U.S. Forecast November 2007

U.S. Forecast November 2007

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

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

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

As another year comes to a conclusion, I would like to reflect on the achievements of the past 12 months. This has indeed been an exciting year for the University of Central Florida. As a university, we opened a football stadium as well as a new arena on campus, and broke ground for a medical school. As a college within the university, our business school continued to attract top students and faculty members, and our endowment increased.

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 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.

Finally, as a center within our college, the Institute for Economic Competitiveness, led by Sean Snaith, Ph.D., received a tremendous amount of national recognition. It is hard to believe that it has only been a year since we started publishing this economic forecast. Throughout the year, the forecast addressed many issues such as rising gas prices, the housing market, unemployment rates, and the value of the U.S. dollar. While the news was not always optimistic, Sean used a clever and unique style to present his research. This format is popular with both the media and consumers.

Thank you for your support. As we head into 2008, I believe UCF will continue to prosper.

Happy New Year and I look forward to addressing you 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 November 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 4 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

• The U.S. is like Big Lots!© for Brits (and Canadians and Germans…). Thanks to the weak U.S. dollar, strong export growth keeps the U.S. economy moving forward despite the wilted housing sector.

• The 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.

• The U.S. consumer remains steadfast even though home equity wells have gone dry, credit standards have tightened, and energy prices continue to set record highs.

• “Say it ain’t so Ben. Say it ain’t so.” Has the Bernanke Fed abandoned inflation targeting as a strategy for monetary policy?

• Unemployment rates will drift upward but not top 5.0%. Job losses in construction and financial services tied to housing will add to the structural job losses experienced in the manufacturing and information sectors.

• Unemployment peaks at 5.0% in 2008 before falling back to 4.5% in 2010.

• There is light at the end of the housing tunnel <insert train joke here>. Housing starts hit their nadir in the first quarter of 2008, and existing home sales begin a long, slow recovery.

• Even with housing starts and sales showing some signs of life in 2008, prices will take another three quarters to stabilize.

• Payroll job growth decelerates to 1.23% in 2008 before gaining steam to average 1.49% during 2009 and 2010.

• The depreciation of the U.S. dollar continues through the first half of 2008. The seven-year slide finally ends in 2009 when the greenback will eek out a modest appreciation.

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The Anxious Index

are the highest they have been in more than five years.

These levels suggest that forecasters believe that a decline in GDP is possible in the 1st quarter of 2008. For the remaining three quarters of next year, the panel expects the anxious index to remain above the 20% level.

In the wake of the sub-prime mortgage meltdown and subsequent volatility in financial markets, are economists more concerned that a recession is an imminent threat to the U.S. economy? The most recent release (4th quarter 2007) of the Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia suggests that the 45 forecasters surveyed for this publication, including the author, have sharply increased their concern that a decline in real GDP might occur in the 1st quarter of 2008.

The survey asks panelists to estimate the probability that real GDP will decline in the quarter in which the survey is taken and the probability of a decline in each of the following four quarters. The anxious index, a term coined by The New York Times reporter David Leonhardt, is the probability of a decline in real GDP in the quarter after a survey is taken. In the survey taken in the 4th quarter of 2007, the index stands at 22.5%, which means that forecasters believe that there is a 22.5% 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

Sa y i t ain ’ t s o , B en . Sa y i t ain ’ t s o !

Inflation Targeting or Inflation Targeting Lite?

Upcoming FOMC meetings in 2007: December 11 In a recent speech, Federal Reserve Chairman Ben Bernanke’s comments reveal that he has abandoned a true inflation targeting approach to monetary policy: “Thus, at least since the stabilization of U.S. inflation in the 1980s, the Federal Reserve’s approach to monetary policy has had much in common with that of central banks that describe themselves as inflation targeters.

Nevertheless, some aspects of inflation targeting may be less well suited to the Federal Reserve’s mandate and policy practice. In particular, although inflation-targeting central banks certainly pay attention to economic growth and employment,

FIGURE 1

The Anxious Index Probability of Decline in Real GDP in the Following Quarter Quarterly, 1968:Q4 to 2007:Q4 100 90 80

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Survey Date Institute for Economic Competitiveness

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their formal accountability is often largely couched only in terms of a price-stability objective.”

From Federal Reserve Chairman Ben S. Bernanke’s speech Cato Institute 25th Annual Monetary Conference, Washington, D.C. November 14, 2007 By describing some aspects of inflation targeting as “less well suited to the Federal Reserve’s mandate and policy practice,” Bernanke revealed the intentions of the Fed regarding its inflation targeting approach to monetary policy. In reality, it was clear that the true (strict) inflation targeting approach was being scrapped when the Federal Open Market Committee voted to cut the federal funds rate by half of a percentage point in response to the sub-prime meltdown and ongoing corrections in the housing sector. A strict inflation targeting approach doesn’t allow for the loosening of monetary policy in response to financial market riling or booming markets that go cold. As its name suggests, these approaches focus on inflation.

Strict inflation targeting is a long-run approach to managing the economy that does not respond to the short-run ebbing and flowing of output or employment, which are permanent fixtures in a market economy.

Instead, the authority in charge of monetary policy selects a measure of price inflation such as the CPI or core CPI (excluding the volatile food and energy sectors). Then, the monetary authority selects a target value or range of values that it commits to maintain.

Such approaches take the mystery out of the conduct of monetary policy. The existence of a clearly defined inflation target reveals how well the central bank is doing in achieving its goal and, furthermore, shows what steps the central bank will take in the event that inflation deviates from its target. In New Zealand, the tenure of the head of the central bank depends on how well the bank hits the inflation target. Another salient feature of such monetary policy regimes is transparency into the process of conducting monetary policy.

Monetary policy conduct often appears to be something out of The Wizard of Oz — “Pay no attention to the man behind the curtain!” Historically, monetary policy has been shrouded in secrecy and obliqueness. Fed chairmen have used abstruse wording, nimbly avoided specifics, and always remained non-committal when it came to actions of the central bank. Inflation targeting requires a transparent central bank that is forthright with regard to what it is forecasting for the economy and clearly communicates what it plans to do and, subsequently, follows through on those plans.

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These steps, in particular the follow-through, are essential in establishing the credibility of the central bank, which, in turn, keeps expectations about inflation contained. When expectations about inflation come untethered, inflation spreads rapidly and begins to root itself in the economy. Once this happens, the cure for inflation is harder to find, and it comes at a much larger cost on the economy at large as it did in the early 1980s.

Where does the Fed stand in regard to pursuing a weak inflation targeting regime? Let’s consider the four key elements of such an approach to monetary policy and determine how the Bernanke Fed stacks up.

The four key elements to an inflation targeting regime include: 1. Inflation must be the primary goal of monetary policy. There may be other objectives considered by the central bank, but they must be secondary to inflation.

2. The central bank must announce a specific numerical target, either a point or a range of values, which will be targeted over a certain time range.

3. There must be increased transparency and communication with the public regarding policy objectives and economic trends.

4. There must be accountability of the central bank to reach and maintain its inflationary goals.

Inflation as the Primary Goal The mandate of the Federal Reserve is “…to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Without stable prices, it is not possible to have moderate longterm interest rates, so this mandate is often referred to as the dual mandate. Nowhere in the act is there a specific weight assigned to each of the objectives; thus, one interpretation might give each equal weight, but the mandate itself does have some room for interpretation and could be consistent with an inflation targeting regime. The recent actions of the Fed might call into question whether an inflation target is the primary goal of the central bank’s actions. A central bank focused on inflation likely wouldn’t cut interest rates in an effort to ward off the ill effects of the housing contraction at a time when unemployment is below 5%, real GDP growth for the 3rd quarter showed an initial reading of 3.9%, and energy prices skyrocketed to record levels. That being said, long-term interest rates remain at historically very low levels that are consistent with inflationary expectations remaining in check.

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Specific Target The second element of an inflation targeting regime is not yet in place. Since the Greenspan era, the Fed’s socalled “comfort zone” is inflation in the 1% to 2% range.

Usually, this range applies to the core Consumer Price Index (CPI) or core Personal Consumption Expenditures (PCE) rate of inflation. This comfort zone for inflation has never been officially announced but has been derived de facto. In recent history, the U.S. economy has been outside of this range, and the Fed has not responded by tightening monetary policy, which may be due to the implicit time range it takes to return to the preferred zone that the Fed operates under — or not. Suffice it to say, the Fed does not have element number two of an inflation targeting regime fully in place.

Transparency and Communication The third element of an inflation targeting regime is partially in place and is approaching full fruition. The speech from which the excerpt above was taken also included the announcement that the Fed plans to move toward more frequent (quarterly) releases of its economic forecasts. This change is in addition to more rapid publication of the minutes from FOMC meetings, a rule that was implemented in 2004. These minutes are now released in just three weeks instead of six.

Accountability The final element of the regime is only very loosely in place. The Fed chairman is required to provide regular, periodic testimony to legislators and at hearings.

It is during these question-and-answer sessions that Congressmen get to grill the Fed chairman over real or perceived shortcomings in achieving the Fed’s mandate.

The truth is that these hearings provide little in the way of true accountability, primarily because without quantifiable targets for inflation (or unemployment, for that matter), there can be no quantifiably true assessment of the performance of the central bank but, rather, just a vague sense of whether or not things are going well (the perception of which may vary, depending on a particular politician’s constituency). In short, without specific targets, as required in element two of an inflation targeting regime, it is difficult to have the final element of accountability in place as well.

In both the words and actions of Fed Chairman Ben Bernanke, it is clear that the Fed has not fully implemented — or will ever implement — an inflation targeting regime. There are indications that some

elements required for such a policy framework exist, but without an explicit target and without accountability to hit such a target, a true inflation targeting regime for the conduct of U.S. monetary policy exists only in academic research. The same place, ironically, where Chairman Bernanke became such an ardent supporter.

The Housing Market: Not Out of the Woods Just Yet The announcements of sub-prime write-downs just keep coming. Each week, a new financial institution seems to come out with an announcement of a few billion dollars worth of write-downs that are usually tied to investments in Collateralized Debt Obligations (CDOs), the value of which is tied to sub-prime mortgages. How much of the value is tied to these mortgages is not always precisely known. Perhaps these banks are being overly cautious, wanting to avoid the unpleasant surprise that more of these CDOs could default than they have allotted and accounted for. Underestimating the impact of subprime mortgages on these bank’s balance sheets would, of course, result in further punishment in terms of already hard-hit stock prices. This gives the appearance of a much greater impact from sub-prime mortgages than might truly be the case.

The supply of homes for sale continues to outpace the demand. As is the case in all markets where a surplus exists, this puts downward pressure on prices.

Consequently, prices continue to fall. This fall, of course, resembles the slow cooling of a soufflé rather than the dramatic and rapid bursting of a bubble. There are pockets of the country where price declines have been substantial and usually correspond to areas where overbuilding and sub-prime mortgage abuses were most profound. The worst housing market in the country is Detroit. The area’s poor housing market has little to do with over-construction or real-estate flipping; rather, it is due to consolidation in the automotive industry, which has led to layoffs and high unemployment rates in the region. For most of the United States, however, the economy remains in pretty good shape. The downturn in the housing sector has slowed but has not stopped economic growth. The performance of the U.S. economy as of late is far from the recent prognostications by some economists, who described the housing market appreciation as a bubble that would send the U.S. economy into a recession when it burst.

Nonetheless, more housing pain remains, and the adjustment back to normalcy in the housing sector is far from over. The real danger could occur in the first six months of 2008 when a large wave of sub-prime loans Institute for Economic Competitiveness

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will be re-priced. This change in prices will put the squeeze on those who could afford housing payments during the teaser rate period but cannot afford the new higher payments and are not able to sell or refinance in the current environment. This situation will have the unfortunate consequence of pushing even more inventory back into the market via foreclosure.

If we can get through the first six months of the year, the fever will break, and the economy will be on its way to recovering from its bout of housing flu. Housing starts will continue to decline through the first half of 2008 before beginning a very slow and deliberate recovery.

Builders will not resort to the old habits of overbuilding, as they have learned their lesson or gone bankrupt — or both. Existing home sales will also begin to recover in the middle of 2008, barring any additional shocks to the economy.

The Chicken Littles, who were screaming that the housing market was a bubble and the bursting of that bubble would spell economic doom for the U.S. economy, will have to turn their pessimistic heads toward another acorn. Although, I am not sure what the next disaster will be — peak oil? A comet hurtling toward Earth? Bird flu?

A presidential election where voters must choose between the lesser of two evils? Well, that last one seems to happen every four years, so why should 2008 be any different?

GD P Ou t l o o k After the paltry real GDP growth in the 1st quarter of 2007 (0.6%), the 3.8% growth rate of the economy in the 2nd quarter was a welcome more robust growth rate. But was this increase just a spasm of an economy in the throes of housing-induced death? Advance figures on GDP growth for the 3rd quarter have dispelled that notion.

Growth has come in at a sizzling 3.9% and may very well be revised upward when the next take on 3rd quarter GDP is released on November 29.

We have not seen such strong back-to-back quarters of growth since the middle of the housing boom in 2004.

Given the economy’s momentum, it seems far less likely that we will fall into a recession as a result of the housing slowdown. As we have contended for years, the economy is not solely dependent upon housing to continue to move forward, and this cross-sector strength has provided the thrust to continue this growth.

Arguing against the notion of the housing bubble does not imply that we believe that the housing morass will have no impact on the economy. It has already had an impact, and it will continue to do so until we get past the critical first six months of 2008. Combined with the

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drag of housing-resurgent energy prices and a floundering stock market, we have a very significant headwind that will result in an economic slowdown. We anticipate that the GDP growth will continue to decelerate through the 1st quarter of 2008 before growth begins to pick up once again.

We are looking for real GDP growth to slow to 1.4% in the 4th quarter of 2007 and slow even further to just 1.0% in the 1st quarter of 2008 before gaining steam (or, perhaps, shedding the ballast of the housing sector) and growing by 2.2% and 3.2% in the 2nd and 3rd quarters of 2008, respectively. By 2009, the U.S. economy will take off again with economic growth in excess of 3.0%.

C o n s u m e r Spen d in g

Will $100-per-barrel oil be a lump of coal in retailers’ stockings?

In a matter of days, we will have early readings on how the holiday shopping season is shaping up. We will see figures from Black Friday, which gets its name not from the mood of spouses who are dragged out of the house and into malls/big box retailers/Roman coliseums where shoppers battle over door busters, but from the fact that this is the day of the year when retailers become profitable with books that go from the red into the black.

I expect that consumers will diminish their spending this holiday season, but it should be on par with last year’s season. Retailers are being aggressive again with pricing and other offers to help part the consumer from their hard-earned dollars, and these efforts will be moderately successful. No records will be set this holiday season — neither record highs nor record lows.

Consumers are being hit with high energy prices at the pump, the thermostat, and the light switch, and these increases are coupled with declining home prices, which is not exactly a recipe for runaway spending by consumers.

However, unemployment rates remain low by historical standards, and incomes continue to grow, which is not exactly a recipe for economic stagnation, either. So, what is cooking as far as consumers are concerned?

The so-called housing equity ATM, the rising home equity that consumers are able to tap via home equity loans, has been shut down for well over a year. Housing prices have been stagnant or declining for at least that long, and, yet, consumer spending remains relatively strong.

The fact that home equity is stagnant or declining is not in dispute, so why hasn’t consumption been hampered by the fall in housing prices? Housing wealth is widely distributed throughout the economy, even more so than stock market wealth, so why hasn’t consumption fallen in

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response to the housing slump as might be expected?

The premise behind the consumption boost that came from rising home prices is predicated on the fact that consumers responded to this housing wealth windfall by taking out record levels of home equity loans that were then used to finance the purchases of cars, plasma televisions, and boats. Thus, as equity stagnated or declined, consumers were left with a new debt payment and a reduced ability to finance additional consumption purchases. Under this “one and it’s done” version of events, the decline in home equity should have had a profoundly negative impact on consumer spending. That hasn’t been the case, however, which suggests that many consumers used home equity withdrawals to consolidate and pay down other types of debts. Rather than having just a temporary impact on the economy, this version of the home equity ATM story actually results in the consumer freeing up disposable income each month, which allows for an ongoing boost in spending. After a full year of stagnant to declining home equity, the fact that consumption has not been more adversely affected lends credence to this explanation of events.

Energy prices have surged yet again, and oil is pushing $100 per barrel. Admittedly, this is a fact that I feared could cause consumer spending to grind to a halt. Gasoline is more than $3.00 per gallon, and consumers are grumbling, but not stumbling, when it comes to spending — at least not yet. The danger to the economy is that the collective impact of all the developments for households could eventually collapse consumer confidence and spending. Higher energy prices and declining home equity individually may not be enough to cause the U.S. consumer to stop spending but, collectively, tighter credit markets could result in a “death by a thousand cuts” that finally brings spending to a halt. That being said, I do not think that, as things stand today, we will see any dramatic collapse in consumer spending, and if oil pulls back from the $100 precipice, the risk of a collapse falls dramatically.

I n v e s t m en t After five years of double-digit growth, corporate profit growth has declined significantly and is projected to turn negative for the next couple of quarters. However, persistently low interest rates and optimism that the housing slowdown will be overcome in a few quarters will result in continued investment growth, particularly since many firms still have large war chests of retained earnings from the years of profit growth. Investment in computers and peripherals continues to grow at a double-digit pace throughout the duration of our forecast horizon.

Investment growth is slower in 2007 than in 2006 and will fall further in 2008, with growth at about half the level it was a year ago. At this point in time, commercial construction is still playing catch-up with the housing boom. The commercial construction sector is watching the ongoing slump in the housing sector with an impending sense of doom; it is only a matter of time until that slowdown spills over into the commercial construction sector. We expect that commercial construction spending will begin to decline in the 2nd quarter of 2008, and this slowdown will persist until the 3rd quarter of 2009.

Residential fixed investment growth, on the other hand, has been in turmoil, and double-digit declines in 2007 will continue through the first half of 2008. By the end of 2008, the housing malaise should begin to subside. 2007 will be the worst year for residential fixed investment growth, with a double-digit decline of nearly 17%, as developers have severely cut back on projects in the wake of large inventories and with demand further hampered by the sub-prime meltdown. The precipitous decline in starts is part of the bitter medicine that this sector needs, and in 2009, the housing sector should be out of the doldrums, and residential fixed investment should return to a more robust growth rate of 9.0%.

G o v e r n m en t Spen d in g The improvement in the federal budget deficit, which was celebrated by the Bush administration as a product of its package of tax cuts, will, unfortunately, be a shortlived phenomenon. The strong growth in the economy and the robust profits of firms have caused revenue to surge, thereby shrinking the deficit.

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 since 2004 primarily as a result of the surge in receipts generated by economic growth, will reverse course and worsen in 2008 and 2009.

Next year’s presidential election will have an impact on the deficit; however, the degree of that impact is not clear right now. It is likely that whoever wins the election will continue with increased military expenditures, as the War on Terror will not come to an end any time soon.

The best hope for fiscal improvement is to have one party in control of Congress and the other party controlling the White House, which is a recipe for fiscal gridlock.

Since neither party seems to be interested in true fiscal austerity, having neither party in control of both executive and legislative branches of government may be our best

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hope for controlling the federal deficit and inhibiting the growth of the national debt.

We expect real government spending growth to slow to less than 1.5% in 2008. The reduction of military expenditures in Iraq will help slow spending growth. In 2009, we anticipate real government spending growth to slow to a near standstill, and in 2010, for the first time in over a decade, it will actually decline. The new administration in the White House must consider the deficit, and some attempt to curtail the deficit will be made, in part, by lowering spending and an eventual troop drawdown in Iraq. 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 2.2% growth in 2007 to 1.0% growth in 2010. The slowdown in spending will be a result of declining revenue at the state and local levels, as the geyser of revenue that the housing boom provided has all but dried up. State and local governments do not have the luxury of unabated spending as the federal government does, and spending cuts will be the policy du jour for the next several years for many regions of the country.

Net Exports The United States: It’s like Big Lots!© For Brits.

The current situation in the U.S. economy should provide enough evidence that international trade is hugely important to the U.S. economy, and all efforts should be made to increase such trade rather than to curtail it.

If the foreign sector of the economy was not performing as strongly as it currently is, the U.S. economy would, without a doubt, be in or entering a recession at this very moment.

Fortunately, the weakened U.S. dollar and strong economic growth abroad has made U.S. goods and services a bargain-basement purchase for our international friends. The Canadian looney, the British pound, and the euro have reached record strength against the U.S. dollar and have folks traveling to the U.S. expressly for the purpose of shopping.

The U.S., which was long viewed as an engine of growth for the global economy, is now taking on, temporarily, the role of caboose. Export growth in 2008 will exceed 10% while imports will grow by just 3.1%.

As the U.S. recovers from the housing slowdown, we anticipate that the imports will begin to grow a little

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faster in 2008 and 2009, but export growth will still exceed that of imports, and by 2010, growth rates will be closer to par. The net result is an improvement in the U.S. current account deficit, the cumulative effect of slower growth and several years of depreciation of the U.S. dollar.

The U.S. dollar has been depreciating significantly against our major trading partners since 2002 and that depreciation, which initially worsened the trade balance, or the downside of the J-curve, has now started to affect trade flows. We are forecasting that this depreciation will continue through 2009.

The flow of capital from the rest of the world continues to pour into the United States. The U.S. Treasury Department’s Report on Foreign Holdings of U.S. Securities was recently released. The report covers holdings as of June 2006 and has detailed information on what countries the U.S. government and U.S. corporations are borrowing from. Preliminary data released from this report reveals that foreigners hold $1.7 trillion worth of marketable U.S. Treasury debt, which represents 52% of the total value of outstanding U.S. debt.

This flow of capital into the U.S. from abroad has been an important factor in allowing the current U.S. expansion to continue. The federal government continues to run large budget deficits, yet interest rates have remained at historically low levels. Well-contained expectations about inflation are part of the story (and why a cut in response to the sub-prime crunch may have been ill-advised). The bigger piece of the puzzle is foreign purchases of Treasury bonds — Japan and China hold over $900 billion worth of marketable U.S. Treasury bonds. This fact has kept bond prices high and yields much lower than they would be in the absence of these purchases. In fact, the yield on 10-year U.S. treasury bonds dropped below 4% briefly and continues to hover around 4%.

I nf l a t i o n Unemployment remains below 5%, and the economy continues to push forward despite a significant slowdown in the housing sector. GDP growth sits near 4.0%; energy prices are setting new record highs; the weak dollar has raised the price of imports; and other commodities, such as corn, are also at record prices. In the middle of all of this, the Fed has cut short-term interest rates by 75 basis points (.75%), which would seem to be the monetary policy equivalent of lighting a match to try to find the location of the leak in your gas tank — a potentially explosive situation for prices.

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In many ways, it feels like the 1970s, sans the music and fashion (thankfully). High energy prices, a slowing economy impacted by the housing correction, and at least the possibility of stagflation (economic stagnation + inflation) do evoke memories of that particularly tumultuous era in our country’s history. However, economic anxiety should not peak because of the vague uneasiness that this similarity may cause.

Labor markets still remain tight, and the unemployment rate is still at a very low level by historical standards. Labor costs continue to be pushed upward, but productivity continues to increase, which reduces the possibility of a wage-price inflation spiral taking hold. If these productivity numbers continue to be on the high side, they will be a crucial shock absorber that keeps wage pressure from rattling the prices of final goods.

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 only risen slightly in recent weeks. This spread can be thought of as a market-based measure of inflationary expectations, and by this measure, expected inflation is around 2.4%, up only slightly from 2.3% at the beginning of 2007. It is worth noting that the level of inflation is above the 1% to 2% implicit target rate that the Fed has been purportedly operating under since Alan Greenspan’s tenure as Fed chief.

Official reserve purchases of Treasury bonds by foreign central banks for the purpose of exchange rate management may be imparting a downward bias into this spread. However, new survey data on inflationary expectations indicates that expectations remain contained. The Philadelphia Federal Reserve Bank’s Survey of Professional Forecasters for the 4th quarter of 2007 shows that the expected average rate of CPI inflation is 2.5% for the next five years.

Looking forward, we expect CPI inflation to moderate over the forecast horizon. Consumer price inflation should fall from the peak level in the 4th quarter of 2007 to less than 1.6% in 2010. Core inflation should stabilize below 2% looking forward.

Given the pressure on prices and inflation, already at the upper end of the Fed’s so-called comfort zone, it seems unlikely that a rate cut is forthcoming in December’s FOMC meeting. Depending how the housing plot unfolds, the Fed may revisit this decision in early 2008.

U ne m p l o y m en t Unemployment rates have begun to drift upward, albeit very slightly. Currently, the U.S. rate of unemployment stands at 4.7%. This is significantly lower than the peak level of unemployment hit during the past decade, which occurred in June 2003 when unemployment reached 6.3%.

We are forecasting unemployment rates to continue to climb for several quarters through the end of 2008. We do expect unemployment to rise to around the 5.0% level before it begins to fall again in 2009. It is expected to reach 4.5% by the end of 2010.

Job losses associated with the housing slowdown will contribute to the rise in unemployment, but these losses should remain contained to those sectors that were at ground zero of the housing boom: construction, real estate, finance as it relates to the housing industry, and retail jobs in home improvement. There will be job losses in other sectors over our forecast horizon, including in the manufacturing and information sectors, both of which are undergoing structural change from global competition and facing the metamorphoses that are taking place in the publishing and entertainment industries. It should be noted that we forecast the losses in both of the sectors to trail off by the end of our forecast horizon.

The bottom line is that unemployment remains low by historical comparison, despite the challenges facing the U.S. economy. As long as people have jobs, they can by and large afford to make their car and mortgage payments and continue to buy goods and services. Full employment ensures that the housing downturn will not drag the entire economy into recession; it is only when the economy gets pulled out from underneath the housing sector that we see precipitous declines in housing prices, like in Detroit, the worst housing market in the country.

Institute for Economic Competitiveness

11

omobile and Light Truck Sales No v e m(Millions b e r 2Vehicles) 007

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, %)

2.2

8.0

2.0

7.5

1.8

7.0

1.6

6.5

1.4

6.0

1.2

5.5

1.0

5.0

97 98 99 00 01 02 03 04 05 06 07 08 09 10 30-Year Fixed Mortgage Rate Housing Starts - Millions

0.8

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

13

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

Oil and Consumer Confidence 100.0

Oil ($ per bb) - left axis

80.0 60.0 40.0 20.0 0.0

97 98 99 00 01 02 03 04 05 06 07 08 09 10 Price of Oil WTI Consumer Sentiment

115 110 105 100 95 90 85 80 75

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

14

U.S. Forecast

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

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

Industrial Production 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

15

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

No v e m b e r 2 0 0 7

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 Billions Current Dollars 2016.2

1853.2

1879.9

2008.9

2243.4

2495.8

2688.1

2772.6

2890.5

3046.8

994.5 164.7

830.5 150.5

774.5 197.8

797.4 250.3

932.4 319.8

1053.2 373.1

1168.3 388.1

1220.6 370.1

1269.3 382.7

1361.8 384.8

85.8 717.5

87.3 734.3

89.7 758.9

94.6 805.2

99.0 849.3

98.6 901.7

100.1 957.7

101.3 1001.3

104.5 1051.4

108.1 1105.5

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

977.6 662.3 315.3 1685.3 1273.1 31.2

1032.4 708.3 324.1 1769.7 1343.6 30.6

1055.5 720.4 335.1 1852.7 1403.9 31.6

1072.0 721.9 350.0 1928.9 1457.7 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

30.8 377.4 288.3 49.1

30.6 391.5 296.6 48.4

31.6 413.0 315.5 49.1

32.6 434.3 313.9 49.5

46.7

-248.0

-372.2

-370.6

-318.3

-220.1

-206.4

-264.5

-270.1

-204.1

te and Local Government Receipts and Expenditures Billions Current Dollars 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

322.5 64.5 911.4 26.0

342.4 60.4 945.8 26.9

363.1 62.0 985.1 27.8

387.9 61.6 1023.6 28.9

304.6

338.5

349.1

361.2

358.6

377.4

391.5

413.0

434.3

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

1709.8 431.7 23.1

1791.3 456.2 22.7

1850.7 487.0 23.2

1909.8 516.8 26.8

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

12.4 2.7 0.0

10.2 2.7 0.0

9.2 2.8 0.0

8.4 2.8 0.0

0.0 -34.2

0.0 -20.4

0.0 1.6

0.0 15.2

0.0 24.6

0.0 -1.5

0.0 -11.7

0.0 2.9

0.0 16.7

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 of theof U.S. Forecast Table 1. Summary Summary the 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 (2000 $) 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 17.343 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

2.1 2.4 2.9 4.8 2.4 2.8 4.6 1.5 7.7 18.9 4.0 2.5 -8.6 46.8 -34.7 12.1 9.8 1.3 15.2 14.2 16.8 -17.1 7.8 2.2 1.9 2.2

2.3 2.2 2.1 0.0 2.2 2.4 4.2 5.4 7.4 19.6 3.6 0.9 5.9 7.5 7.5 1.6 2.0 4.4 2.7 -6.1 9.2 -16.9 10.1 3.1 2.9 1.7

3.4 3.2 3.0 3.8 3.1 2.9 5.1 8.2 7.8 17.9 5.5 2.6 18.6 8.3 35.1 -1.9 -4.2 6.6 0.8 -3.7 0.1 7.3 9.0 5.9 0.1 1.1

2010 3.3 3.2 3.2 6.5 2.8 2.9 4.5 6.0 6.9 18.1 4.4 6.0 3.1 7.5 -9.9 0.9 0.9 7.7 3.5 -2.5 -0.3 13.9 7.7 6.6 -0.4 1.0

11559.1 11822.6 12220.2 12626.4 13815.5 14325.6 15009.7 15755.2

2.1 3.9 2.2 6.4 3.0

1.3 0.8 1.5 0.4 2.7

1.5 1.6 1.6 2.2 2.8

1.6 1.5 1.6 1.0 3.0

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

70.5 1.5 2.0 80.2 1.2 86.1 16.042 1.352 4.933 4.6 1.3 -163 -776

75.3 1.9 1.5 80.3 16.3 79.7 15.461 1.109 4.426 5.0 1.2 -254 -701

74.1 2.2 2.8 80.8 34.7 82.8 15.846 1.398 4.830 4.8 1.6 -285 -697

73.8 2.2 3.1 81.4 46.5 84.1 16.317 1.674 5.336 4.6 1.4 -255 -727

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 -8.1 -1.8 -1.5 -12.3

5.04 4.49 4.63 4.51 4.68 4.87 6.35 1493 13.9 0.770 -5.2

4.50 4.03 4.24 4.33 4.64 4.88 6.41 1570 5.2 0.728 -5.3

4.50 4.29 4.48 4.62 4.87 5.17 6.63 1670 6.4 0.740 1.6

4.50 4.34 4.58 4.77 5.01 5.33 6.70 1780 6.6 0.760 2.7

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

11701 6.5 10210 6.0 8689 3.5 0.8 1416 4.7

12292 5.1 10729 5.1 8983 3.4 1.9 1395 -1.4

12911 5.0 11278 5.1 9316 3.7 2.5 1431 2.6

13572 5.1 11822 4.8 9624 3.3 2.6 1427 -0.3

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 2. Real Gross Domestic Table 2. Annual Real Gross Domestic ProductProduct

1999

2000

2001

History 2002 2003

2004

2005

2006

2007

Forecast 2008 2009

2010

Real GDP Billions 2000 Dollars Gross Domestic Product

9470.4

9817.0

9890.7 10048.9 10301.1 10675.7 11003.5 11319.4

11559.1 11822.6 12220.2 12626.4

9404.1

9760.5

9921.0 10036.5 10285.1 10619.8 10966.9 11275.9

11552.0 11803.2 12183.4 12578.2

6438.6

6739.4

6910.4

7099.3

7295.4

7561.3

7803.6

8044.1

8278.8

8449.4

8706.5

8986.9

804.5

863.3

900.7

964.8

1020.6

1084.8

1137.4

1180.5

1237.6

1237.9

1284.5

1368.3

Nondurables

1876.6

1947.2

1986.7

2037.1

2103.0

2177.6

2255.4

2337.6

2394.2

2445.7

2521.7

2591.7

Services

3758.0

3928.8

4023.2

4100.4

4178.8

4310.9

4427.3

4545.5

4672.9

4784.2

4922.5

5064.4

1133.3

1232.1

1180.5

1071.5

1081.8

1144.3

1225.8

1306.8

1366.8

1423.4

1495.5

1563.3

840.2

918.9

874.2

820.2

843.1

905.1

991.8

1050.6

1066.1

1123.9

1215.7

1289.1

398.5

467.6

459.0

437.4

462.7

505.7

554.3

595.9

641.9

689.4

743.0

794.6

Computers & Peripherals

83.9

101.6

103.7

108.9

123.2

137.2

173.5

203.9

242.5

290.1

341.9

403.7

Communications Equipment

95.4

124.1

114.7

90.5

91.4

100.1

103.4

113.8

118.2

122.5

129.2

134.9

Industrial Equipment

147.9

159.2

145.7

134.5

138.4

134.0

144.3

149.6

153.3

154.7

158.7

168.3

Transportation Equipment

167.6

160.8

141.7

126.3

118.3

142.9

159.5

171.9

157.1

166.3

197.2

203.3

31.7

32.6

33.5

23.9

17.8

17.3

12.8

10.1

14.4

15.4

16.7

18.0

45.7

40.9

30.4

30.1

27.4

35.8

41.7

44.0

28.8

30.0

40.4

36.3

293.2

313.2

306.1

253.8

243.5

246.7

247.8

268.6

301.3

305.5

299.7

302.3

129.4

137.6

130.3

109.8

102.6

105.1

104.3

111.9

122.7

125.1

119.9

121.0

Manufacturing

33.9

31.8

28.5

16.7

15.4

16.2

19.0

20.4

20.7

21.6

23.0

24.8

Power & Communication

40.8

46.8

48.2

47.1

41.0

33.7

32.7

35.2

40.5

41.5

41.8

43.3

Mining & Petroleum

21.3

27.2

32.0

24.5

29.0

33.3

35.1

39.8

45.5

42.5

40.9

39.8

Other

67.9

69.9

66.6

55.9

53.4

54.6

51.9

54.6

63.9

69.5

69.5

69.3

443.6

446.9

448.5

469.9

509.4

560.2

597.1

569.5

472.2

390.6

419.0

477.3

Exports

1008.2

1096.3

1036.7

1013.3

1026.1

1126.1

1203.4

1304.1

1406.2

1547.5

1687.1

1817.2

Imports

1304.5

1475.8

1435.8

1484.6

1545.0

1720.0

1821.5

1928.6

1971.2

2033.1

2153.5

2295.3

573.7

578.8

601.4

643.4

687.1

715.9

726.5

742.3

756.3

777.9

778.9

775.6

1113.2

1142.8

1179.0

1215.5

1217.8

1215.8

1219.7

1239.0

1266.1

1288.2

1302.8

1316.5

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

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

of the Forecast of the U.S.

2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 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 (2000 $) Nominal GDP

GDP Deflator Consumer Prices Excl. Food & Energy Producer Prices, Finished Goods Employment Cost Index - Total Comp.

3.8 3.5 3.0 4.4 2.7 2.8 7.7 5.8 5.4 9.5 -2.2 8.0 1.7 -59.4 -38.5 11.8 6.0 -14.9 5.8 25.4 18.2 -21.8 15.3 5.1 6.7 2.0

1.4 2.0 2.1 4.9 1.1 2.1 6.7 6.1 7.3 27.7 1.9 2.9 11.4 40.3 6.8 8.2 8.5 1.8 4.1 0.9 21.9 -30.9 7.3 1.6 3.6 2.2

1.0 0.5 0.9 -7.8 1.9 2.0 0.4 3.7 6.2 17.4 4.6 -3.7 5.0 -1.5 42.5 -6.7 2.6 8.7 -2.4 -29.7 -2.9 -29.9 11.4 4.0 2.3 1.7

Composition of Real GDP, Percent Change, Annual Rate 2.2 3.2 3.4 3.6 3.4 3.2 3.4 2.1 3.3 3.1 3.4 3.3 3.0 3.4 2.2 3.0 2.9 3.1 3.1 3.0 3.3 -2.3 5.5 2.5 3.2 4.5 4.8 7.3 3.3 2.8 3.0 3.3 3.1 2.9 2.9 2.4 2.7 3.0 3.0 2.8 2.8 2.9 0.9 5.1 5.2 5.5 5.0 5.3 5.2 4.2 7.3 8.7 9.6 8.6 6.1 5.7 7.9 8.2 8.1 7.9 7.3 6.4 6.3 19.6 17.5 16.0 16.4 17.1 16.5 16.0 4.5 5.8 6.4 6.3 5.5 2.8 3.3 -3.4 -1.5 2.8 3.7 3.7 4.2 5.4 1.0 18.4 19.4 24.4 20.9 8.5 6.4 26.0 12.5 7.3 3.1 8.1 5.1 8.5 -13.2 63.0 16.0 51.0 30.4 16.4 17.4 -6.0 0.3 -2.7 -4.0 -3.7 3.3 4.0 -1.3 -4.6 -6.2 -3.4 -8.9 -0.8 3.2 7.9 5.1 8.3 5.0 3.2 13.3 3.8 -8.6 6.4 -2.5 -0.9 4.4 0.3 5.9 -24.7 2.8 -3.9 -12.9 -4.5 13.0 10.8 3.6 1.8 1.4 -1.3 -1.0 0.2 -2.1 -11.2 3.0 5.7 8.5 11.3 11.2 11.3 8.2 8.5 8.4 9.6 9.4 7.6 7.9 2.0 4.7 5.7 6.2 6.6 6.6 6.4 1.2 0.9 0.8 0.0 -0.7 -0.6 -0.1 1.2 1.2 1.2 1.2 1.1 1.0 1.0

3.4 3.4 3.2 5.9 2.8 2.9 5.2 7.3 7.1 17.6 4.8 8.5 6.1 6.6 -2.4 0.0 1.6 13.0 6.5 -13.6 0.5 14.6 7.4 6.2 -0.5 1.1

3.1 3.0 3.4 7.4 2.8 2.9 5.4 7.3 6.4 17.3 5.4 6.9 7.7 7.8 5.1 0.6 2.2 6.5 3.9 -7.6 0.4 11.1 7.1 7.7 -2.2 1.3

3.0 2.9 3.2 6.6 2.7 2.9 5.5 7.2 6.5 17.2 5.6 5.9 6.4 4.8 13.3 1.3 4.2 7.4 -3.4 -4.4 1.1 12.0 6.7 7.6 -1.8 1.1

Billions of Dollars 11630.7 11672.9 11701.7 11766.1 11861.5 11961.2 12069.5 12171.8 12268.1 12371.6 12472.8 12580.4 12678.4 12773.9 13926.7 14014.6 14112.5 14239.8 14396.1 14553.9 14741.8 14920.8 15096.1 15280.0 15470.3 15667.0 15849.7 16033.6 Prices & Wages, Percent Change, Annual Rate 1.1 1.0 1.5 1.5 1.5 1.5 1.1 0.9 1.5 1.9 1.7 1.4 1.4 1.4 1.5 1.6 1.6 1.6 1.5 0.7 3.2 3.2 1.8 0.7 2.7 2.7 2.7 2.7 2.9 2.9

0.8 1.9 2.5 1.0 3.1

1.0 4.0 2.1 8.9 3.0

1.8 0.7 1.7 -1.3 2.8

1.4 0.6 1.4 0.6 2.5

75.2 4.1 4.0 80.6 12.4 85.7 15.867 1.296 4.723 4.6 0.9 -199 -760

83.9 1.7 -1.1 80.1 -2.9 79.4 15.824 1.187 4.224 4.8 1.1 -215 -794

79.0 0.5 1.1 80.1 11.6 77.0 15.255 1.045 4.283 4.9 1.1 -243 -739

74.3 1.7 1.6 80.3 15.2 79.3 15.316 1.067 4.395 5.0 1.4 -270 -695

75.0 2.4 2.4 80.3 15.2 80.7 15.604 1.135 4.495 5.0 1.6 -270 -685

Other Key Measures 72.8 73.5 74.4 74.7 2.3 2.4 2.1 2.1 2.3 3.1 3.2 3.1 80.4 80.6 80.8 80.8 23.2 29.9 33.6 37.5 81.7 82.4 83.1 82.8 15.668 15.748 15.823 15.879 1.189 1.275 1.361 1.440 4.533 4.657 4.755 4.876 5.0 4.9 4.8 4.8 1.5 1.6 1.6 1.3 -276 -273 -281 -267 -684 -685 -691 -705

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))

5.07 4.35 4.52 4.50 4.73 4.94 6.55 1491 -1.5 0.758 -11.9

4.59 3.88 4.04 4.14 4.48 4.73 6.31 1558 18.1 0.736 -11.7

4.50 3.92 4.10 4.19 4.51 4.76 6.26 1546 -3.1 0.728 -4.2

4.50 4.00 4.21 4.30 4.61 4.85 6.37 1549 0.8 0.723 -2.6

4.50 4.06 4.28 4.38 4.68 4.92 6.46 1582 8.4 0.729 3.4

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

11784 5.7 10285 6.0 8729 4.3 0.9 1441 -0.2

11931 5.0 10408 4.8 8768 1.8 0.7 1418 -6.1

12082 5.0 10532 4.8 8853 3.9 1.4 1373 -12.7

12220 4.6 10667 5.2 8946 4.2 1.9 1387 3.9

12358 4.5 10792 4.7 9022 3.4 2.0 1407 5.9

12510 4.9 10927 5.0 9111 3.9 2.2 1413 1.5

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. $)

3.3 3.2 3.1 6.7 2.4 2.8 2.1 3.2 7.2 17.1 4.4 5.3 -11.5 8.4 -67.7 -0.8 0.6 4.8 2.1 -8.3 -0.3 16.6 7.2 5.6 0.7 1.0

1.7 1.5 1.6 1.3 3.1

1.6 1.5 1.6 1.0 2.9

1.5 1.6 1.6 1.1 3.1

1.6 1.5 1.6 0.7 3.1

73.9 2.3 3.1 80.9 38.0 83.0 15.935 1.518 5.030 4.7 1.3 -259 -708

73.3 2.2 3.0 80.9 41.2 83.4 16.088 1.583 5.132 4.7 1.4 -220 -713

73.9 2.2 3.2 81.4 44.8 84.1 16.235 1.638 5.234 4.6 1.5 -218 -713

74.1 1.9 3.0 81.6 48.7 84.4 16.393 1.703 5.380 4.5 1.3 -196 -732

73.9 1.9 2.9 81.6 51.3 84.5 16.553 1.772 5.598 4.5 1.3 -183 -750

Financial Markets, NSA 4.50 4.50 4.50 4.50 4.14 4.23 4.29 4.30 4.37 4.44 4.46 4.46 4.47 4.52 4.58 4.65 4.77 4.79 4.83 4.91 5.03 5.11 5.23 5.01 6.54 6.55 6.62 6.68 1601 1628 1656 1684 4.8 6.6 7.1 6.6 0.732 0.734 0.738 0.741 1.3 1.2 2.0 2.0

4.50 4.35 4.54 4.72 4.97 5.29 6.67 1712 6.7 0.746 2.5

4.50 4.34 4.57 4.77 5.01 5.34 6.70 1741 6.8 0.754 4.4

4.50 4.34 4.58 4.77 5.01 5.34 6.70 1770 6.6 0.758 2.2

4.50 4.34 4.58 4.77 5.00 5.33 6.70 1793 5.2 0.762 1.9

4.50 4.33 4.58 4.76 5.00 5.32 6.69 1817 5.4 0.765 1.6

Incomes 12673 12834 5.2 5.1 11067 11214 5.1 5.3 9195 9279 3.7 3.6 2.4 2.5 1432 1439 5.4 1.9

13149 5.0 11486 4.9 9436 3.5 2.6 1428 0.5

13318 5.1 11602 4.0 9497 2.6 2.5 1420 -2.1

13491 5.2 11751 5.2 9584 3.7 2.6 1434 3.8

13655 4.9 11895 4.9 9665 3.4 2.6 1429 -1.4

13823 4.9 12041 4.9 9748 3.4 2.7 1424 -1.4

12988 4.8 11347 4.8 9353 3.2 2.6 1426 -3.6

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

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4 2010Q1

2010Q2

2010Q3

2010Q4

Billions 2000 Dollars Gross Domestic Product

11630.7 11672.9 11701.7 11766.1 11861.5 11961.2 12069.5 12171.8 12268.1 12371.6 12472.8 12580.4 12678.4 12773.9

Final Sales of Domestic Product Total Consumption Durables Nondurables Services

11612.9 11670.8 11685.8 11748.0 11843.7 11935.5 12037.3 12136.1 12228.6 12331.5 12429.7 12533.8 12628.1 12721.1 8349.9 8368.2 8413.8 8476.9 8538.7 8605.6 8672.0 8737.8 8810.7 8878.6 8948.5 9023.8 9096.7 8305.3 1241.8 1257.1 1232.7 1225.7 1242.6 1250.4 1260.4 1274.6 1289.8 1313.3 1335.2 1354.9 1380.1 1402.9 2399.8 2406.7 2417.9 2437.6 2454.7 2472.9 2493.4 2513.0 2531.2 2549.3 2564.9 2582.7 2601.0 2618.3 4689.6 4714.5 4737.8 4766.7 4798.4 4833.9 4870.5 4904.9 4939.4 4975.2 5009.6 5045.5 5082.5 5119.8 1406.0 1407.3 1410.6 1428.6 1447.1 1467.0 1485.2 1505.0 1524.6 1532.5 1552.3 1573.3 1595.0 1382.7 1072.7 1089.0 1099.2 1110.6 1130.7 1155.3 1183.0 1208.4 1227.0 1244.5 1254.6 1277.3 1300.6 1324.0 647.1 658.9 669.0 682.2 696.1 710.2 724.3 737.5 749.3 761.1 774.7 788.4 801.0 814.1 242.8 259.7 271.0 284.3 296.7 308.6 321.2 335.0 348.8 362.7 378.2 394.9 412.0 429.7 118.2 118.8 120.1 121.5 123.2 125.2 127.2 128.9 129.8 130.9 132.4 133.9 135.8 137.7 156.0 157.1 155.7 154.3 153.8 154.8 156.3 157.7 159.4 161.5 163.6 167.1 170.0 172.5

Nonresidential Fixed Investment Equipment & Software Information Processing Equipment Computers & Peripherals Communications Equipment Industrial Equipment Transportation Equipment Aircraft Other Equipment Structures Commercial & Health Care

154.0 13.2 25.1 308.4 123.2

158.3 14.5 25.5 314.7 125.8

160.3 14.4 28.2 309.4 126.6

160.7 15.4 27.3 304.8 126.2

168.1 15.8 31.6 305.0 124.8

176.2 16.1 32.9 302.9 122.8

187.0 16.3 37.1 299.9 121.8

196.8 16.6 39.9 297.1 119.1

200.9 16.8 41.5 299.5 118.8

204.1 17.2 43.3 302.5 119.8

198.3 17.5 36.0 301.9 120.0

201.3 17.8 35.8 301.9 120.4

205.2 18.2 36.2 302.3 121.1

208.4 18.4 37.4 303.3 122.4

Manufacturing Power & Communication Mining & Petroleum Other Residential Fixed Investment

20.5 41.8 48.0 65.7 463.9

20.6 42.2 48.1 69.3 428.1

21.0 41.9 44.5 68.8 396.1

21.4 41.0 41.8 69.4 385.0

21.7 41.7 42.1 69.7 387.9

22.2 41.4 41.7 70.0 393.4

22.4 41.3 40.3 69.7 401.8

22.6 41.8 39.9 69.5 413.1

23.4 41.8 41.2 69.6 424.6

23.6 42.4 42.3 69.2 436.6

23.9 42.7 41.4 69.2 454.7

24.7 43.3 40.0 69.2 471.3

25.1 43.8 39.2 69.3 484.4

25.5 43.4 38.8 69.5 498.9

1432.2 1978.4 763.5 1269.8

1458.4 1986.4 770.4 1276.9

1500.0 2006.4 774.9 1282.4

1530.7 2016.5 777.3 1286.2

1563.3 2040.2 779.0 1290.1

1596.0 2069.3 780.5 1294.0

1634.1 2101.3 780.5 1297.8

1672.3 2135.7 779.2 1301.2

1704.3 2171.1 778.1 1304.5

1737.7 2206.0 777.9 1307.7

1769.0 2236.6 779.4 1310.9

1801.6 2271.2 778.5 1314.4

1833.6 2314.7 774.2 1318.5

1864.5 2358.5 770.6 1322.2

Exports Imports Federal Government State Local Government Table&5.

Annual Employment

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

138.002 139.693 141.870 143.884 115.748 117.211 119.231 121.039

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

0.659

0.673

0.668

7.644

7.512

7.578

0.659 7.798

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

14.031 26.464 4.531 8.455 18.384

13.799 26.682 4.612 8.578 18.957

13.592 27.171 4.771 8.800 19.366

13.635 27.467 4.945 9.002 19.572

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

17.927 3.089 13.561 22.253 2.713 19.540

18.471 3.121 13.862 22.483 2.716 19.767

19.355 3.109 14.096 22.639 2.720 19.919

20.133 3.116 14.199 22.845 2.775 20.070

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

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

1.34 1.37 6.53 -0.60 -1.20 0.89 1.47 1.11

1.23 1.26 2.20 -1.73 -1.65 0.82 1.80 1.45

1.56 1.72 -0.78 0.88 -1.49 1.83 3.43 2.59

1.42 1.52 -1.34 2.90 0.32 1.09 3.65 2.29

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

3.07 2.13 1.16 3.21 1.21

3.12 3.03 1.02 2.22 1.03

2.16 4.79 -0.37 1.69 0.69

1.06 4.02 0.22 0.73 0.91

-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

-0.55 1.46

0.12 1.16

0.13 0.77

2.04 0.76

Growth Rates

Federal State & Local 22

U.S. Forecast

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

Table 6. Quarterly 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

138.2 115.9 0.7

138.5 116.2 0.7

138.9 116.5 0.7

139.4 116.9 0.7

140.0 117.5 0.7

140.5 118.0 0.7

141.1 118.5 0.7

141.7 119.0 0.7

142.1 119.5 0.7

142.6 119.9 0.7

143.1 120.3 0.7

143.7 120.8 0.7

144.1 121.3 0.7

144.6 121.8 0.7

7.6 14.0 26.5

7.6 13.9 26.5

7.5 13.9 26.6

7.5 13.9 26.6

7.5 13.7 26.7

7.5 13.7 26.8

7.6 13.6 27.0

7.6 13.6 27.1

7.6 13.6 27.2

7.6 13.6 27.3

7.7 13.6 27.4

7.8 13.6 27.4

7.8 13.6 27.5

7.9 13.7 27.6

4.5 8.5

4.5 8.5

4.6 8.5

4.6 8.6

4.6 8.6

4.7 8.7

4.7 8.7

4.7 8.8

4.8 8.8

4.8 8.9

4.9 8.9

4.9 9.0

5.0 9.0

5.0 9.1

Education & Health

18.5

18.6

Professional & Business Services Information

17.9 3.1

18.1 3.1

18.7 18.2 3.1

18.9 18.3 3.1

19.0 18.6 3.1

19.1 18.8 3.1

19.2 19.0 3.1

19.3 19.3 3.1

19.4 19.5 3.1

19.5 19.7 3.1

19.5 19.8 3.1

19.6 20.0 3.1

19.6 20.3 3.1

19.6 20.4 3.1

Leisure & Hospitality Government

13.6 22.3

13.7 22.4

13.7 22.4

13.8 22.5

13.9 22.5

14.0 22.5

14.1 22.6

14.1 22.6

14.1 22.6

14.1 22.7

14.1 22.9

14.2 22.9

14.2 22.8

14.3 22.8

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 19.9

2.7 20.0

2.8 20.0

2.8 20.0

2.7 20.1

2.7 20.1

Total Nonfarm Employment Private Nonfarm Mining

0.86 0.93 6.28

1.09 0.98 3.68

1.05 1.04 1.04

1.43 1.55 1.50

1.64 1.80 -0.04

1.53 1.68 -2.88

1.64 1.83 -1.20

1.64 1.84 0.27

1.33 1.48 -0.55

1.34 1.42 -0.17

1.45 1.21 -0.75

1.51 1.72 -2.01

1.34 1.77 -3.50

1.27 1.49 -4.17

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

-2.09 -1.52 0.69 1.21 0.27

-1.19 -2.08 0.20 1.24 -0.27

-3.11 -0.54 0.83 2.77 0.52

-3.11 -1.63 0.40 0.72 3.89

0.38 -3.25 2.04 3.40 3.53

1.89 -2.44 1.78 2.62 1.84

2.00 -1.79 1.91 3.36 2.45

-0.26 -0.29 2.33 4.37 2.18

0.61 -0.35 1.72 4.43 2.65

2.27 0.13 1.23 3.44 2.98

3.64 0.10 0.48 2.94 2.46

4.13 0.50 1.17 3.58 1.55

3.58 1.22 0.93 4.05 1.67

4.03 1.26 0.61 3.47 2.11

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

3.76 1.34 -0.56 2.19 0.48

3.15 2.81 0.03 2.96 1.63

2.80 2.34 1.94 1.29 1.15

3.06 3.88 2.46 2.89 0.81

3.30 4.93 0.92 0.96 0.83

1.92 4.73 -1.51 3.25 0.75

2.13 4.96 -2.39 2.66 0.63

2.15 5.02 0.74 0.67 0.59

1.44 4.42 0.81 -0.40 0.56

1.00 3.59 0.06 0.47 0.93

0.87 3.17 0.19 0.56 2.69

0.98 4.70 0.24 1.07 0.36

0.91 4.51 -0.02 1.60 -0.96

0.64 2.95 -0.40 1.83 0.14

Federal State & Local

-0.05 0.55

-0.33 1.90

0.40 1.25

0.44 0.86

0.30 0.91

0.22 0.82

-0.01 0.72

-0.52 0.74

-0.36 0.69

2.72 0.69

17.21 0.70

-2.78 0.81

-13.96 0.88

-5.61 0.92

Growth Rates

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 87.1

120.1 118.7 86.5

120.6 119.0 85.9

121.0 119.2 85.5

121.4 119.6 85.2

121.7 119.9 85.0

122.1 120.4 84.8

122.6 120.9 84.6

123.1 121.3 84.4

123.5 121.7 84.1

124.0 122.2 83.9

124.5 122.6 83.6

125.0 123.1 83.2

125.5 123.5 82.9

Motor Vehicles Furniture Other Durables Nondurables Food

98.9 69.6 99.3 118.8 120.4

99.0 68.5 99.0 120.4 121.6

98.7 67.6 98.9 120.0 122.3

98.7 66.7 99.0 119.8 122.6

98.9 65.9 99.1 119.9 122.8

99.2 65.1 99.3 119.9 123.0

99.6 64.5 99.4 120.1 123.3

99.9 63.8 99.5 120.6 123.5

100.2 63.1 99.7 121.0 123.8

100.4 62.5 99.8 121.2 124.2

100.6 61.8 99.8 121.6 124.6

100.7 61.1 99.9 122.0 125.0

100.8 60.4 99.9 122.4 125.5

100.8 59.7 100.0 122.8 125.9

Clothing & Shoes Gasoline & Oil Fuel Services Housing

90.0 186.7 194.3 124.8 125.1

89.3 200.0 221.7 125.7 126.1

89.1 190.4 204.4 126.5 126.8

89.1 183.9 200.3 127.2 127.2

89.0 182.4 196.7 127.9 127.6

89.0 179.6 193.3 128.5 128.1

88.9 178.8 193.5 129.2 128.6

88.8 180.6 195.1 129.9 129.1

88.7 181.6 195.6 130.6 129.7

88.6 180.9 194.9 131.2 130.3

88.5 181.2 195.1 131.9 131.0

88.3 182.2 195.7 132.6 131.6

88.2 182.7 195.9 133.2 132.2

88.1 182.9 196.0 133.9 132.9

Household Operations Electricity Natural Gas Water & Sewer Telephone

124.6 137.1 158.8 136.8 97.4

125.2 137.9 158.7 138.0 97.8

126.4 138.8 165.5 139.4 97.9

127.5 139.7 171.5 140.9 97.7

128.2 140.2 174.8 142.3 97.4

128.5 140.6 175.3 143.7 97.0

129.5 140.8 184.9 145.0 96.6

130.8 141.3 196.0 146.3 96.2

131.7 141.9 202.7 147.6 95.7

132.0 142.2 205.5 148.7 95.3

132.4 142.4 207.8 149.8 94.9

132.5 142.6 208.4 150.9 94.4

132.8 143.0 210.1 151.9 94.1

133.0 143.3 209.9 153.0 93.6

Domestic Service Other Household Transportation Other Services

125.3 130.4 120.1 133.4

125.6 131.0 121.0 134.8

126.2 131.8 121.6 135.9

126.8 132.7 122.0 136.8

127.5 133.5 122.6 137.6

128.0 134.4 123.1 138.3

128.5 135.1 123.7 139.2

129.0 135.9 124.3 140.0

129.4 136.6 124.9 140.9

129.7 137.3 125.5 141.8

130.0 138.0 126.2 142.7

130.2 138.6 126.7 143.7

130.5 139.3 127.3 144.8

130.7 139.9 128.0 145.8

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 Consumption Durables

0.8

1.0

1.8

1.4

1.1

1.0

1.5

1.5

1.5

1.5

1.7

1.6

1.5

1.6

1.6 -1.8

3.0 -2.7

0.9 -2.6

0.9 -2.0

1.2 -1.4

1.0 -1.1

1.4 -0.8

1.6 -0.9

1.6 -1.0

1.3 -1.2

1.4 -1.3

1.4 -1.5

1.5 -1.5

1.5 -1.5

0.8 -4.3

0.6 -4.4

0.4 -4.4

0.3 -4.5

0.3 -4.5

0.4 0.9

0.3 1.2

0.1 1.4

0.2 1.3

0.2 1.3

Motor Vehicles

1.6

0.3

-1.0

-0.1

0.7

1.3

1.5

1.5

1.2

Furniture Other Durables Nondurables

-6.2 -0.3 1.1

-6.4 -1.4 5.6

-5.5 -0.2 -1.4

-5.2 0.3 -0.8

-4.7 0.5 0.4

-4.6 0.7 0.0

-4.1 0.6 0.7

-4.1 0.5 1.5

-4.2 0.4 1.3

Food Clothing & Shoes

4.6

4.1

2.3

0.9

0.8

0.6

0.8

0.9

1.0

1.1

1.3

1.4

1.5

1.5

-1.8

-3.2

-0.6

-0.2

-0.3

-0.2

-0.3

-0.5

-0.5

-0.5

-0.5

-0.8

-0.5

-0.5

Gasoline & Oil

-9.4

28.3

-19.2

-13.7

-3.3

-6.1

-1.8

4.2

2.1

-1.4

0.6

2.3

1.0

0.4

Fuel Services Housing

19.1 2.5 2.9

56.4 2.7 3.0

-31.2 2.6 2.2

-8.0 2.3 1.5

-7.3 2.1 1.3

-6.9 1.9 1.4

0.5 2.1 1.6

3.2 2.2

1.1 2.1

-1.4 2.0

0.3 2.0

1.2 2.0

0.5 2.1

0.1 2.0

1.7

1.8

1.9

1.9

1.9

1.9

1.9

Household Operations Electricity

-0.6 0.7

1.9 2.3

3.9 2.6

3.5 2.6

2.0 1.4

0.9 1.0

3.4 0.7

3.9 1.4

2.6 1.7

1.2 0.8

1.0 0.5

0.6 0.8

0.9 0.9

0.4 1.1

-20.6

-0.3

17.1

14.7

7.7

1.1

21.8

24.2

13.7

5.5

4.4

1.3

3.2

-0.3

Water & Sewer Telephone

Natural Gas

6.6 1.8

3.5 1.8

4.3 0.1

4.2 -0.5

4.1 -1.3

3.8 -1.6

Domestic Service Other Household

0.1 3.5

0.8 1.6

1.9 2.7

2.1 2.6

2.0 2.6

1.7 2.4

3.6 -1.7 1.5 2.3

3.6 -1.9 1.5 2.3

3.4 -1.8 1.3 2.2

3.2 -2.0 1.1 2.0

3.0 -1.8 0.9 1.9

2.8 -1.7 0.7 1.8

2.8 -1.7 0.7 1.8

2.8 -1.8 0.7 1.8

Transportation Other Services

4.8 3.9

2.9 4.4

1.9 3.0

1.5 2.6

1.9 2.5

1.8 2.2

1.9 2.4

1.9 2.5

2.0 2.5

1.9 2.4

1.9 2.7

1.8 2.8

2.0 2.9

1.9 2.9

2004

2005

2006

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

1999 GDP

2000

2001

History 2002 2003

2007

Forecast 2008 2009

2010

97.9

100.0

102.4

104.2

106.4

109.5

113.0

116.6

119.5

121.2

122.8

124.8

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

117.5 87.2

119.4 85.4

121.1 84.5

122.8 83.4

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

98.7 70.1

98.9 66.3

100.0 63.5

100.7 60.7

99.3

99.1

99.6

99.9

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

118.3 119.7

119.9 122.7

120.7 123.7

122.2 125.3

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

90.3 184.7 194.3

89.1 184.0 198.7

88.8 180.5 194.8

88.3 182.3 195.7

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

127.5

130.2

132.9

Housing

96.9

100.0

103.9

107.8

110.4

113.2

116.1

120.3

124.7

127.4

129.5

131.9

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

124.6 137.0 162.2 135.7 97.1

127.6 139.8 171.8 141.6 97.5

131.0 141.5 197.3 146.9 96.0

132.7 142.8 209.1 151.4 94.3

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

125.2 129.8

127.1 133.1

129.1 136.3

130.4 139.0

Water & Sewer Telephone Domestic Service Other Household Transportation

97.5

100.0

101.7

102.9

106.0

108.3

112.7

117.0

119.5

122.3

124.6

127.0

Other Services

96.5

100.0

104.0

108.3

113.1

118.2

123.4

128.2

132.9

137.1

140.5

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

2.5

1.4

1.4

1.6

Consumption

1.7

2.5

2.1

1.4

2.0

2.6

2.9

2.8

2.5

1.7

1.4

1.5

Durables

-2.4

-1.6

-1.9

-2.4

-3.6

-1.8

-0.7

-1.3

-1.8

-2.1

-1.1

-1.3

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

-0.6 -4.5

0.2 -5.3

1.2 -4.3

0.7 -4.3

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

0.8 2.9 3.8

-0.2

0.5

0.3

1.4 2.5

0.7 0.8

1.2 1.3

Clothing & Shoes

-1.6

-1.3

-2.0

-2.7

-2.5

-0.4

-1.0

-0.4

-1.1

-1.4

-0.3

-0.6

9.1

28.6

-3.5

-5.0

17.0

18.1

21.5

14.0

9.0

0.4

-1.9

1.0

Fuel

1.4

37.8

2.2

-9.4

20.0

14.7

27.3

13.7

7.8

3.2

-1.9

0.5

Services

2.2

2.7

3.3

2.7

3.2

3.2

3.4

3.4

3.1

2.5

2.1

2.1

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

3.7 2.6 3.5

2.2 2.4 2.0

1.6 2.6 1.2

1.9 1.3 0.9

Natural Gas

0.6

16.5

22.3

-13.5

22.5

8.4

19.2

4.4

-0.9

6.0

14.8

6.1

Water & Sewer

2.2

2.5

2.9

3.2

3.7

6.1

5.3

4.9

5.0

4.4

3.7

3.1

-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

2.1 3.7 2.4

0.4 1.5 2.6

-1.6 1.6 2.4

-1.8 0.9 2.0

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

2.2 3.6

2.4 3.2

1.9 2.4

1.9 2.7

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

11700.9 12292.4 12910.9 13571.9 7918.1 8289.3 8687.3 9110.3 1016.4 1051.5 1089.9 1136.2 1005.2 1043.7 1111.6 1182.5 35.2 29.2 20.1 19.7

54.6 696.3 1100.2 1612.5 475.7

64.2 792.5 1155.4 1732.7 505.8

61.9 870.0 1223.4 1828.2 529.0

39.8 923.0 1312.9 1920.4 555.4

31.8 965.9 1415.5 2005.7 585.2

5.9 5.6 6.8 7.4

6.6 6.0 4.6 5.2

6.5 6.3 4.7 1.8

5.1 4.7 3.5 3.8

5.0 4.8 3.7 6.5

5.1 4.9 4.2 6.4

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

86.9 18.8 13.9 5.0 7.5

-14.4 -1.0 9.8 5.9 5.5

-30.6 -35.8 6.1 7.3 5.0

-1.4 -18.8 4.7 7.8 4.4

6.0

6.0

6.8

6.3

4.6

5.0

5.4

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 onâ&#x20AC;Ś all goods & services durable goods furniture & appliances computers & software

9785.6

9911.5

1081.6 419.6 66.8

1087.6 420.5 67.4

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

437.1 194.8 2849.8 373.6 23.7

440.5 196.5 2898.2 372.5 27.4

gasoline & motor oil food other nondurable goods

342.6 1343.9 766.1

366.4 1361.5 770.5

Consumer Expenditures by Type Billions Current Dollars 9955.4 10033.0 10139.7 10240.2 10357.2 10480.1 10600.9 10725.3 10846.9 10972.0 11105.3 11235.9 1088.6 1105.1 1119.8 1132.1 1148.9 1163.3 1059.5 1048.2 1058.8 1062.5 1068.9 1078.6 410.9 420.9 411.8 405.4 402.5 401.8 404.2 406.9 415.8 425.4 431.3 436.3 72.7 74.8 66.8 67.6 68.4 69.4 70.4 71.7 73.8 76.0 77.1 78.2 437.6 453.3 422.2 417.2 428.0 430.3 430.8 435.0 446.4 458.3 465.3 471.5 208.0 212.4 195.8 195.7 198.0 199.7 202.6 205.1 210.2 214.9 218.3 220.9 3061.6 3090.5 3118.9 3151.5 3184.3 3215.9 2901.8 2919.3 2943.0 2965.1 2995.2 3029.8 393.3 398.9 376.3 379.9 381.7 383.5 386.6 389.7 396.5 402.5 406.5 409.4 23.7 23.5 25.3 24.4 24.0 23.7 23.7 23.7 23.6 23.5 23.5 23.5 354.3 355.0 349.4 345.0 346.0 344.1 346.3 352.1 354.4 357.9 359.5 361.0 1456.9 1471.0 1484.6 1499.1 1513.6 1528.2 1374.7 1387.6 1400.0 1413.5 1427.8 1442.6 833.5 856.8 776.1 782.5 791.2 800.3 810.8 821.7 845.0 868.4 881.2 893.8

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

8305.3 1241.8 602.5 229.3 442.0

8349.9 1257.1 613.8 237.7 445.0

8368.2 1232.7 609.4 243.1 427.7

8413.8 1225.7 607.8 253.7 422.7

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

200.3 2399.8 415.1

202.9 2406.7 417.3

202.2 2417.9 422.1

202.2 2437.6 426.3

204.4 2454.7 428.7

206.0 2472.9 430.9

208.8 2493.4 434.8

211.2 2513.0 438.8

12.2 183.6

12.4 183.2

12.4 183.5

12.2 187.7

12.2 189.7

12.3 191.6

12.2 193.7

food other nondurable goods

1116.2 690.6

1119.3 693.2

1123.9 695.7

1131.9 698.3

1139.9 702.4

1149.0 706.9

1158.3 712.3

3.0

2.1

0.9

2.2

3.0

2.9

3.1

3.1

3.0

4.4 11.4 28.0 -5.6 10.2

4.9 7.5 14.7 2.8 5.1

-7.8 -2.8 9.1 -15.6 -1.2

-2.3 -1.0 17.5 -4.6 -0.1

5.5 1.9 17.2 9.6 4.5

2.5 4.0 17.8 0.8 3.1

3.2 6.5 17.7 -1.0 5.4

4.5 6.8 18.5 2.3 4.6

4.8 8.3 17.4 1.2 5.4

2.7 7.5 -26.4 1.7 1.7 3.5

1.1 2.1 5.3 -0.8 1.1 1.5

1.9 4.6 1.5 0.7 1.6 1.4

3.3 4.0 -7.7 8.9 2.8 1.5

2.8 2.3 2.1 4.4 2.8 2.4

3.0 2.0 1.5 4.1 3.2 2.5

3.3 3.6 -1.2 4.4 3.2 3.0

3.1 3.7 -2.9 2.5 3.3 3.1

2.9 4.1 -1.5 0.4 2.9 3.4

Consumer Expenditures by Type Billions 2000 Dollars 8737.8 8810.7 8476.9 8538.7 8605.6 8672.0 1289.8 1313.3 1242.6 1250.4 1260.4 1274.6 650.8 610.7 616.8 626.9 637.6 665.8 315.1 264.6 276.4 288.6 302.0 329.1 436.6 432.9 433.8 432.8 435.3 444.5

8878.6 1335.2 681.5 343.1 450.7

8948.5 1354.9 696.4 358.4 455.2

9023.8 1380.1 714.1 373.9 461.7

9096.7 1402.9 730.6 389.8 467.6

221.1 2582.7 455.8

224.6 2601.0 460.9

227.3 2618.3 464.9

12.0 196.4

12.0 196.8

12.0 197.4

216.3 2549.3 447.5

12.1 194.9

214.1 2531.2 443.3 12.1 195.1

12.1 195.9

218.5 2564.9 450.8 12.1 195.9

1167.8 717.8

1176.3 724.0

1184.5 729.8

1191.6 736.0

1199.2 742.1

1206.3 749.0

1213.3 755.6

3.3

3.1

3.2

3.4

3.2

7.3 9.2 17.7 7.2 4.1

6.7 9.4 17.0 5.5 4.1

5.9 8.8 17.8 4.0 4.8

7.4 10.1 17.4 5.8 6.3

6.6 9.3 17.0 5.1 4.8

2.9 3.8 0.0 1.6 2.8 3.2

2.4 3.0 -1.1 0.0 2.4 3.4

2.8 4.4 -1.2 0.9 2.5 3.3

2.8 4.5 -0.4 0.9 2.4 3.7

2.7 3.4 -0.1 1.2 2.3 3.5

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 onâ&#x20AC;Ś 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

9727.9 10092.0 10540.9 11040.0

817.6 293.9 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

1079.5 417.2 65.7 440.9 192.3

1057.3 405.4 68.0 424.4 197.3

1085.3 409.4 72.2 437.4 206.5

1141.0 428.5 76.5 462.1 216.6

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

2832.5 371.4 25.0 338.6 1335.1

2932.3 380.3 24.4 346.1 1394.0

3044.3 391.5 23.6 351.8 1449.6

3167.6 404.3 23.5 358.3 1506.4

495.6

532.9

564.4

595.5

623.7

655.9

688.8

731.4

762.4

787.5

827.8

875.1

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

8278.8 1237.6

8449.4 1237.9

8706.5 1284.5

8986.9 1368.3

280.7 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

595.5 221.7 446.7 197.8 2394.2 411.2

611.2 259.4 429.3 203.7 2445.7 427.0

645.2 308.7 437.3 212.6 2521.7 441.1

705.6 366.3 458.8 222.9 2591.7 458.1

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

12.9 183.4 1115.5 687.5

12.3 188.1 1136.2 700.8

12.1 194.9 1171.7 721.0

12.0 196.6 1202.6 745.7

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 4.8 8.1 17.6

2.1 0.0 2.7 17.1

3.0 3.8 5.6 19.0

3.2 6.5 9.4 18.7

10.2 11.4 4.6 7.5 2.3

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

2.2 3.6 2.4 5.1 8.2

-3.9 3.0 2.2 3.8 -4.8

1.9 4.3 3.1 3.3 -1.0

4.9 4.8 2.8 3.9 -0.9

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

-1.8 2.2 3.2

2.6 1.8 1.9

3.6 3.1 2.9

0.9 2.6 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 Business Fixed Investment Table 14.14.

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

1479.1

1538.5

1614.1

1685.0

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

1011.0 468.1

1063.3 475.3

1148.3 465.8

1209.0 476.0

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

276.7 143.9

292.0 146.8

290.1 140.2

303.2 145.5

Billions Current Dollars

Industrial

32.6

31.8

29.5

17.8

16.7

18.5

23.3

26.8

28.2

30.8

34.1

38.1

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

104.7 64.2

114.5 67.9

115.8 69.8

119.5 73.3

Mines & Wells

20.6

27.2

39.2

35.6

45.7

55.7

73.7

105.4

117.6

104.0

92.9

86.2

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

1066.1 301.3 194.7

1123.9 305.5 202.7

1215.7 299.7 198.3

1289.1 302.3 201.4

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

98.8 20.7 75.3 73.9 46.9

99.8 21.6 81.6 75.9 47.9

94.2 23.0 81.5 75.5 48.1

95.1 24.8 81.8 76.3 49.5

21.3

27.2

32.0

24.5

29.0

33.3

35.1

39.8

45.5

42.5

40.9

39.8

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

5.8 1.9

4.0 5.2

4.9 8.0

4.4 5.3

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

15.6 17.1 15.4 5.6 23.2

1.7 5.7 2.1 9.2 9.8

-2.0 -0.7 -4.4 10.8 1.1

2.2 4.5 3.8 11.7 3.2

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

18.4 11.7

6.2 -11.2

2.7 -10.6

5.0 -7.1

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

2001

History 2002 2003

2004

2005

2006

2007

Forecast 2008 2009

1999

2000

2010

1891.2

2053.9

2016.2

1853.2

1879.9

2008.9

2243.4

2495.8

2688.1

2772.6

2890.5

3046.8

Personal Tax and Nontax Receipts

893.0

999.1

994.5

830.5

774.5

797.4

932.4

1053.2

1168.3

1220.6

1269.3

1361.8

Corp. Profits Tax Accruals

213.0

219.5

164.7

150.5

197.8

250.3

319.8

373.1

388.1

370.1

382.7

384.8

83.9

87.8

85.8

87.3

89.7

94.6

99.0

98.6

100.1

101.3

104.5

108.1

Contributions for Social Insurance

651.7

691.7

717.5

734.3

758.9

805.2

849.3

901.7

957.7

1001.3

1051.4

1105.5

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

977.6 662.3

1032.4 708.3

1055.5 720.4

1072.0 721.9

220.3 1131.4

242.5 1243.0

259.2 1328.7

274.9 1390.6

289.8 1479.1

308.2 1576.1

315.3 1685.3

324.1 1769.7

335.1 1852.7

350.0 1928.9

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

240.2 53.1 46.7

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

1273.1 31.2 30.8 377.4 288.3 49.1 -206.4

1343.6 30.6 30.6 391.5 296.6 48.4 -264.5

1403.9 31.6 31.6 413.0 315.5 49.1 -270.1

1457.7 32.6 32.6 434.3 313.9 49.5 -204.1

Federal Government Receipts and Expenditures Billions Current Dollars 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

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

322.5 64.5 911.4 26.0 377.4

342.4 60.4 945.8 26.9 391.5

363.1 62.0 985.1 27.8 413.0

387.9 61.6 1023.6 28.9 434.3

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

1709.8 431.7 23.1

1791.3 456.2 22.7

1850.7 487.0 23.2

1909.8 516.8 26.8

-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

12.4 2.7 0.0 0.0 -1.5

10.2 2.7 0.0 0.0 -11.7

9.2 2.8 0.0 0.0 2.9

8.4 2.8 0.0 0.0 16.7

State and Local Government Receipts and Expenditures Billions Current Dollars

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 Imports of Goods and Services Table 16.16.

U.S. U.S. Exports and Imports of Goods and 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

-723.0 -776.5 1636.7

-670.0 -700.9 1830.4

-651.6 -697.3 2005.0

-657.1 -727.0 2170.4

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

-822.4

-800.3

-803.2

-828.1

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

84.22 303.2 120.0 446.3 43.5

84.63 343.3 135.3 502.7 45.7

82.76 365.8 153.7 561.9 50.9

85.55 388.7 166.8 609.0 56.1

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

317.1 147.1 49.3 486.7

360.3 169.4 52.9 542.2

393.2 193.0 57.4 590.4

425.5 218.3 62.1 639.8

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

2359.6 1990.8 82.5 336.9 295.8 258.3 446.0 104.0 307.1 475.0 96.2 368.9

2500.4 2109.4 90.2 375.2 314.6 261.4 479.5 108.2 330.9 488.2 100.3 391.0

2656.5 2238.4 93.5 383.8 341.4 277.1 516.3 117.3 351.4 518.1 108.3 418.1

2827.5 2379.6 95.7 396.6 363.3 300.2 548.3 126.9 369.6 554.3 121.1 447.9

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

-565.0

-485.6

-466.4

-478.1

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

1406.2 1971.2

1547.5 2033.1

1687.1 2153.5

1817.2 2295.3

Exports G & S

3.7

10.6

-5.6

-2.3

3.5

13.6

10.7

12.1

11.5

11.9

9.5

8.3

Imports G & S

12.1

18.0

-4.9

2.6

7.8

16.7

12.6

10.3

5.8

6.0

6.2

6.4

Real Exports G & S Real Imports G & S

4.3 11.4

8.8 13.2

-5.3 -2.6

-2.0 3.5

1.3 4.1

9.8 11.3

6.9 5.9

8.4 5.9

7.8 2.2

10.1 3.1

9.0 5.9

7.7 6.6

Exports & Imports % Change

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 Todayâ&#x20AC;&#x2122;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

w w w. i e c . u c f . e d u