National financial trends and their effects on southern utah
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National Financial Trends and Their Effects on Southern Utah. Alan Hamlin, Ph.D. Chair, Dept. of Management Southern Utah University. Current Macro-Economic Trends. Declining GDP: Factory orders down 4 th straight month in Nov 08 (US Commerce Dept.)

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National Financial Trends and Their Effects on Southern Utah

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National Financial Trends and Their Effects on Southern Utah

Alan Hamlin, Ph.D.

Chair, Dept. of Management

Southern Utah University


Current Macro-Economic Trends

  • Declining GDP: Factory orders down 4th straight month in Nov 08 (US Commerce Dept.)

  • Declining Employment- 693,000 jobs lost in December

  • Declining Interest Rates- Fed funds rate 0.09% 1/6/09

  • Declining Interbank lending (2009 commercial lending will not improve- Moody’s 12/08)

  • Declining Consumer lending (November Consumer Conf. Index=38, lowest in history)

  • Increasing defaults and foreclosures- highest since 1930s

  • Declining personal consumption- 73,000 stores to close in next 6 months (Int. Council of Shopping Ctrs.)

  • Declining state and local revenue


  • Federal Rescue Efforts

    • Recent actions include:

      • Increase the money supply to reduce interest rates, currently 0-0.5%

      • Allow non-banks to borrow from Fed

      • Convert non-banks to bank status to allow access to bailout monies- ex. GMAC

      • Borrow extensively from EU banks to fund emergency measures

      • Buy lower-quality mortgage-backed securities from FNMA and others


    US Treasury Efforts

    • Recent actions include:

      • Obtaining $700B in TARP funds to buy “toxic” assets from troubled banks and non-banks

      • Shut down failed banks & investment banks

      • Guarantee share prices of all publicly offered money market funds that desire to participate, inc. those w/NAV below zero.

      • Take over FHLMC and FNMA, guarantee their debts and assume stock ownership.


    Current State and Local Data

    • State of Utah statistics

      -19,000 jobs w/b lost in 2009 (DWS 1/7/2008)

      - Heavy losses in const. & mfg.

      • Iron County statistics 2008

        -Sales tax down 11% yr. over yr. (12/15 SL Tribune)

        -Residential bldg. permit valuation down over 61%

        -Projected unemployment rate for 2009= 5% (DWS)

    • Washington County statistics 2008

      -Retail sales tax down 12%- SG budget cut 15%

      -Residential building permits down from 982 in 2005

      to 156 in 2008, $183M to $24M.

      • Defaults & foreclosures up significantly

      • Projected unemployment rate for 2009= 6% (DWS)


    Prognostications

    • What does this year look like for Southern Utah?

      • Unemployment higher

      • Construction and mfg. lower

      • Consumer and commercial spending

      • Housing estimates

      • Low interest income for retirees

      • Continued volatility in equity & capital mkts.


    Who Will This Affect?

    • Real Estate: builders, lenders, realtors, appraisers, all others.

    • Tourism: hotels, restaurants, golf, airlines.

    • All luxury retailers: upscale malls, automobiles, RV/Boat retailers, etc.

    • Local and State Governments

    • Education


    What Can Be Done?

    • Governments, businesses and households must:

      • Cut spending

      • Increase revenues if possible

      • Refinance debt

      • Change habits and thinking

      • Ride out the storm- 18 months is normal, this recession will probably be longer and deeper.


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