Arun Raha-State Eco Revenue Outlook PDF
Preview Arun Raha-State Eco Revenue Outlook
State Economic & Revenue Outlook Presented to Washington Chapter: National Institute of Governmental Purchasing Arun Raha Executive Director January 14, 2009 Washington State Economic and Revenue Forecast Council Overview • Credit to consumers and business is still mostly unavailable • Financial sector woes have spilled over into the real economy • The U.S. economy has been in recession since December 2007 • Washington’s economy has lagged the U.S. into the downturn, but will lead it in the recovery Arun Raha • State revenue collections will be affected WA Economic & more severely, because this is a consumer Revenue Outlook led recession 14 Jan 2009 Washington State Economic and Revenue Forecast Council Slide 1 Banks are now able to borrow from each other USD 3m LIBOR - 3m US T-bill Spread Basis Points Bailout 500 passes The spread 450 indicates Lehman collapses, Merrill taken over the 400 by Bank of America premium 350 Fannie & Freddie taken banks have Bear Stearns hedge over by government to pay to fund in trouble over 300 borrow subprime portfolio Bear 250 Stearns from each collapse HSBC and New other 200 Century Financial report losses on 150 subprime mortgage bonds AIG 100 collapse 50 BNP Paribas freezes 3 funds Arun Raha 0 Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- WA Economic & 07 07 07 07 07 07 08 08 08 08 08 08 Revenue Outlook 14 Jan 2009 Source: British Bankers Association, US Federal Reserve Bank, ERFC; data through January 8, 2009 Washington State Economic and Revenue Forecast Council Slide 2 But lending to businesses and consumers remains mostly tight Net Tightening minus Easing Percent There is 100 some anecdotal 80 evidence that credit 60 conditions eased a 40 little late in the year 20 for credit- worthy car 0 and home buyers -20 Arun Raha -40 00 02 04 06 08 WA Economic & Revenue Outlook For large and medium firms For small businesses Credit cards Other consumer loans 14 Jan 2009 Source: Federal Reserve Board, Senior Loan Officers Quarterly Survey, data through Oct 2008 survey Washington State Economic and Revenue Forecast Council Slide 3 Consumer sentiment is lower than in previous recessions Index Mich: 1966Q1 = 100, SA Conf Board: 1985 =100, SA Conference Board 150 measure was its lowest ever 120 recorded in October, and then 90 fell even lower in December 60 Arun Raha 30 WA Economic & 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 Revenue Outlook U Mich Conf Board 14 Jan 2009 Source: University of Michigan; Conference Board; data through December 2008. Washington State Economic and Revenue Forecast Council Slide 4 Automotive sales have tumbled nationally, and in Washington 25 80 Auto Retail s Sales: n o 20 64 li l US units R mi A sold A D S S 15 48 U V. s, t s, i n e USD value U l a n 10 32 S of WA auto o r dealer Milli ale e sales 5 16 D A W 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Arun Raha WA Economic & US Light Trucks US Cars WA Auto Dealer Sales Tax Revenue Outlook 14 Jan 2009 Source: Autodata Corporation, WA Dept. of Revenue, ERFC estimate for 2008 Q4 Washington State Economic and Revenue Forecast Council Slide 5 State housing permit activity has slowed, similar to the national economy Thousands, annualized units, 3 MMA, SA 4000 80 3500 70 3000 60 2500 50 S. A . 2000 40 W U 1500 30 1000 20 500 10 Arun Raha 0 0 WA Economic & 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 Revenue Outlook U.S. WA 14 Jan 2009 Source: Census Bureau, Data through November Washington State Economic and Revenue Forecast Council Slide 6 Vacancy rates show continued demand for multi-family housing in Washington Homeowner • Homeowner vacancy 3 t rates in Washington n 2 e c r are rising, but still e 1 P lower than national 0 1990 1993 1996 1999 2002 2005 2008 vacancy rates YTD U.S. Washington (+/- 0.3) Rental 12 • Rental vacancies are t n 8 e low in Washington c r e 4 P Arun Raha 0 1990 1993 1996 1999 2002 2005 2008 WA Economic & YTD Revenue Outlook U.S. Washington (+/- 1.0) 14 Jan 2009 Source: Bureau of the Census; data through 2008 Q3 Washington State Economic and Revenue Forecast Council Slide 7 WA construction employment: All types are declining Thousands, SA 110 50 100 40 s e g R g - 90 30 n n E o & N y & v 80 20 a s e e H R 70 10 Arun Raha 60 0 00 01 02 03 04 05 06 07 08 WA Economic & Revenue Outlook Res & related Non-res & related Heavy & Eng 14 Jan 2009 Source: ERFC, data through November 2008 Washington State Economic and Revenue Forecast Council Slide 8 Non-farm payroll employment growth forecast: U.S. v WA Percent change, year ago Slowing 8 growth in Washington, 6 but we will outperform the national 4 economy 2 0 -2 Forecast Arun Raha -4 WA Economic & 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 Revenue Outlook Washington U.S. 14 Jan 2009 Source: ERFC forecast; Bureau of Labor Statistics - actual data through December 2008, WA actual data through November, 2008 Washington State Economic and Revenue Forecast Council Slide 9
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