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Colorado's Economic Outlook 2016: APICS NoCo Attended ISM Denver's Annual Federal Reserve Meeting

fed bank

Colorado's Economic Outlook 2016: APICS NoCo Attended ISM Denver's Annual Federal Reserve Meeting

Presented on March 31 2016

alison

Our presenter... Alison Felix, Vice President and Denver Branch Executive, Denver Branch, Federal Reserve Bank of Kansas City

ISM Denver held their annual event in Denver last night at the Federal Reserve Bank.  We heard from economist, Alison Felix, Vice President and Denver Branch Executive of Federal Reserve Bank of Kansas City. Alison serves as the regional economist for Colorado, Wyoming and northern New Mexico.

I will recap just a few of the key points from Alison’s presentation you may find interesting.

"China’s economy has slowed from its high of 10%+ annual growth to just under 7% with Europe and the rest of world slowing dramatically..."

As we’ve seen in recent weeks, China’s economy has slowed from its high of 10%+ annual growth to just under 7% with Europe and the rest of world slowing dramatically. This has hurt not only oil and energy producers but all exporters as the US Dollar remains stronger than our trading partners. This has several effects that impact us here in Colorado and the region.

The U.S. economy is expected to expand at a moderate pace in 2016. 

us gross domestic product

Prices trending lower in many sectors have kept the inflation rate under 1% for “headline” rate items. For core items, it is around 1.6%, so up slightly. The stronger USD has helped the job market to some extent but many employers remain cautious due to low growth with our overseas trading partners. 

National unemployment has reached 4.9% with Colorado closer to 3% for much of the Front Range. Adding in employees who have stopped looking, it is 6%. When also adding in under-employed, those working more than one job to make up the lost incomes, it is 9.7%. We now have more small jobs and lots of underemployment.

The Fed Financial Rate for 2016 is expected to remain under 1% but committee consensus has this increasing to 2% in 2017 and 3% by 2018 if the forecast holds true.  This will dampen the housing market and all related businesses as house financing slows a tad.

Employment has been increasing in Colorado and the nation for more than six years, with Colorado gains outpacing the nation.

employment

In Denver and the Front Range, employment growth is strong at 17-18% annually with Colorado projected to continue at 14%-15% for the near term. Energy, hardest hit with low oil price on crude, is down 19% but remains a small sector in terms of labor overall.  For sectors other than energy, employers are now seeing salaries increase to find the right talent.

Sector growth is as follows:

Private Education Up 5.9%
Health Care Up 3.8%
Manufacturing Up 2.4 %
Professional Services Up 1.4% (depressed by oil layoffs)
Transportation Dn 3.8%
Mining/Oil/Gas  Dn 19%

 

Our local economy is forecast to continue to grow due to trending migration into the region. Larimer and Weld counties with 2% annual growth are expected to lead the way. Demand on housing remains strong with Single Family Homes demand up over 100% since 2009 and Multi Family residence up more than 200% in the same time.

"Demand on housing remains strong with Single Family Homes demand up over 100% since 2009 and Multi Family residence up more than 200% in the same time."

home price

Home prices in Denver are 45.9% higher than 2007 and up 12.7% YoY with around 4% vacancy rates or less on rental properties. Commercial real estate also has lower vacancy than in recent history.

Oil cost to extract is expected to come down with more efficient equipment to around $60/bbl but for now the market supply at $40/bbl continues to depress US pricing and production for the foreseeable future. This is also a factor for our European partners.

Overall, economic growth is forecast to remain upwards but slow at less than 3%. The major country share of this is EU 18%, CH 14%, Can 17%, MX 13% & JP 6%. Most other countries are contracting still causing on-going weakness in global economies.

ag article

Read more about the 'Mounting Pressure in the U.S. Farm Sector' here...

One interesting aspect is that farm net income has continued to fall dramatically over the past 3 years, largely due to improvements in productivity. Of course, this hurts the small operators the most who cannot afford several losing years consecutively.


 

See Alison Felix's full powerpoint presentation... here.

Learn more about Alison Felix's presentations... here.

Learn more about ISM Denver... here.

APICS NoCo sincerely thanks ISM Denver and specifically Sue Keller for arranging this event for members to expand their knowledge.

–Written by Bob Forshay, COO at APICS NoCo

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