Economic Analysis
2014
GDP Growth
The economic recovery of United States in 2014 became a light brightspot in global economy after the 2009 recession. The low price level do you mean low infl? If so that isn’t really a great thing at the current time, decreasing unemployment rate, better development of the what is the estate?estate and manufacturing industry made the economy continuously recover although at a much lower rate than prev recoveries. However, some important indexes like the investment of the real estate, income of residents residents?, manufacturing have not reached to the same level as it performed before the recession in 2014 – true – but RE was performing very well and is a strong area of growth in 14. The percentage change in Real Gross Domestic Product in 2014 increased in the former three quarters and then decrease in the Q4.not true
In the first quarter, the change of GDP was 2.1% not correctnegative growth1. The most important factor was the abominable weather. The personal consumption expenditures for nondurable goods decreased because [footnoteRef:1]what is this? the inconvenient of buying your table (footnoted) does not imply a decrease. The Gross private domestic investment decreased 6.6% because of the huge lower equipment investment1. The exports decreased extremely and the imports increased. They all led to the negative growth. [1: http://bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=2013&903=1&906=q&905=2016&910=x&911=0]
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Figure1[footnoteRef:2] : CCI Index in 2014 [2: FactSet]
The GDP growth reached to 4.0% in the second quarter. By analyzing the components that affected overall GDP growth, personal consumption expenditures and gross private domestic investment played an important role in this significant growth. Consumption contributed 2.56% change in GDP. After the severe weather, the private inventory investment, exports, fixed investment, and non-federal government spending increased.this is a rebound in pretty much all areas However, 5% more imports negatively impact GDP and offset those positive contributors. Purchasing Managers’ Index (PMI) also indicated that the economic situation would turns better. The overall PMI index was over 50 and kept the upward trend, which represents expansion of the manufacturing sector.overall is both manuf and service Besides, as shown in figure 1, the consumer confidence index had an upward tendency, may because corporates operated better??, unemployment rate decreased was there a strong recovery in this area in 2014? If so, why?, and the income of residents increased. Income was growing at very low rates
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Figure 2[footnoteRef:3] [3: Bureau of Labor Statistics]
Unemployment rate continuously went down in 2014, and the job market significantly became better. Businesses have added 10.9 million jobs over 57 consecutive months. Private employment has risen by at least 200,000 for ten consecutive months[footnoteRef:4]. In every month this is not true, there were 241,000 job growth in 2014 and total employment has risen by 2.65 million in the first 11 months of 2014. How does this compare to previous years overall jobs? From the Figure 2, we can see that compare to previous years, the monthly job growth in 2014 was highest. As Figure 3 shows, the unemployment rate in October has decreased to 5.7% why is October imp? You have year end which is better. Since July in 2008, it was the first time that the unemployment rate was lower than 6%. The strong increasing new jobs were mainly created by business services, such legal services and administrative services. Medical insurance and retail trade also provided a huge amount of positions, and the recovery of real estate market created lots of jobs for construction. The decreasing unemployment rate strengthened the confidence of consumers with higher income, which simulated the consumption and the investment. Good – now look at wages [4: https://www.whitehouse.gov/sites/default/files/docs/2014-12-year-in-review-update.pdf]
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Figure 3[footnoteRef:5] [5: http://data.bls.gov/pdq/SurveyOutputServlet]
Retailers were not qualified to increase the price because of the consumer market depression but you were just saying how good things are, and lower oil prices why are prices lower? freed funds for other things from upstream of supply chains, so the inflation risk would not be too high in the short term why short term?. Instead of inflation, deflation appeared sometimes that implies weakness. Since 2014, only 4 months reached the Federal Reserve’s goal- neg?2% inflation growth. Compared to CPI, Federal Reserve focuses more on PCE, because it can show the inflation or deflation for personal consumption expenditures, which can more comprehensively and stably measure the inflation level. Core PCE was lower than 2% in 2014 as the Figure 4 shows. With the recovery of GDP, the CPI kept low. Why are you looking at CPI if you just said the Fed is focused on PCE and it is better?
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Figure 4[footnoteRef:6] [6: FactSet]
In 2014, the international trade has become a little better because the European Union out of debt crisis, the economic recovery of Japan was 2014 a good year for Japan?, and the change of the foreign trade strategies in US what are you referring to. Besides, the “ shale revolution” stimulated tremendous production of oil and natural gas in US, which indicated United States to be more closer to the independence of energy 2014 was not a good year for this industry but this is an imp trend that needs to be discussed. They all help US decrease the trade deficit. w/exception of Q3, trade had neg contrib to GDP However, under the background of developed economic monetary policies and economic tendency went to different,what does this mean? the currency rate of US dollar will rise a lot did it?. Since 2014, the exchange rate of the Euro to the US has been risen about 8%, which had some negative influence to exports.only against the Euro?
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Figure 5[footnoteRef:7] [7: FactSet]
President’s aggressive policies respond its recovery included the Recovery Act and the payroll tax cut. President Barack Obama also recapitalized the financial sector, rescue the auto industry and reform financial regulation. No idea what period on time you are referring to – this is not relevant to the time period being analyzed To some degree, the Obama Health Care Plan in the US stimulated the personal medical insurance expenditures, and reflected that consumers were more desire to consume support this and was it now required or penalty in 2014?. Millions of Americans were more willing to purchase this more “affordable” health care plans and the government offered subsidies to low and middle income Americans in 2014?. These changes in the health care system are major savings for households, businesses, and the Federal government this is not a true statement. The government decreased the government spending. After gaining 9.9% in the Q3, Federal spending declined 7.5% in the fourth quarter due to the 12.5% decrease in defense spending. Such that G contrib pos or neg to GDP?
Monetary Policy
Fed used expansionary monetary policy not in 2014 – they ended their policy in order to lower unemployment, boost consumer spending, increase private- sector borrowing and stimulate economic growth after the recession. The Fed moved gradually to tighten monetary policy meaning what. The committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures???[footnoteRef:8]. This long run goal helped to stable the price, to moderate long-term interest rates and to maximize employment. ???? I am confused – analyze what the Fed did and why in 2014 Although unemployment was above its longer-run normal level and inflation was below 2% objective as Figure 6 shows, the Federal Reserve continued to increase the size of its balance sheet at a reduced pace. The Fed also announced a decision to reduce the monthly increase in its holding s of long-term securities by 10 billion a month to $ 75 billion a month[footnoteRef:9]. They ended QE in October – what were they saying at that point about the economy? Decision to change rates? [8: https://www.federalreserve.gov/monetarypolicy/files/20140211_mprfullreport.pdf] [9: https://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_2.pdf]
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Figure 6[footnoteRef:10]: PCE Index [10: FactSet]
Financial Market
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Figure 7[footnoteRef:11] [11: http://quotes.wsj.com/index/SPX/advanced-chart]
From the Figure 7, we can conclude that the overall trend of S&P 500 in 2014 was upward steadily, raising 11.4% for the year. There was sunk in February, August, October and December. The annual total return of S&P 500 is 13.69%, which decreased a lot compared to that in 2013 but still an excellent year – why? What sectors did well? Not so well?. The interest rate of 10-year US Treasury notes declined from 3.04% in 2013 to 2.17%2014. This decline was more like driven by the future increase of the Federal funds rate. The general decline in interest rate reflects in part the environment of slow global growth and low inflation but comes after a huge increase in 2013 – what specifically shifted. The strong employment and low inflation with falling oil price allowed the Fed hike rate in the end of 2014 not correct . Low interest rates could lead to a disastrous asset bubble, but the rising interest rates could lead to drop in new hiring or expansion plans.why is this relevant here when we are in 2016 Thus, The Fed considered its wait- and-see strategy in 2014. Technology hardware, storage & peripherals industry performed really well in this year, other industries did better it may increase about 61% I don’t understand what time period you are covering here b/c this chart is from jan 2013 through current time – this is not just 2014. Compared to other industry tobacco played a little weaker.???
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Figure 8[footnoteRef:12] [12: https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml]
Where is your performance of the bond market?
You also need to discuss the investment section of GDP in more detail
2015
GDP growth
The US economy in 2015 was a modest recovery. The domestic economy grew robustly was it modest or robust with the rising of personal consumption and investment. For the gross private investment, except the first quarter, other quarters performed worse than last year, especially the nonresidential part. why However, the changes of exports in four quarters were negative, which weighed on overall GDP growth.
The first quarter, the economy suffered from the appreciation of dollars, severe weather, and the strike on the west coast which negatively impact the exports, so the GDP grow slowly. The economy of US was performed badly in the first quarter both in 2014 and 2015, which indicated that the foundation of recovery was not firm and still weak.
The second quarter played the best wording off, but its growth was not as significant as 2014. Gross private domestic investment occupied 70% of US economy not correct, which was the core power to drive the economy recovery in the second quarter. This is offFrom the Figure 9, we can see the consumer confidence awoke from the first cold quarter. Why and in Q1 some areas were strong such as res RE market
The third quarter and fourth growth was not reach the market expectation. The inventory and investment decrease mainly cause the lower GDP growth. The dropping oil price why is it continuing to decline stroked again the mining industry, accelerating the corporates use the inventories do you mean more consumer demand?. Besides, the dollar appreciated sharply in part caused the export growth to be slow. Why?
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Figure 9[footnoteRef:13]: Consumer Confidence Index in 2015 [13: Factset]
The sharp oil price decrease was the major economic element in 2015. Oil prices slumped to 11-year lows to around $36 per barrel in December in 2015. CEA estimates that lower oil prices directly boosted real GDP growth by 0.2 percentage point during 2015, despite the adverse impacts on domestic energy producers and manufactures that sell to the energy sector[footnoteRef:14]. So this is very minimal – why aren’t consumers spending their savings? [14: https://www.whitehouse.gov/blog/2016/02/22/2016-economic-report-president]
The main challenge for the US economy is productivity growth. Thus, the President has announced many policies like immigration reform, public investments, tax reform, and expanding markets for U.S. exports13.any of these go through?
Figure 10[footnoteRef:15] [15: Data from Bureau of Labor Statistics]
From December 2014, the labor market has grown by 2.3 million jobs in this year. Although the pace of job growth was slower than that in last year, it was still an improvement over other years after recession. The private service sectors contributed most in job growth, especially the education and health services sector. The professional and business services sectors also performed really well by adding 534,000 jobs. Besides, the leisure and hospitality sector played an important role in the economy as well. The unemployment rate still went down in this year from 5.7% in January to 5.0% in December, which was below its pre-crisis average in 2006-07 unemploy rate was below 5%. The president supported a range of policies to help promote equality of labor market: such as supporting children in poor families, ensuring the fir criminal justice system.did any of these pass? Help the economy? The improvement of the labor market and steadily increasing wages support this drove the personal consumption expenditures. The mining and logging sector played the worst because the oil prices decreased a lot in this year, and this sector has lost more than 124000 jobs. If oil prices are down, why would mining and logging be impacting?
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Figure 11[footnoteRef:16]: Consumer price Index & Core Consumer Price Index [16: Factset]
The CPI growth was negative in January, September and December, and other months ranged from 0 to 0.2%, varied on the edge of deflation. The main reason for the low product price is the decreasing price of energy. Although the core CPI index is stable from 2014, the energy price and related transportation price dragged the CPI drop. And the core reflects what about the economy in this time period The business profit growth space was compassed???, which will lead to reduce wages what actually happened? and cut staff in order to keep the profit. The low CPI increase the consumers’ purchasing power at the early stage, but if it became a vicious circle, finally the consumption expenditures would decrease. This is a very academic statement – what is actually happening is what I want to see
The decline in infrastructure quality and the low long-term interest rates provided a good opportunity for the government to invest in infrastructure, which can boosted the productive capacity of US economy – did they? Did this add to GDP?. Although it increased the government spending, but reduce a lot of cost from other dimensions. Business can reduce the cost of product; households can consume more with lower maintenance costs; consumers save time for transportation; and labor market can provide more jobs. Not sure what point you are trying to make here
Monetary Policy
Because the unemployment rate dropped steadily and the labor market structure meaning what improved, the Federal Reserve would consider raise interest rates. If the inflation rate touched 2% target, the Fed would execute. In Sept. 15, the unemployment rate was close to 5%, but the inflation rates were far away from 2%, so the Fed extended to raise interest rates?? Not relevant – talk about what they finally did do. The Federal Reserve continues to purchase long-term debt securities, but the overall size of its holdings keep approximately constant good- meaning?. The foundation of the economy is too weak, so raising the interest rate was not a good idea at that time they raised rates in Dec. It may prevent the GDP growth.you are repeating yourself – give the overview of what the Fed actually did do once and why they held off one time First, it did not benefit the domestic consumption and investment. High interest rate would decrease the loan, lowering the economic activities gradually. Once increasing the interest rate, the profits of the corporates would decrease significantly, which would influence the wages and consumption. Until Dec. 16, 2015 the Fed finally raised interest rates, ending the extraordinary period of government intervention in financial markets. And what did they say at that time?
The government promoted worker voice and raised the minimum wages in order to divide rents more equally in a well-functioning competitive market. This is true but why is it in monetary policy?
Financial Markets
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Figure 12[footnoteRef:17] [17: http://quotes.wsj.com/index/SPX/advanced-chart]
The annual return of S&P 500 in 2015 was 1.38% with prices actually declining, which decreased a lot compared to 13.69% in 2014. The unexpected decline in commodity prices, especially crude oil, the appreciated dollar, soft economic growth and the currency devaluation this needs to be expanded in China all impact the stocks. You also need to discuss Greece/Europe Besides, the Fed increased the interest rate in December. The dramatic drop of oil price decimated energy-stock earnings – with the sector returning?. High currency of dollar made U.S. corporations sold worse in market you MUST have someone read through your paper -abroad. The YTM of 10 year UST was 2.24% meaning what?. High-yield corporate bonds fell sharply to -5.0% and it also impacted the no energy high-yield corporates why. The best sector performer in 2015 is consumer discretionary stocks, such as Amazon and Netflix. The worst is energy sector, which down more than 25%.
What was the return of the overall bond market and why?
2016
GDP growth
In former two quarters of 2016, the GDP growth was not very significant. The first quarter was only 0.8% and second quarter is 1.4%. The inventories decreased, the profits were difficult to increase what does this mean, the consumer confidence declined as Figure 13 shows, which indicated that consumers were worried about the economy. why Until July, the consumer confidence index seemed going up.
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Figure 13[footnoteRef:18]: Consumer Confidence Index in 2016 [18: FactSet]
Fortunately, the second quarter turns better. The personal consumption expenditures contributed most for the second quarter’s growth. From March, core CPI index began increasing and got rid of the deflation risk what turned around . The tendency of this index seems continuously going up in the last section you talked about deflation risk. From Figure 15, the unemployment rate in 2016 is not as that in 2015 decline steadily. In the second quarter it dropped a while, then went up and almost kept at 4.9% in the third quarter. The labor market created 151,000 new jobs in August.we have sept numbers – need to look at average gains Now the unemployment rate was 5.0%, which may decrease at 4.7% at the end of the year. The solid labor market, rising wages and rising consumer confidence stimulate the consumption.why did the rate go up? Support rising wages?
Figure 15[footnoteRef:19]: Unemployment Rate in 2016 [19: http://data.bls.gov/pdq/SurveyOutputServlet]
However, the gross private domestic investment declined to negative 7.9%, which weighed the GDP growth a lot. The low oil price oil rebounded in Feb and rising election uncertainty put more pressure on business investment and consumer confidence. Is that true now when Clinton is pretty much a certainty? We have data on Q3 just not GDP
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Figure 14[footnoteRef:20]: CPI index & core CPI index in 2016 [20: FactSet]
Net X is negative in the first quarter but had a tendency to be positive to the GDP. Actually pos contrib in both quarters The strong dollar is an important factor weighed on exports. Imports down in Q1 and very little growth in Q2 - whyThe government spending in the second quarter grew the least in these three years. It expended credits for lower-income brackets, boost public investment in infrastructure system and raise the minimum wageyou said they raised the min wage last year? Also this is not a federal thing and doesn’t impact the G in govt spending to help the poor in order to cut the growing debt problem. – what debt problem?
Monetary Policy
In 2016 former 3 quarter???, FOMC unchanged policy because the global economic and financial developments have increasing risk. The economy in the first quarter did not performed well, so the IMF cut its outlook U.S. economic expansion in 2016 0.2% from the growth forecast, considering the weak energy industry, the stronger dollar and the uncertainty of whether U.K. would leave the European Union or not. What they did back in Q1 is not relevant – the question is where are we now – we know UK is leaving, oil has rebounded etc The Federal Reserve has not changed the interest rate in June and September and maintained the federal funds rate target range at 1/4 to 1/2, considering the vote of Brexit and the lower down employment rate. The Fed also kept its holdings of longer-term securities at sizable levels over the first half of the year.
Financial Market
British citizen voted to leave the European Union in June, which impact the global financial market. It increased the uncertainty about economic growth in the U.K. Right after the vote, all major U.S. indices declined by about 5%. Although the fall in equities reversed within a week, the S&P 500 index reached an all-time high. There are only about 15% of GDP is related to international trade and investors were anticipating a possible increasing interest rate at least 18 months before it??? What are you referring to. Thus, Brexit did not impact a lot on U.S. as other economics.it hasn’t happened so we don’t know what the impact will be. What is the return of the S&P to date? Sectors?
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Figure 15[footnoteRef:21]: S&P 500 Index in 2016 [21: http://quotes.wsj.com/index/SPX/advanced-chart]
From following graph, we can see the tendency of yield of 10 year US Treasury in 2016 is downward. What rate of return and why
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Figure 16[footnoteRef:22]: US 10-YR [22: http://data.cnbc.com/quotes/US10Y]
Works Cited
Board of Governors of the Federal Reserve System, “ Monetary Policy Report,” Federalreserve.gov, February 11, 2014
http://data.bls.gov/pdq/SurveyOutputServlet
Council of Economic Advisors, “The Economy in 2014,” Whitehouse.gov, December 23, 2014
https://www.whitehouse.gov/sites/default/files/docs/2014-12-year-in-review-update.pdf
Jason Furman, Sandra Black and Jay Shambaugh, “ The 2016 Economic Report of the President,” Whitehouse.gov, February 22, 2016
https://www.whitehouse.gov/blog/2016/02/22/2016-economic-report-president
“ President Economic Report,” Whitehouse.gove, December 23, 2015
https://www.whitehouse.gov/blog/2016/02/22/2016-economic-report-president
“S&P 500 Index,” quotes, WSJ, October 9, 2016
http://quotes.wsj.com/index/SPX/advanced-chart
“Sectors & Industries Overview,” Fidelity Investment, October 9, 2016
https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml
“Unemployment rate,” Bureau of Labor Statisitcs, October 9, 2016
http://data.bls.gov/pdq/SurveyOutputServlet
U.S. Bureau of Economic Analysis, “Table 1.1.1. Percent Change From Preceding Period In Real Gross Domestic Product,” (accessed September 29, 2016). http://bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=2013&903=1&9
“US 10-YR,” Data, CNBC, October 9, 2016
http://data.cnbc.com/quotes/US10Y
Unemployment rate in 2015 42005.0 42036.0 42064.0 42095.0 42125.0 42156.0 42186.0 42217.0 42248.0 42278.0 42309.0 42339.0 5.7 5.5 5.5 5.4 5.5 5.3 5.3 5.1 5.1 5.0 5.0 5.0 Unemployment Rate in 2016 Jan Feb Mar Apr May Jun Jul Aug Sep 4.9 4.9 5.0 5.0 4.7 4.9 4.9 4.9 5.0
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