11577 5.3 9433 3.7 2.2 1411 -1.7

13437 5.6 11711 4.6 9499 2.8 2.1 1402 -2.3

13619 5.4 11871 5.5 9589 3.8 2.3 1408 1.7

13788 5.0 12021 5.1 9666 3.2 2.3 1400 -2.4

13957 4.9 12170 5.0 9741 3.1 2.4 1388 -3.4

13072 5.5 11427 5.3 9347 3.3 2.1 1417 -1.9

Institute for Economic Competitiveness

21

U . S . F o r eca s t Tab l e s Table 4. Quarterly Gross Domestic Product Table 4. Quarterly Gross Domestic Product 2007Q3 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 Table 5. Annual Employment

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4 2010Q1

2010Q2

2010Q3

11577.4 11647.6 11717.0 11788.3 11870.2 11966.3 12072.3 12175.0 12270.9 12366.6 12459.6 12547.6 12626.9 12694.9 11564.7 11631.8 11688.7 11760.5 11843.3 11932.3 12031.9 12132.8 12226.4 12322.0 12415.3 12504.6 12585.5 12656.1 8348.5 8406.4 8465.7 8526.2 8590.5 8658.7 8724.0 8787.6 8859.4 8926.8 8995.0 9066.9 9131.2 8293.2 1239.3 1248.7 1248.3 1253.9 1268.4 1279.5 1292.2 1307.7 1322.8 1345.5 1364.5 1382.0 1405.3 1422.7 2393.1 4686.3 1357.0 1061.1 642.4

2408.9 4716.9 1373.4 1078.6 652.1

2434.3 4747.8 1386.1 1094.9 663.0

2455.1 4779.9 1395.2 1105.6 674.2

2473.5 4809.6 1407.4 1120.5 685.3

2492.4 4844.7 1424.6 1140.6 696.5

2514.0 4879.7 1440.6 1163.1 708.4

2533.4 4912.3 1460.7 1189.2 720.0

2550.5 4945.7 1477.7 1206.9 731.6

2569.0 4980.6 1492.1 1220.3 743.3

2586.2 5014.9 1501.0 1230.0 755.1

2604.8 5049.7 1513.0 1242.6 766.5

2623.2 5084.6 1527.1 1255.9 778.1

2639.2 5118.2 1538.4 1268.3 790.7

240.3 122.8 154.3 153.9 14.4

249.9 124.0 152.6 163.5 14.4

261.3 125.0 151.0 171.1 14.5

273.7 125.8 149.9 173.3 15.5

286.1 126.6 149.2 178.4 15.9

299.1 127.5 149.9 186.5 16.2

312.1 128.7 150.8 196.1 16.3

325.8 129.8 152.3 209.1 16.6

28.2 297.5 120.7 21.5 42.0

30.5 298.3 122.6 21.4 41.9

33.3 297.2 123.5 22.5 40.9

33.3 297.0 122.7 23.3 40.6

35.8 296.4 119.9 24.4 40.8

42.8 64.5 479.1 1404.1 1973.1 757.9

42.1 64.8 458.3 1438.2 1994.7 762.5

41.2 64.2 437.3 1472.1 2023.8 765.7

41.4 64.0 428.7 1504.0 2045.9 768.2

41.7 64.2 430.7 1534.8 2072.7 769.9

38.5 296.1 118.3 25.7 40.5 42.0 64.3 436.6 1566.9 2106.7 770.6

42.3 293.4 116.6 26.5 40.4 40.7 64.4 445.4 1599.5 2134.2 769.5

47.3 291.5 115.6 26.8 40.7 39.6 64.4 456.3 1632.7 2164.5 768.9

339.4 130.7 154.1 213.4 16.8 48.4 292.5 116.6 28.2 40.7 38.7 64.4 466.9 1667.0 2199.0 768.4

353.7 131.7 156.0 214.6 17.2 47.4 294.4 118.9 28.9 41.3 37.7 64.3 476.5 1698.9 2234.1 769.2

368.9 132.8 158.5 211.5 17.5 43.4 294.7 120.5 30.1 41.5 35.9 64.2 487.3 1729.5 2264.4 771.7

384.7 134.2 160.4 212.4 17.7 43.0 295.3 121.7 31.4 42.2 34.1 64.2 494.0 1758.2 2293.1 772.1

401.4 135.8 161.6 214.4 18.0 43.4 297.0 122.7 32.3 42.6 33.5 64.6 497.9 1786.2 2328.6 769.1

418.3 137.5 162.3 215.5 18.2 43.7 297.4 123.5 33.1 42.2 32.7 64.9 500.4 1814.4 2363.3 766.8

1268.3

1272.8

1277.5

1281.0

1285.7

1290.7

1295.4

1299.9

1304.6

1308.5

1312.3

1316.1

1320.2

1323.7

Table 5. Annual Employment 1999

2000

2001

History 2002 2003

2004

2005

2006

2007

Forecast 2008 2009

2010

Millions Total Nonfarm Employment Private Nonfarm Mining Construction

128.992 131.792 131.832 130.347 129.990 131.423 133.696 136.175 108.680 111.002 110.711 108.838 108.411 109.804 111.890 114.187

138.042 139.589 141.691 143.644 115.800 117.144 119.039 120.743

0.518 6.545

0.520 6.788

0.532 6.826

0.512 6.715

0.503 6.734

0.523 6.976

0.562 7.336

0.619 7.690

0.653

0.651

0.638

7.646

7.456

7.529

7.733

Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities Education & Health

17.323 25.770 4.298 7.646 14.795

17.266 26.225 4.412 7.688 15.109

16.442 25.986 4.373 7.808 15.643

15.257 25.500 4.224 7.847 16.201

14.506 25.286 4.184 7.976 16.588

14.316 25.532 4.248 8.031 16.952

14.229 25.959 4.362 8.153 17.371

14.201 26.232 4.465 8.363 17.836

14.074 26.501 4.550 8.457 18.349

13.952 26.936 4.691 8.484 18.697

13.888 27.357 4.843 8.658 19.038

13.896 27.651 5.006 8.802 19.229

Professional & Business Services Information Leisure & Hospitality Government Federal State & Local

15.954 3.418 11.544 20.312 2.770 17.542

16.670 3.629 11.860 20.790 2.865 17.925

16.481 3.629 12.032 21.120 2.763 18.357

15.981 3.394 11.986 21.509 2.766 18.744

15.987 3.189 12.173 21.579 2.761 18.819

16.386 3.117 12.495 21.620 2.731 18.889

16.946 3.060 12.814 21.806 2.732 19.074

17.555 3.054 13.139 21.988 2.728 19.260

17.943 3.088 13.543 22.242 2.710 19.531

18.442 3.065 13.889 22.445 2.712 19.733

19.287 3.045 14.080 22.652 2.705 19.947

19.960 3.046 14.307 22.900 2.768 20.132

Total Nonfarm Employment Private Nonfarm Mining

2.44 2.51 -8.37

2.17 2.14 0.52

0.03 -0.26 2.38

-1.12 -1.69 -3.81

Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities

6.47 -1.35 2.32 3.13 2.48

3.74 -0.33 1.77 2.66 0.54

0.57 -4.78 -0.91 -0.86 1.57

-1.63 -7.17 -1.87 -3.40 0.50

-0.27 -0.39 -1.82 0.28 -4.93 -0.84 -0.93 1.64

0.609

1.10 1.28 4.02 3.59 -1.29 0.98 1.51 0.69

1.73 1.90 7.46 5.16 -0.61 1.67 2.69 1.52

1.85 2.05 10.07 4.86 -0.19 1.05 2.38 2.58

1.37 1.41 5.58 -0.58 -0.89 1.02 1.90 1.13

1.12 1.16 -0.24 -2.48 -0.87 1.64 3.09 0.31

1.51 1.62 -2.00 0.97 -0.46 1.56 3.23 2.05

1.38 1.43 -4.60 2.71 0.06 1.08 3.38 1.67

Education & Health Professional & Business Services Information Leisure & Hospitality Government

2.42 5.36 6.18 2.77 2.02

2.13 4.49 6.21 2.74 2.36

3.53 -1.11 0.02 1.46 1.59

3.57 -3.01 -6.46 -0.38 1.84

2.39 0.04 -6.04 1.56 0.33

2.19 2.50 -2.25 2.64 0.19

2.47 3.42 -1.81 2.56 0.86

2.68 3.59 -0.20 2.54 0.83

2.87 2.21 1.10 3.08 1.15

1.90 2.78 -0.73 2.55 0.91

1.83 4.58 -0.66 1.38 0.92

1.00 3.50 0.05 1.61 1.10

-0.04 2.35

3.44 2.19

-3.40 2.41

0.09 2.11

-0.17 0.40

-1.08 0.37

0.06 0.98

-0.16 0.98

-0.64 1.41

0.07 1.03

-0.27 1.09

2.36 0.93

Growth Rates

Federal State & Local 22

U.S. Forecast

2010Q4

U . S . F o r eca s t Tab l e s Table 6. Quarterly Table 6. Quarterly Employment Employment 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 Employment (Millions) Total Nonfarm Employment Private Nonfarm Mining Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities

138.3 116.0 0.7

138.6 116.3 0.7

138.9 116.6 0.7

139.3 116.9 0.7

139.8 117.3 0.7

140.3 117.8 0.6

140.9 118.3 0.6

141.4 118.8 0.6

142.0 119.3 0.6

142.5 119.8 0.6

143.0 120.1 0.6

143.5 120.5 0.6

143.9 121.0 0.6

144.2 121.3 0.6

7.6 14.1 26.5

7.6 14.1 26.6

7.5 14.0 26.8

7.4 14.0 26.9

7.4 13.9 27.0

7.5 13.9 27.1

7.5 13.9 27.2

7.5 13.9 27.3

7.5 13.9 27.4

7.6 13.9 27.5

7.7 13.9 27.5

7.7 13.9 27.6

7.8 13.9 27.7

7.8 13.9 27.8

4.6 8.5

4.6 8.5

4.6 8.4

4.7 8.5

4.7 8.5

4.7 8.5

4.8 8.6

4.8 8.6

4.9 8.7

4.9 8.7

4.9 8.8

5.0 8.8

5.0 8.8

5.1 8.8

Education & Health

18.4

18.5

Professional & Business Services Information

18.0 3.1

18.1 3.1

18.6 18.2 3.1

18.6 18.3 3.1

18.7 18.5 3.1

18.8 18.7 3.1

18.9 18.9 3.1

19.0 19.2 3.0

19.1 19.4 3.0

19.1 19.6 3.0

19.2 19.7 3.0

19.2 19.9 3.0

19.3 20.1 3.0

19.3 20.1 3.1

Leisure & Hospitality Government

13.6 22.2

13.6 22.3

13.8 22.4

13.9 22.4

13.9 22.5

14.0 22.5

14.1 22.6

14.1 22.6

14.1 22.7

14.1 22.7

14.2 22.9

14.3 22.9

14.3 22.9

14.4 22.9

Federal State & Local

2.7 19.5

2.7 19.6

2.7 19.7

2.7 19.7

2.7 19.8

2.7 19.8

2.7 19.9

2.7 19.9

2.7 20.0

2.7 20.0

2.8 20.1

2.8 20.1

2.7 20.2

2.7 20.2

Total Nonfarm Employment Private Nonfarm Mining

1.07 1.25 1.18

0.96 0.93 -0.69

0.98 0.98 -0.90

1.19 1.23 -1.34

1.31 1.38 -0.12

1.44 1.53 -1.85

1.61 1.75 -1.38

1.65 1.80 -2.53

1.49 1.61 -3.94

1.47 1.53 -4.13

1.45 1.18 -5.28

1.32 1.47 -5.07

1.11 1.50 -5.58

0.93 1.08 -4.57

Construction Manufacturing Trade, Transportation, and Utilities Transportation & Warehousing Financial Activities

-0.99 -0.34 1.25 3.39 0.74

-2.83 0.37 1.22 3.53 -0.91

-4.88 -2.26 2.56 3.98 -0.35

-2.74 -0.59 1.55 2.45 0.26

-0.96 -0.63 1.49 2.91 1.95

1.22 -1.06 1.32 2.41 2.26

1.13 -0.60 1.42 3.02 2.42

1.31 -0.06 2.11 4.05 1.79

2.48 0.04 1.54 3.96 2.26

3.08 0.13 1.25 3.46 2.09

3.18 -0.09 0.43 2.86 1.59

2.83 -0.08 1.08 3.26 1.21

2.35 0.40 1.20 3.48 1.33

1.51 0.31 0.85 2.91 1.28

Education & Health Professional & Business Services Information Leisure & Hospitality Government

2.98 1.76 0.26 1.92 0.12

1.80 3.05 -2.87 0.94 1.12

0.93 2.70 -2.90 4.24 1.00

1.77 2.51 0.92 3.52 0.95

2.17 3.70 1.92 0.58 0.95

2.01 4.23 -0.63 1.95 0.99

1.94 5.25 -2.30 2.04 0.85

1.72 5.18 -1.15 0.67 0.87

1.41 4.66 -0.44 -0.05 0.87

1.14 3.56 0.03 1.37 1.15

0.86 2.82 -0.19 1.99 2.90

0.76 3.67 0.43 2.19 0.50

0.85 3.10 0.76 2.15 -0.90

0.61 1.59 0.71 2.06 0.12

-1.42 0.33

1.11 1.12

0.33 1.09

0.22 1.05

-0.04 1.09

-0.55 1.20

-0.87 1.09

-0.52 1.05

-0.36 1.04

2.89 0.91

17.61 0.91

-2.27 0.89

-13.47 0.87

-5.26 0.85

Growth Rates

Federal State & Local

Table 7. Quarterly Implicit Price Deflators (2000=100) Table 7. Quarterly Implicit Price Deflators (2000=100) 2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

2010Q1

2010Q2

2010Q3

2010Q4

GDP Consumption Durables

119.8 117.8 87.2

120.3 118.2 86.9

121.1 118.7 86.7

121.7 119.3 86.5

122.3 120.0 86.5

122.9 120.5 86.4

123.6 121.0 86.4

124.2 121.6 86.3

124.8 122.2 86.2

125.4 122.7 86.1

126.1 123.3 85.9

126.7 123.8 85.7

127.3 124.4 85.5

128.0 124.9 85.3

Motor Vehicles Furniture Other Durables Nondurables Food

98.4 70.0 99.8 118.4 120.5

98.5 69.2 100.0 118.3 121.5

98.7 68.5 100.2 118.5 121.9

99.1 67.8 100.4 118.9 122.4

99.7 67.2 100.6 119.6 122.9

100.3 66.6 100.9 119.8 123.4

100.8 66.0 101.1 120.0 123.9

101.4 65.4 101.3 120.7 124.5

101.8 64.8 101.5 121.2 125.1

102.2 64.2 101.6 121.5 125.6

102.5 63.6 101.7 122.0 126.1

102.7 63.1 101.8 122.3 126.6

Clothing & Shoes Gasoline & Oil Fuel Services Housing

89.3 183.7 189.9 124.9 125.1

89.3 174.4 185.2 125.7 125.7

89.3 172.9 176.8 126.6 126.5

89.3 174.2 175.8 127.5 127.2

89.3 177.6 178.6 128.4 128.0

89.2 174.6 176.2 129.2 128.8

89.2 172.2 173.5 130.0 129.6

89.2 174.6 174.3 130.8 130.3

89.2 175.5 173.9 131.6 131.1

89.1 173.8 172.9 132.4 131.8

88.9 174.5 173.4 133.2 132.6

88.8 173.7 172.6 134.0 133.4

102.9 62.5 101.9 122.7 127.1 88.8 173.6 172.5 134.8 134.1

103.1 61.9 102.0 123.2 127.7 88.7 173.5 172.4 135.7 134.8

Household Operations Electricity Natural Gas Water & Sewer Telephone

125.1 137.0 165.9 135.5 97.3

125.7 137.6 166.3 136.9 97.5

126.9 138.5 173.2 138.3 97.5

127.9 139.2 179.3 139.8 97.4

129.1 139.9 187.0 141.3 97.3

129.3 140.4 185.7 142.7 97.0

129.9 140.6 189.6 144.1 96.8

129.9 140.8 186.9 145.5 96.5

130.1 141.0 185.9 146.9 96.2

130.1 141.3 183.2 148.3 95.9

130.2 141.5 181.4 149.6 95.7

130.3 141.9 180.5 150.9 95.4

Domestic Service Other Household Transportation Other Services

125.5 130.4 119.6 132.9

126.1 131.2 120.5 133.8

126.8 132.0 121.2 134.8

127.5 132.9 121.9 135.7

128.1 133.8 122.8 136.6

128.8 134.6 123.5 137.4

129.3 135.5 124.3 138.4

129.9 136.3 125.1 139.3

130.5 137.1 125.9 140.4

131.0 137.9 126.6 141.4

131.5 138.7 127.4 142.6

132.0 139.5 128.1 143.7

130.6 142.4 180.2 152.2 95.1 132.4 140.3 128.9 144.8

130.9 143.1 180.3 153.5 94.9 132.8 141.0 129.7 146.0

Institute for Economic Competitiveness

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

2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 GDP

0.7

1.9

2.4

2.0

2.1

2.0

2.3

1.8

2.0

2.0

2.1

2.0

2.0

2.0

Consumption Durables

1.4 -1.2

1.3 -1.4

1.8 -1.0

2.1 -0.7

2.4 -0.2

1.6 -0.2

1.7 -0.3

2.0 -0.3

2.0 -0.4

1.6 -0.7

1.8 -0.8

1.7 -0.9

1.8 -0.9

1.8 -1.0

Motor Vehicles

-0.2

0.5

0.8

1.6

2.3

2.4

2.2

2.1

1.8

Furniture Other Durables Nondurables

-3.9 1.8 0.0

-4.5 0.6 -0.6

-4.1 1.0 0.8

-4.1 0.8 1.6

-3.6 0.9 2.3

-3.7 0.9 0.5

-3.7 0.8 0.8

-3.7 0.9 2.2

-3.7 0.8 1.8

1.3 -3.8

1.1 -3.5

0.9 -3.5

0.8 -3.6

0.7 -3.6

0.5 1.0

0.3 1.5

0.3 1.1

0.4 1.4

0.4 1.5

Food Clothing & Shoes Gasoline & Oil

4.9

3.3

1.5

1.5

1.6

1.6

1.7

1.8

1.9

1.7

1.6

1.6

1.7

1.8

-4.8

0.1

0.0

-0.3

0.0

-0.1

-0.1

0.0

-0.1

-0.5

-0.6

-0.5

-0.3

-0.3

-15.8

-20.4

-3.3

2.8

7.9

-6.7

-5.5

5.5

2.0

-3.7

1.6

-1.9

-0.2

-0.2

Fuel Services Housing

9.3 2.6 2.7

-9.8 2.7 2.2

-18.1 2.9 2.4

-2.2 2.8 2.4

6.3 2.8 2.4

-5.3 2.5 2.4

-6.3 2.6 2.4

1.9 2.4 2.3

-0.9 2.5

-2.4 2.3

1.1 2.4

-1.8 2.4

-0.2 2.5

-0.2 2.5

2.4

2.4

2.3

2.3

2.2

2.2

Household Operations Electricity

0.9 0.4

1.8 1.6

3.9 2.8

3.3 2.1

3.6 2.0

0.7 1.5

1.9 0.5

0.0 0.5

0.5 0.7

0.0 0.8

0.3 0.7

0.5 1.1

0.8 1.5

1.0 1.8

Natural Gas

-3.4

1.0

16.6

13.9

17.3

-2.9

8.5

-5.8

-2.1

-5.7

-4.0

-1.9

-0.8

0.1

Water & Sewer Telephone

2.9 1.4

3.9 1.0

4.3 -0.1

4.3 -0.2

4.2 -0.6

4.0 -1.1

3.9 -1.0

Domestic Service Other Household

0.7 3.4

1.9 2.4

2.2 2.7

2.1 2.6

2.1 2.6

1.9 2.5

1.8 2.5

3.9 -1.1 1.8 2.5

3.9 -1.2 1.8 2.5

3.7 -1.1 1.6 2.4

3.6 -0.9 1.5 2.3

3.5 -1.3 1.4 2.2

3.4 -1.1 1.3 2.2

3.4 -1.2 1.3 2.2

Transportation Other Services

3.4 2.4

2.9 2.9

2.5 2.9

2.3 2.8

2.7 2.6

2.4 2.4

2.4 2.7

2.6 2.8

2.7 2.9

2.3 2.9

2.4 3.3

2.3 3.1

2.4 3.3

2.5 3.2

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

1999 GDP

2000

2001

History 2002 2003

2004

2005

2006

2007

Forecast 2008 2009

2010

97.9

100.0

102.4

104.2

106.4

109.5

113.0

116.6

119.6

122.0

124.5

127.0

Consumption Durables

97.6 101.6

100.0 100.0

102.1 98.1

103.5 95.8

105.6 92.4

108.4 90.7

111.6 90.0

114.7 88.9

117.4 87.4

119.6 86.5

121.9 86.3

124.1 85.6

Motor Vehicles Furniture Other Durables

99.6 104.7 100.8

100.0 100.0 100.0

100.5 94.1 100.3

100.1 88.7 99.5

97.7 83.3 97.9

96.9 79.9 98.0

98.6 76.8 97.7

99.3 73.4 98.4

98.5 70.4

99.5 67.6

101.6 65.1

102.8 62.8

99.6

100.5

101.4

101.8

96.2 97.7

100.0 100.0

101.5 102.9

102.1 105.0

104.1 107.0

107.6 110.3

111.6 112.7

115.0 115.3

117.7 119.7

119.2 122.6

120.9 124.8

122.6 126.9

101.3 78.2 72.7

100.0 100.0 100.0

98.0 96.3 101.7

95.4 90.4 91.7

93.0 105.2 109.7

92.7 124.0 125.4

91.7 150.8 159.6

91.3 170.5 180.3

90.2 177.6 184.1

89.3 174.8 176.9

89.2 174.0 173.7

88.8 173.8 172.7

Nondurables Food Clothing & Shoes Gasoline & Oil Fuel Services

97.4

100.0

103.3

106.0

109.4

112.9

116.7

120.7

124.5

127.9

131.2

134.4

Housing

96.9

100.0

103.9

107.8

110.4

113.2

116.1

120.3

124.6

127.6

130.7

133.7

Household Operations Electricity Natural Gas

98.1 98.4 84.9

100.0 100.0 99.1

104.6 108.1 118.8

103.7 106.8 101.1

107.7 109.3 123.8

97.6 103.5

100.0 100.0

102.9 98.0

106.2 98.1

110.2 97.2

109.9 111.2 134.1 116.9 95.2

115.5 118.0 160.2 123.1 94.4

121.5 132.3 164.2 129.1 95.1

124.8 136.9 165.9 135.1 97.0

128.3 139.5 181.3 140.5 97.3

130.0 140.9 186.4 146.2 96.4

130.5 142.2 180.6 151.6 95.3

95.8 96.3

100.0 100.0

103.8 104.9

107.6 109.5

110.3 114.8

112.8 117.8

116.6 122.0

120.8 126.7

125.4 129.8

127.8 133.3

130.2 136.7

132.2 139.9

Water & Sewer Telephone Domestic Service Other Household Transportation

97.5

100.0

101.7

102.9

106.0

108.3

112.7

117.0

119.2

122.4

125.5

128.5

Other Services

96.5

100.0

104.0

108.3

113.1

118.2

123.4

128.2

132.5

136.1

139.9

144.3

24

U.S. Forecast

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 1999

2000

History 2002 2003

2001

2004

2005

2006

2007

Forecast 2008 2009

2010

GDP

1.4

2.2

2.4

1.7

2.1

2.9

3.2

3.2

2.6

2.0

2.1

2.0

Consumption

1.7

2.5

2.1

1.4

2.0

2.6

2.9

2.8

2.3

1.9

1.9

1.8

Durables

-2.4

-1.6

-1.9

-2.4

-3.6

-1.8

-0.7

-1.3

-1.7

-0.9

-0.3

-0.7

Motor Vehicles Furniture

0.4 -6.2

0.4 -4.5

0.5 -5.9

-0.4 -5.7

-2.4 -6.0

-0.8 -4.1

1.8 -3.8

0.7 -4.5

-0.8 -4.1

1.0 -4.0

2.1 -3.7

1.2 -3.6

Other Durables Nondurables Food

-1.6 2.5 1.9

-0.8 4.0 2.3

0.3 1.5 2.9

-0.8 0.6 2.0

-1.6 2.0 1.9

0.1 3.3 3.1

-0.4 3.7 2.3

0.8 3.1 2.3

1.2 2.3 3.7

0.9

0.8

0.5

1.3 2.5

1.4 1.7

1.4 1.7

Clothing & Shoes

-1.6

-1.3

-2.0

-2.7

-2.5

-0.4

-1.0

-0.4

-1.3

-1.0

-0.1

-0.4

9.1

28.6

-3.5

-5.0

17.0

18.1

21.5

14.0

4.5

-1.2

-0.5

-0.1

Fuel

1.4

37.8

2.2

-9.4

20.0

14.7

27.3

13.7

2.1

-3.9

-1.8

-0.5

Services

2.2

2.7

3.3

2.7

3.2

3.2

3.4

3.4

3.1

2.8

2.6

2.4

2.8 -0.1 -0.7

3.2 1.9 1.6

3.9 4.6 8.1

3.8 -0.9 -1.1

2.5 3.9 2.4

2.5 2.1 1.7

2.6 5.1 6.2

3.6 5.3 12.2

3.6 2.8 3.4

2.4 2.8 1.9

2.4 1.3 1.0

2.3 0.4 0.9

Natural Gas

0.6

16.5

22.3

-13.5

22.5

8.4

19.2

4.4

1.5

9.3

2.9

-3.1

Water & Sewer

2.2

2.5

2.9

3.2

3.7

6.1

5.3

4.9

4.6

4.0

4.0

3.7

-2.4 2.9 3.3

-3.4 4.4 3.8

-2.0 3.8 4.9

0.2 3.7 4.3

-0.9 2.5 4.9

-2.0 2.2 2.6

-0.9 3.4 3.6

0.8 3.6 3.8

2.0 3.8 2.5

0.3 1.9 2.7

-1.0 1.9 2.5

-1.1 1.5 2.3

Transportation

2.2

2.5

1.7

1.2

2.9

Other Services

3.3

3.6

4.0

4.1

4.4

2.2 4.6

4.0 4.4

3.8 3.9

1.9 3.3

2.6 2.8

2.5 2.7

2.4 3.1

2004

2005

2006

2007

Gasoline & Oil

Housing Household Operations Electricity

Telephone Domestic Service Other Household

Table 11. Personal Income and its Components

Table 11. Personal Income and its Components History 2002 2003

1999

2000

2001

Personal Income Wages & Salaries Other Labor Income Nonfarm Income Farm Income

7802.4 5357.1 562.4 649.7 28.6

8429.7 5782.7 609.9 705.7 22.7

8724.1 5942.1 642.7 752.2 19.7

8881.9 6091.2 745.1 757.8 10.6

9163.6 6325.4 815.6 782.1 29.2

9727.2 10301.1 10983.4 6656.4 7029.7 7448.3 868.5 927.7 970.7 939.1 987.4 874.3 37.4 30.8 19.4

Rental income Dividends Interest Income Transfer Payments Personal Social Insurance Tax

147.4 335.6 928.6 1022.1 338.1

150.3 376.1 1011.0 1084.1 359.2

167.4 369.0 1011.0 1193.9 374.5

153.0 397.2 936.1 1286.2 384.8

133.0 422.6 914.1 1351.0 396.5

118.4 537.1 895.1 1422.5 420.5

Personal Income Wages & Salaries Other Labor Income Nonfarm Income

5.1 6.7 6.2 8.6

8.0 8.0 8.5 8.6

3.5 2.8 5.4 6.6

1.8 2.5 15.9 0.7

3.2 3.8 9.6 3.2

6.1 5.2 6.5 11.8

Farm Income Rental income Dividends Interest Income Transfer Payments

-2.0 7.3 -4.1 -0.5 4.4

-19.6 2.0 12.1 8.9 6.1

-12.8 11.5 -1.8 0.0 10.1

-46.1 -7.8 7.7 -7.4 7.8

269.0 -11.7 6.4 -2.3 5.0

6.6

6.2

4.3

2.7

3.0

Forecast 2008 2009

2010

Personal Income Billions Current Dollars

42.9 598.9 1018.9 1520.7 445.7

11684.0 12293.3 12983.1 13700.2 7884.4 8253.4 8671.5 9122.0 1017.1 1053.5 1089.4 1138.6 1015.3 1071.0 1143.2 1214.9 25.5 18.2 18.8 19.9

54.6 696.3 1100.2 1612.5 475.7

58.4 791.8 1147.5 1734.5 506.9

48.0 865.2 1228.5 1839.0 529.9

29.3 923.2 1343.1 1938.5 558.1

24.0 965.5 1465.1 2032.2 589.9

5.9 5.6 6.8 7.4

6.6 6.0 4.6 5.2

6.4 5.9 4.8 2.8

5.2 4.7 3.6 5.5

5.6 5.1 3.4 6.7

5.5 5.2 4.5 6.3

32.5 -10.4 26.7 -2.1 5.3

-17.1 -66.8 12.6 13.8 6.9

-36.2 33.4 16.3 8.1 6.0

37.1 7.7 13.8 4.3 7.6

-28.2 -17.0 9.3 7.0 6.0

3.9 -39.1 6.7 9.3 5.4

5.8 -16.4 4.6 9.1 4.8

6.0

6.0

6.8

6.6

4.5

5.3

5.7

Growth Rates

Personal Social Insurance Tax

Institute for Economic Competitiveness

25

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

(Current Dollars)

2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4

2010Q1 2010Q2 2010Q3 2010Q4

Consumer spending on‌ all goods & services durable goods furniture & appliances computers & software

9768.0

9864.8

1080.9 414.6 66.1

1085.3 409.9 66.7

motor vehicles & parts other durable goods nondurables clothing & shoes fuel oil & coal

447.4 190.2 2834.0 368.1 24.5

455.0 191.3 2848.6 371.7 22.3

gasoline & motor oil food other nondurable goods

338.9 1339.7 762.7

322.8 1359.1 772.7

Consumer Expenditures by Type Billions Current Dollars 9978.5 10100.7 10233.0 10351.9 10479.3 10612.0 10742.6 10874.0 11005.9 11135.9 11275.5 11407.9 1140.7 1158.1 1172.1 1184.6 1201.7 1213.8 1082.1 1085.1 1097.0 1106.1 1116.4 1128.9 423.5 434.6 406.1 405.5 406.7 409.0 413.3 417.7 428.9 439.7 445.7 449.6 74.0 76.3 67.3 68.3 69.1 70.3 71.4 72.7 75.3 77.5 78.6 79.5 477.2 491.6 453.0 454.7 461.9 466.8 469.4 474.5 486.2 496.2 503.8 509.0 207.8 212.7 193.4 194.9 197.9 199.5 202.4 205.0 210.2 214.9 218.1 220.3 3092.1 3122.0 3154.7 3186.0 3219.7 3251.1 2884.2 2920.3 2959.3 2985.8 3017.5 3057.2 394.5 400.6 376.5 378.6 380.9 383.1 387.2 390.9 397.9 404.3 408.2 410.8 21.9 21.9 22.0 22.0 22.1 22.0 21.9 21.9 21.9 21.8 21.8 21.8 344.3 345.3 327.1 332.3 339.1 335.9 335.5 342.4 342.9 345.6 346.9 347.7 1477.0 1492.6 1507.5 1522.9 1538.2 1553.5 1375.8 1393.4 1410.4 1426.7 1443.2 1460.3 854.5 879.3 782.8 794.0 806.9 818.1 829.8 841.7 866.8 891.3 904.6 917.3

all goods & services durable goods furniture & appliances computers & software motor vehicles & parts

8293.2 1239.3 591.9 225.1 454.5

8348.5 1248.7 592.0 233.3 461.7

8406.4 1248.3 592.4 242.1 458.8

8465.7 1253.9 597.7 252.8 458.7

other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil

194.3 2393.1 412.1

195.2 2408.9 416.0

197.1 2434.3 421.5

198.2 2455.1 424.1

201.0 2473.5 426.6

202.3 2492.4 429.3

205.0 2514.0 434.0

207.3 2533.4 438.2

12.9 184.5

12.0 185.1

12.4 189.1

12.5 190.8

12.4 190.9

12.5 192.3

12.6 194.8

food other nondurable goods

1112.0 687.7

1119.0 694.2

1128.4 699.7

1138.5 705.9

1147.8 713.3

1156.5 719.3

1164.8 725.4

2.5

2.7

2.8

2.8

2.9

3.0

3.2

3.0

2.9

3.6 5.3 20.2 3.3 0.8

3.1 0.0 14.6 6.3 1.9

-0.2 0.3 15.1 -2.5 3.8

1.8 3.6 17.7 -0.1 2.4

4.6 4.9 16.6 4.1 5.7

3.5 6.0 18.7 1.8 2.5

4.0 7.9 17.8 0.0 5.4

4.8 8.0 18.9 2.2 4.4

4.6 9.4 18.3 0.4 4.9

1.9 5.0 -12.0 1.8 0.9 2.6

2.6 3.8 -27.5 1.4 2.5 3.8

4.2 5.2 13.2 8.7 3.4 3.1

3.4 2.5 1.7 3.6 3.6 3.6

3.0 2.4 -3.9 0.2 3.3 4.2

3.0 2.5 3.5 3.0 3.0 3.3

3.5 4.4 4.2 5.1 2.9 3.4

3.1 3.9 -1.1 2.6 2.9 3.3

2.7 3.7 0.7 0.2 2.6 3.5

Consumer Expenditures by Type Billions 2000 Dollars 8787.6 8859.4 8526.2 8590.5 8658.7 8724.0 1322.8 1345.5 1268.4 1279.5 1292.2 1307.7 653.6 605.0 614.0 626.1 638.7 668.3 315.2 263.3 275.6 287.8 301.4 329.6 468.5 463.3 465.5 465.4 468.0 475.8

8926.8 1364.5 683.1 343.7 479.8

8995.0 1382.0 697.4 358.6 483.2

9066.9 1405.3 713.3 373.2 489.5

9131.2 1422.7 726.2 387.8 493.8

216.9 2604.8 455.1

220.0 2623.2 459.9

222.2 2639.2 463.2

12.7 199.0

12.7 199.8

12.7 200.4

212.2 2569.0 446.7

12.6 196.1

209.8 2550.5 442.3 12.6 196.2

12.6 197.2

214.7 2586.2 450.4 12.6 197.9

1173.3 731.3

1181.0 737.7

1188.5 743.8

1195.6 750.4

1203.0 756.5

1210.0 763.3

1216.6 769.4

3.3

3.0

3.1

3.2

2.8

6.9 9.0 18.3 6.2 4.5

5.6 8.9 17.0 3.3 4.7

5.1 8.4 17.4 2.8 4.2

6.7 9.1 16.3 5.3 5.8

5.0 7.3 15.6 3.5 3.9

2.9 4.0 1.5 2.1 2.6 3.3

2.7 3.3 -0.7 1.3 2.4 3.6

2.9 4.1 1.1 2.3 2.5 3.2

2.8 4.2 0.2 1.6 2.3 3.6

2.4 2.9 0.2 1.1 2.2 3.2

Real Consumer Expenditures Annual Growth Rate 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

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 1999 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

2000

2001

2002

Forecast 2003

2004

2005

2006

2007

2008

2009

2010

Consumer Expenditures by Type Billions Current Dollars 6282.5

6739.4

7055.0

7350.7

7703.6

8195.9

8707.8

9224.5

9711.3 10166.0 10677.0 11206.3

817.7 293.9 40.4 370.8 132.1

863.3 312.9 43.8 386.5 141.8

883.7 312.1 42.0 407.9 143.0

923.9 323.1 44.6 429.3 149.7

942.7 331.5 46.6 431.7 157.1

983.9 355.7 51.6 436.8 167.9

1023.9 378.2 56.5 444.9 176.4

1048.9 404.1 61.4 434.2 184.5

1078.7 413.0 65.4 447.7 189.5

1092.5 406.9 68.7 459.1 196.4

1136.0 420.8 73.3 476.8 206.4

1193.1 442.4 78.0 500.2 216.5

1804.8 286.3 11.9 137.9 873.1

1947.2 297.7 15.8 175.7 925.2

2017.1 297.7 15.4 171.6 967.9

2079.6 303.5 14.2 164.5 1001.9

2190.2 310.9 16.9 192.7 1046.0

2343.7 325.0 18.3 231.4 1113.1

2516.2 341.7 21.1 280.7 1183.8

2688.0 357.2 21.6 318.6 1259.3

2815.6 369.7 24.1 327.2 1332.9

2937.4 379.8 22.0 333.6 1401.6

3072.2 392.6 21.9 341.2 1468.3

3202.9 406.0 21.8 346.4 1530.5

495.6

532.9

564.4

595.5

623.7

655.9

688.8

731.4

761.7

800.4

848.2

898.1

6438.6 804.5

6739.4 863.3

6910.4 900.7

7099.3 964.8

7295.4 1020.6

7561.3 1084.8

7803.6 1137.4

8044.1 1180.5

8274.7 1234.8

8497.2 1262.5

8757.4 1317.1

9030.0 1393.6

280.8 32.9 372.4 130.3 1876.6 282.7

312.9 43.8 386.5 141.8 1947.2 297.7

331.8 55.4 405.8 143.1 1986.7 303.7

364.3 74.1 429.0 151.3 2037.1 318.3

397.8 94.8 442.1 161.9 2103.0 334.2

445.1 118.5 450.8 173.3 2177.6 350.7

492.2 150.3 451.3 183.5 2255.4 372.6

550.9 188.6 437.3 190.9 2337.6 391.1

587.0 219.6 454.6 194.0 2392.6 410.0

602.3 258.4 461.6 199.7 2463.8 425.4

646.7 308.5 469.5 208.6 2541.7 440.3

705.0 365.8 486.6 218.4 2613.3 457.1

16.4 176.3 893.6 508.6

15.8 175.7 925.2 532.9

15.2 178.3 940.2 549.2

15.5 181.9 954.6 567.1

15.4 183.2 977.7 593.2

14.6 186.7 1009.4 618.0

13.2 186.1 1050.0 639.1

12.0 186.8 1091.8 666.2

13.1 184.3 1114.0 686.7

12.4 190.8 1142.8 709.6

12.6 196.1 1176.9 734.6

12.6 199.3 1206.3 759.9

5.1 11.8 14.7 50.9

4.7 7.4 11.6 33.6

2.5 4.3 6.0 26.2

2.7 7.2 9.8 34.1

2.8 5.8 9.1 27.6

3.6 6.4 12.0 25.4

3.2 4.9 10.6 26.9

3.1 3.8 12.0 25.5

2.9 4.6 6.6 16.5

2.7 2.2 2.6 17.7

3.1 4.3 7.4 19.4

3.1 5.8 9.0 18.6

10.2 11.5 4.6 7.5 2.2

3.9 8.9 3.8 5.3 -3.4

5.1 0.9 2.0 2.0 -3.9

6.1 5.8 2.5 4.8 2.7

3.1 7.0 3.2 5.0 -0.6

2.0 7.2 3.6 5.0 -5.5

0.1 5.9 3.6 6.2 -9.0

-2.9 4.0 3.6 5.0 -9.4

4.0 1.6 2.4 4.8 9.7

1.5 2.9 3.0 3.7 -4.7

1.7 4.5 3.2 3.5 1.3

3.6 4.7 2.8 3.8 0.4

3.5 3.2 5.7

-0.3 3.5 4.8

1.5 1.6 3.1

2.1 1.5 3.3

0.7 2.4 4.6

1.9 3.2 4.2

-0.3 4.0 3.4

0.4 4.0 4.2

-1.3 2.0 3.1

3.5 2.6 3.3

2.8 3.0 3.5

1.6 2.5 3.4

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

Real Consumer Expenditures Annual Growth Rate 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

Institute for Economic Competitiveness

27

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

Business Fixed Investment Table 14.

Business Fixed Investment History 2002 2003

2004

2005

2006

2007

Forecast 2008 2009

1999

2000

2001

2010

Business Fixed Investment

1133.9

1232.1

1176.8

1066.3

1077.4

1154.5

1272.1

1397.7

1464.8

1533.1

1611.2

1675.1

Producers Dur. Equipment Nonresidential Structures

851.7 282.2

918.9 313.2

854.2 322.6

787.1 279.2

800.2 277.2

856.3 298.2

937.5 334.6

992.6 405.1

1007.4 457.4

1068.8 464.3

1150.6 460.6

1200.2 474.9

Non-Farm Buildings Commercial

207.6 109.1

222.8 121.3

216.4 118.2

180.6 97.0

174.7 91.7

188.4 101.1

203.2 109.5

236.6 124.8

273.4 141.4

285.0 142.9

290.0 139.3

315.1 151.5

Billions Current Dollars

Industrial

32.6

31.8

29.5

17.8

16.7

18.5

23.3

26.8

29.1

34.6

41.6

49.7

Other Buildings Utilities

65.8 44.5

69.7 51.5

68.7 54.4

65.8 54.6

66.2 49.2

68.9 44.7

70.4 47.0

85.0 54.1

103.0 63.7

107.4 66.6

109.1 68.8

113.8 72.7

Mines & Wells

20.6

27.2

39.2

35.6

45.7

55.7

73.7

105.4

110.5

101.3

88.6

73.9

Business Fixed Investment Producers Dur. Equipment Nonresidential Structures

840.2 293.2 216.6

918.9 313.2 222.8

874.2 306.1 208.4

820.2 253.8 170.0

843.1 243.5 160.3

905.1 246.7 163.1

991.8 247.8 161.9

1050.6 268.6 174.9

1059.0 293.9 191.9

1115.4 296.7 196.1

1194.9 292.9 195.1

1249.2 296.1 204.9

Non-Farm Buildings Commercial Industrial Other Buildings Utilities

113.5 33.9 69.2 69.2 45.9

121.3 31.8 69.7 69.7 51.5

114.2 28.5 65.6 65.6 52.8

91.2 16.7 62.1 62.1 51.8

83.9 15.4 61.0 61.0 45.6

86.9 16.2 60.0 60.0 38.8

85.9 19.0 56.9 56.9 38.0

90.2 20.4 64.3 64.3 41.0

97.0 21.2 73.9 73.9 46.6

96.5 24.0 75.9 75.9 46.7

92.2 27.6 75.5 75.5 46.7

97.2 31.7 76.3 76.3 48.0

21.3

27.2

32.0

24.5

29.0

33.3

35.1

39.8

42.7

41.6

39.2

34.0

7.7 9.6

8.7 7.9

-4.4 -7.0

-9.3 -7.7

1.1 1.7

7.1 7.0

10.2 9.5

9.9 5.9

4.8 1.5

4.7 6.1

5.1 7.7

4.0 4.3

Nonresidential Structures Non-Farm Buildings Commercial Industrial Other Buildings

2.6 2.3 9.2 -19.4 5.4

10.9 7.4 11.2 -1.9 6.0

3.2 -2.7 -2.3 -7.0 -1.5

-13.4 -16.5 -17.8 -39.5 -4.2

-0.6 -3.1 -5.1 -4.6 0.6

7.6 7.8 10.2 10.4 4.0

12.2 8.0 8.4 27.2 2.3

21.0 16.4 13.9 14.7 20.8

13.1 15.8 13.5 8.8 21.4

1.6 4.3 1.1 19.1 4.5

-0.8 1.8 -2.4 20.2 1.5

3.1 8.6 8.8 19.5 4.3

Utilities Mines & Wells

12.6 -11.9

15.8 31.9

5.5 45.3

1.3 -8.8

-9.6 28.8

-8.9 21.8

5.2 32.2

15.2 43.4

17.7 5.2

4.7 -8.2

3.3 -12.6

5.7 -16.6

Billions 2000 Dollars

Mines & Wells

Annual Growth Rate Business Fixed Investment Producers Dur. Equipment

28

U.S. Forecast

U . S . F o r eca s t Tab l e s Table 15. Government Receipts and Expenditures

Table 15. Government Receipts and Expenditures

History 2002 2003

2004

2005

2006

2007

Forecast 2008 2009

1999

2000

2001

2010

1891.2

2053.9

2016.2

1853.2

1879.9

2008.9

2243.4

2495.8

2669.3

2768.8

2902.4

3061.5

Personal Tax and Nontax Receipts

893.0

999.1

994.5

830.5

774.5

797.4

932.4

1053.2

1170.6

1217.7

1271.2

1368.5

Corp. Profits Tax Accruals

213.0

219.5

164.7

150.5

197.8

250.3

319.8

373.1

368.0

368.4

386.9

383.5

83.9

87.8

85.8

87.3

89.7

94.6

99.0

98.6

98.2

101.5

105.5

109.1

Contributions for Social Insurance

651.7

691.7

717.5

734.3

758.9

805.2

849.3

901.7

959.8

1003.0

1056.4

1114.1

Expenditures Purchases Goods & Services

555.8 360.6

578.8 370.3

612.9 392.6

679.7 437.1

756.4 497.2

825.6 550.7

878.5 588.7

932.5 624.3

972.8 656.9

1021.5 693.5

1047.7 706.7

1073.3 716.0

220.3 1131.4

242.5 1243.0

259.2 1328.7

274.9 1390.6

289.8 1479.1

308.2 1576.1

316.0 1686.9

328.0 1786.4

340.9 1875.2

357.3 1955.0

838.7 14.0 14.0 276.1

916.9 18.8 18.8 304.6

963.7 23.6 23.6 338.5

1012.3 26.2 26.2 349.1

213.7 39.1 -248.0

196.5 45.4 -372.2

203.8 45.5 -370.6

1079.3 35.6 35.6 361.2 238.4 62.9 -318.3

1184.6 29.7 29.7 358.6 260.5 52.6 -220.1

1272.8 30.8 30.8 379.8 282.7 50.4 -216.8

1347.7 30.6 30.6 404.2 297.6 51.0 -275.6

1415.1 31.6 31.6 424.5 319.0 52.8 -277.1

1475.6 32.6 32.6 442.6 324.2 53.2 -226.9

Federal Government Receipts and Expenditures Receipts

Indirect Business Tax and Nontax Accruals

National Defense

195.2

208.5

Other Transfer Payments To Persons To Foreigners Grants in Aid to State & Local Gov't

986.1 735.7 15.2 15.2 232.9

1038.1 770.0 18.3 18.3 247.3

Net Interest Subsidies less Surplus of Gov't Entities Surplus (+) or Deficit (-)

264.7 44.1 103.6

263.2 46.1 189.5

240.2 53.1 46.7

Receipts Personal Tax/Nontax Receipts Corporate Profits Indirect Business Tax and Nontax Accruals Contributions for Social Insurance

214.5 35.8 590.2 9.8 232.9

236.6 35.6 621.1 11.0 247.3

242.7 30.2 642.8 13.7 276.1

221.3 32.2 675.5 15.8 304.6

226.6 35.3 717.5 19.8 338.5

249.0 43.0 769.2 23.6 349.1

276.7 56.7 822.6 25.5 361.2

301.2 62.5 868.8 26.0 358.6

323.3 61.4 909.1 26.1 379.8

341.1 60.6 949.8 26.9 404.2

364.3 62.2 992.9 28.0 424.5

388.5 60.7 1034.8 29.3 442.6

Federal Grants-In-Aid

232.9

247.3

276.1

304.6

338.5

349.1

361.2

358.6

379.8

404.2

424.5

442.6

1065.0 252.4 -3.8

1142.8 271.7 -4.5

1212.8 305.2 5.2

1281.5 332.0 16.5

1336.0 353.0 24.8

1391.3 383.8 24.1

1485.0 403.8 21.4

1590.5 400.8 21.6

1706.5 433.8 22.4

1786.7 462.5 21.8

1858.5 493.0 22.1

1928.7 523.8 26.4

-10.0 1.8 0.0 0.0 50.4

-7.1 1.9 0.0 0.0 50.0

3.6 2.0 0.0 0.0 4.8

-1.6 2.0 0.0 0.0 -34.2

0.7 2.2 0.0 0.0 -20.4

3.4 2.4 0.0 0.0 1.6

10.7 2.5 0.0 0.0 15.2

11.1 2.6 0.0 0.0 24.6

12.0 2.5 0.0 0.0 -3.0

9.3 2.6 0.0 0.0 2.4

8.3 2.6 0.0 0.0 14.6

7.5 2.7 0.0 0.0 17.0

State and Local Government Receipts and Expenditures

Expenditures Purchases Goods & Services Transfer Payments Interest Received Net Subsidies Dividends Received Net Wage Accruals Surplus (+) or Deficit (-)

Institute for Economic Competitiveness

29

U . S . F o r eca s t Tab l e s Table Exports and Goods and Services Table 16.16.

U.S.U.S. Exports and Imports of Imports Goods and of Services History 2002 2003

1999

2000

2001

2004

-260.5 -301.6 991.3

-379.5 -417.4 1096.3

-367.0 -384.7 1032.8

-424.4 -459.6 1005.9

-499.4 -522.1 1040.8

-615.4 -640.2 1182.4

2005

Forecast 2008 2009

2006

2007

2010

-714.6 -754.8 1309.4

-762.0 -811.5 1467.6

-728.4 -778.8 1617.3

-710.2 -764.8 1796.9

-691.6 -768.6 1972.3

-680.6 -774.0 2135.2

Billions of Dollars Net Exports Goods & Services Current Account Exports - Goods & Services Merchandise Balance

-347.8

-454.7

-429.5

-485.0

-550.9

-669.6

-787.1

-838.3

-835.7

-847.8

-854.3

-865.1

Food, Feed & Beverage Industrial Supplies Excl Petroleum Motor Vehicles & Parts Capital Goods, Excl. MVP Computer Equipment

45.98 142.4 75.3 311.3 46.8

47.85 166.7 80.4 357.0 55.5

49.43 155.3 75.4 321.7 47.6

49.60 153.5 78.9 290.5 38.6

55.03 168.3 80.7 293.7 39.9

56.55 199.5 89.2 331.4 42.8

58.95 227.5 98.6 362.4 45.5

65.93 267.3 107.2 413.9 47.6

77.79 295.5 117.1 441.8 43.2

75.36 325.9 133.5 498.7 46.7

75.83 348.1 152.1 554.2 52.7

77.65 369.5 165.1 602.8 58.1

Other Consumer Goods, Excl. MVP Other Consumer Services

211.6 80.9 41.4 294.1

253.4 89.4 43.1 312.0

221.6 88.3 41.0 301.6

201.5 84.4 40.7 308.4

207.1 89.9 36.9 316.4

238.7 103.3 38.4 364.1

256.0 116.1 43.6 402.4

291.2 130.0 46.2 437.1

315.6 148.7 50.4 486.1

354.1 172.0 54.6 536.7

389.4 194.5 59.1 588.5

420.5 217.2 63.6 639.4

Imports - Goods & Services 1251.8 Merchandise 1045.5 Food, Feed & Beverage 43.6 Petroleum & Products 67.8 Industrial Supplies Excl Petroleum 147.9 179.0 Motor Vehicles & Parts Capital Goods, Excl. MVP 295.7 Computer Equipment 81.5 Other 190.5 Consumer Goods, Excl. MVP 242.1

1475.8 1243.5 46.0 120.2 172.8 195.9 347.0 89.8 230.9 282.0

1399.9 1168.0 46.6 103.6 164.8 189.8 298.0 74.0 192.7 284.5

1430.3 1189.4 49.7 103.5 158.4 203.8 283.3 75.2 182.7 308.0

1540.2 1284.0 55.8 133.1 174.4 210.1 295.9 76.5 195.3 334.0

1797.8 1499.5 62.1 180.5 225.1 228.2 343.6 88.6 230.7 377.2

79.6 232.3

80.7 231.9

82.8 241.0

80.6 256.2

82.9 298.3

2229.6 1880.4 75.0 302.4 290.1 256.7 418.3 101.4 288.5 446.1 91.9 349.2

2345.7 1979.5 82.5 326.5 299.6 255.9 444.4 105.2 305.2 477.5 93.0 366.2

2507.1 2119.5 88.4 354.5 321.2 277.2 479.0 111.7 327.6 500.6 98.5 387.6

2663.9 2249.5 92.8 351.9 337.8 296.9 521.8 121.8 354.5 539.1 109.2 414.4

2815.8 2372.3 95.3 354.4 347.1 317.8 553.9 131.7 371.8 581.7 122.1 443.6

Billions of Dollars

Other Consumer Services

69.5 206.3

2024.0 1702.0 68.1 251.9 264.8 239.5 379.3 93.3 260.3 411.5 87.0 322.0

Billions 2000 Dollars Net Exports Goods & Services

-296.2

-379.5

-399.1

-471.4

-518.9

-593.8

-618.0

-624.5

-578.9

-542.8

-533.4

-540.3

Exports G & S Imports G & S

1008.2 1304.5

1096.3 1475.8

1036.7 1435.8

1013.3 1484.6

1026.1 1545.0

1126.1 1720.0

1203.4 1821.5

1304.1 1928.6

1393.2 1972.1

1519.5 2062.3

1649.5 2182.9

1772.1 2312.3

Exports G & S

3.7

10.6

-5.6

-2.3

3.5

13.6

10.7

12.1

10.2

11.1

9.8

8.3

12.1 4.3 11.4

18.0 8.8 13.2

-4.9 -5.3 -2.6

2.6 -2.0 3.5

7.8 1.3 4.1

16.7 9.8 11.3

12.6 6.9 5.9

10.3 8.4 5.9

5.2 6.8 2.3

6.9 9.1 4.6

6.3 8.6 5.8

5.7 7.4 5.9

Exports & Imports % Change Imports G & S Real Exports G & S Real Imports G & S

30

U.S. Forecast

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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