Article: National Economic Conditions - 3rd Quarter 2011

INTRODUCTION

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The U.S. Economy has now shown positive growth in nine consecutive quarters. In its November press release, the Federal Open Market Committee (“FOMC”) acknowledged that information received since its previous meeting in September “indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year.”[1]Despite this, the FOMC noted several factors that acted as barriers to growth:

• The labor market shows continued signs of weakness, with hiring and employee wages down,
• The unemployment rate remains elevated,
• Nonresidential investment remains largely subdued, and
• The housing sector has shown few signs of recovery in the past several quarters.

Factors that helped contribute to the expansion in the economy were also mentioned, including:

• Acceleration in overall household spending in recent months,
• A continued expansion of total business investment in equipment and software,
• Moderate current inflation, and
• Longer-term inflation projections have remained steady.[2]  

During its September meeting (to which the FOMC made no amendment in its November press release), participants acknowledged that economic expansion remained slow and, further, were uncertain (but optimistic) that information received during the intermeeting period was not indicative of a contraction in activity:

Looking ahead, participants continued to expect some pickup in the pace of recovery over coming quarters but anticipated that the unemployment rate would decline only gradually. They generally judged that risks to the growth outlook, including strains in global financial markets, were significant and tilted to the downside…Participants continued to see the outlook for growth and inflation as more uncertain that usual.[3]

Through its November press release, members of the FOMC publicly announced that they had agreed not to make changes to the existing federal funds rate (at 0 to ¼ percent) and anticipated that future economic conditions will likely mandate that the federal funds rate remain at abnormally low levels through mid-2013, if not longer.[4]

Gross Domestic Product

The most commonly cited measure of general economic conditions is growth in real GDP. Real GDP is the real (adjusted for inflation) dollar value of all goods and services produced within the country in a given period. The Bureau of Economic Analysis (“BEA”) quarterly measure of real GDP is seasonally adjusted at annual rates (SAAR), which means that the figure has been annualized with seasonal effects removed.

Real GDP increased 2.5% (SAAR) in the third quarter of 2011 from $13,271.80 billion to $13,352.80 billion after increases of 2.3%, 0.4%, and 1.3% during the fourth quarter of 2010, and the first and second quarter of 2011, respectively. Real GDP increased 3.0% in 2010, after annual changes of 1.9%, -0.3%, and -3.5% in 2007, 2008, and 2009, respectively.[5]

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the third quarter primarily reflected accelerations in PCE and in nonresidential fixed investment and a smaller decrease in state and local government spending that were partly offset by a larger decrease in private inventory investment.[6]

 In November 2011, the FOMC predicted that real GDP growth would have a central tendency between 1.6% and 1.7%, between 2.5% and 2.9%, and between 3.0% and 3.5% during 2011, 2012, and 2013, respectively. In its longer-run projection, the FOMC predicted that real GDP growth would have a central tendency between 2.4% and 2.7% (consistent with its previous longer-run projection).[7]

 The third quarter Philadelphia Federal Reserve Survey of Professional Forecasters (the “Philly Survey”) predicts real GDP growth of 1.6%, 1.8%, 1.9%, and 2.1% (SAAR) for the fourth quarter of 2011 and the first, second and third quarters of 2012, respectively. The Philly Survey further predicts annual GDP growth of 2.0%, 2.1% during 2011 and 2012, respectively.[8]

The September Wall Street Journal Survey of Economic Forecasters (the “WSJ Survey”) estimates that real GDP grew at an annualized rate of approximately 2.0% in the third quarter of 2011. In addition, the WSJ Survey predicts growth rates of 2.1%, 2.1%, 2.4%, and 2.6% (SAAR), for the fourth quarter of 2011 and the first, second, and third quarters of 2012, respectively. The WSJ Survey projects GDP will experience annual growth rates of 1.5% and 2.4% in 2011 and 2012, respectively.[9]

A New York Times article, published subsequent to the government’s release of third quarter (2011) GDP, acknowledges the importance of economic development (even if it is slow development) at this time, but reminds its readers that the path to economic recovery is still a long trek ahead:

The nation’s total output of goods and services grew at an annual rate of 2.5 percent from July to September, almost double the 1.3 percent rate in the previous quarter…The pace is not brisk enough, however, to recover the ground lost in the economic bust, relieve unemployment or even entirely dispel fears of a second recession.

Economists do not expect growth to accelerate in the next few quarters to the point that it drives the unemployment rate well below 9 percent.[10]

However, due perhaps to a lack of encouraging economic news over the past several quarters, some have preferred to look at the positives that can be taken from the government’s report:

“There was some strength across the board,” said Ellen Zentner, and economist at Nomura. “Now we have some momentum heading into the fourth quarter.”

Economists surveyed by MarketWatch had projected that growth would reach 2.8%.

Wall Street reacted favorably to the news. The Dow Jones Industrial Average jumped more than 200 points to cross the 12,000 mark, encouraged by the GDP report and by a new plan by European leaders to fix the euro-zone’s sovereign-debt crisis.[11]

Real GDP growth over time:[12]

Prices and Inflation

Inflation is the increase in the general price level of goods and services in an economy. The Consumer Price Index (CPI) is the most commonly cited measure of inflation. The CPI measures the price of a standard market basket of goods designed to be representative of the items purchased by a typical urban consumer.

The CPI increased at an annualized rate of approximately 1.2% during the third quarter of 2011, from 224.3 in the second quarter of 2011 to 227.0 (1982-1984=100, seasonally adjusted). The third quarter increase came after growth rates of 0.8%, 1.5%, and 0.4% in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. Additionally, the CPI increased approximately 3.9% over the last twelve months (from September 2010 to September 2011), compared to annual growth rates in the CPI (not seasonally adjusted, “NSA”) of 2.8%, 3.8%, -0.4%, and 1.6% during 2007, 2008, 2009, and 2010, respectively.[13]

 The Philly Survey anticipates annualized growth in the CPI of 2.0%, 2.0%, 2.1%, and 2.0% (SAAR) for the fourth quarter of 2011 and the first, second, and third quarters of 2012, respectively. Furthermore, the Philly Survey predicts annual (quarter four over quarter four) CPI growth of 3.2%, 2.0%, and 2.1% for 2011, 2012, and 2013, respectively.[14]

The WSJ Survey predicts the CPI will grow 3.1% over the twelve months ended December 2011and 2.2% in the twelve months ended June and December 2012, respectively.[15]

Economists at Bank of America/Merrill Lynch (“BAC economists”) expect the CPI to increase 1.2%, 1.2%, and 1.5% (SAAR) during the fourth quarter of 2011 and first and second quarters of 2012, respectively. In addition, BAC economists project annual CPI growth rates of 3.2%, 1.7% and 1.5% for 2011, 2012 and 2013, respectively.[16]

The CPI for food increased from 227.5 in the second quarter of 2011 to 230.7 in the third quarter of 2011 (1982–1984=100), a 1.4% increase. The third quarter increase followed changes of 0.4%, 1.8%, and 1.0% during the fourth quarter of 2010 and first and second quarters of 2011, respectively. The CPI for food increased 4.7% in the last twelve months (from September 2010 to September 2011). In comparison, the CPI for food (NSA) had annual growth rates of 4.0%, 5.5%, 1.8%, and 0.8% during 2007, 2008, 2009, and 2010, respectively.[17]

The CPI for energy increased 6.1% in the third quarter of 2011 from 237.9 in the second quarter of 2011 to 252.3 (1982–1984=100). The third quarter increase followed changes of 6.7%, 9.2%, and -3.3% in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The CPI for energy increased approximately 19.6% in the last twelve months (from September 2010 to September 2011). In comparison, the CPI for energy (NSA) experienced annual growth rates of 5.5%, 13.9%, -18.4%, and 9.5% in 2007, 2008, 2009, and 2010, respectively.[18]

[19]

At its November meeting, the FOMC acknowledged that certain measures of consumer price inflation had risen in 2011 due in large part to increases in the prices of oil and other commodities, but expect both core and headline inflation to stabilize over the near term outlook period, stating:

The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases further dissipate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.[20]

 The Producer Price Index (PPI) is another commonly cited measure of inflation. The PPI measures the price of a standard market basket of goods designed to be representative of the items purchased by a typical producer. The PPI for all finished goods increased 1.0% in the third quarter of 2011, from 191.0 in the second quarter of 2011 to 192.9 (1982=100). The third quarter increase followed increases of 1.9%, 3.2%, and 0.8% in the fourth quarter of 2010 and first and second quarters of 2011, respectively. The PPI for all finished goods increased 7.0% in the last twelve months (from September 2010 to September 2011). In comparison, the PPI for all finished goods (NSA) experienced annual changes of 3.9%, 6.3%, -2.6%, and 4.2% during 2007, 2008, 2009, and 2010, respectively.[21]

[22]

The average price per barrel of oil decreased 11.0% in the third quarter of 2011 from an average of $96.26 in June 2011 to an average of $85.63 in September 2011. The price per barrel of oil increased 13.8% in the last twelve months (from September 2010 to September 2011). In comparison, the average price per barrel of oil had an annual growth rate of 9.5%, 37.8%, -37.8%, and 28.3% in 2007, 2008, 2009, and 2010, respectively.[23]

The WSJ Survey projects the price per barrel of oil will be $88.95 by December 31, 2011. It further projects the price per barrel of oil to be $89.98 and $92.82 by June 30 and December 31, 2012, respectively.[24]

IBISWorld expects that the price per barrel of oil will increase 31.4% in 2011. Furthermore, IBISWorld predicts the price per barrel of oil will experience annual growth rates of 0.7%, -8.8%, and 11.8% in 2012, 2013, and 2014, respectively. Over the five years to 2016, IBISWorld expects the price per barrel of oil to grow at an average annualized rate of approximately 3.0%.[25]

 [26]

Trade Deficit

Real net exports increased (became less negative) from a second quarter total of -$416.4 billion (SAAR) to  -$409.4 billion in the third quarter of 2011. The 2011 third quarter level of real net exports was preceded by real net exports of -$414.2 billion and -$424.4 billion in the fourth quarter of 2010 and the first quarter of 2011, respectively. Prior to the end of 2010, real net exports had consistently increased, posting annual totals of -$648.8 billion, -$494.8 billion, and -$358.8 billion in 2007, 2008, and 2009, respectively. However, the prevailing trend reversed in 2010 with real net exports decreasing to -$421.8 billion.[27]

The Philly Survey predicts real net exports will be -$396.5 billion, -$394.6 billion, and -$390.2 billion in the fourth quarter of 2011 and the first and second quarters of 2012, respectively. On an annual basis, the Philly Survey projects real net exports will increase from -$421.8 billion in 2010 to -$406.7 billion in 2011. However, in 2012, the Philly Survey expects real net exports to decrease to -$391.5 billion.[28]

BAC economists project that real net exports will reach -$412.0, -$375.0, and -$379.0 billion during 2011, 2012, and 2013, respectively.[29]

 [30]

Interest Rates

Interest rates remained stable during the third quarter of 2011. The discount window rate remained constant at 0.75% as it had for the majority of 2010 and the first half of 2011. The 0.75% rate is an increase from the rate of interest prevalent throughout 2009 (0.50%), a historically low rate that was the result of a downward trend that began in July 2007 (6.25%).[31]

The federal funds rate decreased 1 basis point in the third quarter of 2011 from 0.09% in second quarter of 2010 to 0.08%. The current rate represents a decrease of 11 basis points over the last twelve months (from September 2010 to September 2011).[32] In its November 2011 press release, the FOMC stated that it would maintain its target range for the federal funds rate (between 0 and ¼) and reaffirmed its expectation that generally depressed economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013”.[33]

The yield to maturity on 20-year U.S. Treasury bonds decreased 108 basis points in the third quarter of 2011, from 3.91% in the second quarter of 2011 to 2.83%. The yield decreased 64 basis points during the last twelve months (from September 2010 to September 2011).[34] The average yield to maturity on Aaa rated (Moody’s) corporate bonds decreased 90 basis points from 4.99% in June 2011 to 4.09% in September 2011. The yield decreased 44 basis points during the last twelve months.[35]

[36]

Financial Markets

The Dow Jones Industrial Average (DJIA) decreased 12.1% in the third quarter of 2011 from 12,414.34 on June 30, 2011 to 10,913.38 on September 30, 2011. The third quarter decrease followed increases of 7.3%, 6.4%, and 0.8% in the fourth quarters of 2010 and the first and second quarters of 2011, respectively. The DJIA increased 1.2% in the last twelve months (from September 30, 2010 to September 30, 2011). In comparison, the DJIA had annual (December to December) growth rates of 6.4%, -33.8%, 18.8%, and 11.0% during 2007, 2008, 2009, and 2010, respectively. The DJIA peaked on October 11, 2007 at 14,279.96 and then reached a recent low of 6,440.08 on March 9, 2009.[37]

The S&P 500 decreased 14.3% from 1,320.64 on June 30, 2011 to 1,131.42 September 30, 2011. The third quarter decrease in the S&P followed changes of 10.2%, 5.4%, and -0.4% during the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The index decreased 0.9% in the last twelve months (from September 30, 2010 to September 30, 2011). Historically, the index had annual changes (December to December) of 3.5%, -38.5%, 23.5%, and 12.8% in 2007, 2008, 2009, and 2010, respectively. The S&P 500 hit its recent high of 1,576.09 on October 11, 2007 and its recent low of 666.79 on March 6, 2009.[38]

 The NASDAQ Composite Index decreased 12.9% from 2,773.52 on June 30, 2011 to 2,415.4 on September 30, 2011. The third quarter decrease followed changes of 12.0%, 4.9%, and -0.3% in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The index increased 2.0% in the last twelve months (from September 30, 2010 to September 30, 2011). In comparison, the NASDAQ had annual changes of 9.8%, -40.5%, 43.9%, and 16.9% in 2007, 2008, 2009, and 2010, respectively. The NASDAQ reached its recent high of 2,861.51 on October 31, 2007 and its recent low of 1,265.52 on March 9, 2009.[39]

[40]

Housing, Construction, and Real Estate

Average mortgage rates for 30-year fixed mortgages decreased 40 basis points in the third quarter of 2011, from 4.51% (the average rate for June 2011) to 4.11% (the average rate for September 2011). Additionally, average mortgage rates decreased 24 basis points during the last twelve months (from September 2010 to September 2011).[41] According to IBISWorld, the average annual 30-year conventional mortgage rates during 2009 and 2010 were approximately 5.04% and 4.69%, respectively. Moreover, IBISWorld projects average annual 30-year mortgage rates of 4.50%, 4.12%, 4.43%, 4.95%, 5.22%, and 5.30% during the five years to 2016, respectively.[42]

[43]

With mortgage rates at or near historically low levels, third quarter (2011) statistics indicate that there was some improvement made in the nation’s housing market following a disappointing second quarter. Housing starts increased 7.0% by the end of the third quarter of 2011, from 615,000 starts (SAAR) in June 2011 to 658,000 starts in September 2011. The third quarter increase followed changes of -11.9%, 12.7%, and 3.7% during the fourth quarter of 2010 and the first and second quarters of 2011, respectively. Annual housing starts increased 10.2% over the last 12 months (from September 2010 to September 2011). In comparison, housing starts experienced annual (NSA) rates of growth of -24.8%, -33.2%, -38.8%, and 5.9% during 2007, 2008, 2009, and 2010, respectively.[44]

The Philly Survey projects total housing starts will reach an annual rate of approximately 610,000 in the fourth quarter of 2011, and then grow to starts totaling 630,000 and 680,000 in the first and second quarters of 2012, respectively. The Philly Survey estimates that in 2010 there were approximately 580,000 housing starts. In addition to its quarterly projections, the Philly Survey predicts annual housing starts will total 590,000 and 700,000 in 2011 and 2012, respectively.[45] Housing starts hit a recent peak of 2.3 million (SAAR) in January 2006.[46]

As of September, the WSJ Survey predicts that annual housing starts will reach 600,000 and 730,000 in 2011 and 2012, respectively.[47] In comparison, BAC economists predict annual housing starts will reach 587,000, 622,000, and 659,000 in 2011, 2012, and 2013, respectively.[48]

Houses sold increased 3.3% by the end of the third quarter of 2011, from 303,000 (SAAR) houses sold in June 2011 to 313,000 in September 2011. This increase came after changes of 4.7%, -7.9%, and -0.7% during the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The August 2010 rate of 278,000 houses sold was the lowest in recorded history (with data dating back to January 1959). Houses sold annually (NSA) decreased 13.9% in 2010, compared to decreases of 26.2%, 37.5%, and 22.7% during 2007, 2008, and 2009, respectively.[49]

Houses for sale decreased 1.8% by the end of the third quarter of 2011, from 166,000 houses for sale in June 2011 to 163,000 in September 2011. The third quarter drop in the number of houses for sale followed decreases of 5.9%, 6.3%, and 6.7% in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The total number of houses for sale at the conclusion of the third quarter of 2011 (163,000) is the lowest figure in a recorded history that dates back to January 1963. Houses for sale (NSA) decreased at an annual rate of 19.0% in 2010, following changes of -7.6%, -29.0%, and 34.1% in 2007, 2008, and 2009, respectively.[50]

 The months of supply of houses for sale represents the number of months it would take to sell all of the houses currently up for sale at the existing sales rate (seasonally adjusted). The months of supply of houses for sale decreased from 6.6 months in June 2011 to 6.2 months in September 2011.[51] The months of supply of houses for sale decreased 19.5% over the twelve months ended September 2011,[52] compared to annual rates of change (NSA) of 25.1%, 13.5%, -14.8%, and -5.9% for the four years to 2010, respectively.[53]

[54]

Unemployment

The average unemployment rate decreased 10 basis points in the third quarter of 2011, from 9.2% in the second quarter of 2011 to 9.1%. Prior to its third quarter decrease the unemployment rate decreased 20 and 60 basis points in the fourth quarter of 2010 and first quarter of 2011, respectively, but subsequently increased 40 basis points in the second quarter of 2011. In addition, the average unemployment rate decreased 50 basis points in the last twelve months (from September 2010 to September 2011). The average annual unemployment rate (NSA) had basis point increases of 120, 350, and 30 in the three years to 2010, respectively.[55] In November 2011, the FOMC announced that the unemployment rate would have central tendencies between 9.0% and 9.1%, between 8.5% and 8.7%, between 7.8% and 8.2%, and between 6.8% and 7.7% during 2011, 2012, 2013, and 2014, respectively. The FOMC projects the longer-run central tendency for the unemployment rate will be between 5.2% and 6.0%.[56]

The Philly Survey projects average annual unemployment rates of 9.0%, 8.6%, 8.1%, and 7.6% over the four years to 2014, respectively.[57]

The WSJ Survey predicts the unemployment rate will be 9.1% at December 2011, with the rate declining over the course of the next year to 8.9% at June 2012 and 8.6% at December 2012.[58] In comparison, BAC economists project the unemployment rate will average 9.1%, 9.2% and 9.3% in 2011, 2012, and 2013, respectively.[59]

A WSJ MarketWatch article published on the heels of the government’s release of third quarter (2011) GDP attempts to rationalize the optimism incited by the reported economic expansion by pointing out some obvious areas of concern, including unemployment:

...Yet faster growth in the third quarter doesn’t offer much relief to millions of Americans facing economic hardship. More than 16 million people want a full-time job but can’t find one, while millions of others owe more on their mortgages than their houses are worth.

While welcoming faster growth, White House spokesman Jay Carney on Thursday said “it is not good enough.” He noted that economists believe the U.S. has to expand much faster than 2.5% to significantly lower the nation’s 9.1% unemployment rate.[60]

[61]

Forward Looking Indicators

The Index of Consumer Sentiment (ICS) is a measure of overall consumer expectations and a predictor of consumer spending and economic conditions. A higher ICS indicates that consumers have higher confidence in the economy and are consequently more likely to spend. The ICS was estimated to be 59.4 (1966=100) in September 2011, a 16.9% decrease from the June 2011 ICS of 71.5. The third quarter decrease in consumer sentiment followed changes of 9.2%, -9.4%, and 5.9% in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. In the twelve months ended September 2011, the ICS decreased 12.9%. In comparison, the ICS experienced annual (December to December) growth rates of -17.7%, -20.4%, 20.6%, and 2.8% in 2007, 2008, 2009, and 2010, respectively.[62]

 [63]

Offering an explanation as to why consumer sentiment has been at or near records lows over the past several months, Richard Curtin, the Survey of Consumers chief economist, proposed the following:

Consumers have always trusted the government to initiate policies that would foster renewed growth in jobs and incomes. The widespread distrust of the President, Congress, and the Federal Reserve is now an important cause of pessimism. The upcoming debates about spending cuts and tax hikes surrounding the budget resolution will increase uncertainty and cause consumers to become even more prudent spenders. Although renewed downturn in the economy has a 50-50 chance of starting around the start of 2012, it is even more likely that growth will not be robust enough to restore consumer optimism about their job and income prospects.[64]

 The Conference Board Leading Economic Index (LEI) is a signalling measure of the business cycle in which cyclical turning points of the LEI have historically taken place “before those in aggregate economic activity.” The LEI is an average of ten “leading” indicators.[65] The LEI increased 1.0% by the end of the third quarter of 2011, from 115.3 in June 2011 to 116.4 (2004=100). The third quarter increase followed increases of 2.2%, 1.6%, and 1.1% during the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The LEI increased 5.9% in the twelve months ended September 2011.[66]

 [67]

The following excerpt regarding the release of September’s LEI was offered by Ataman Ozyildirim, an economist at The Conference Board:

September data shows moderating growth in both the LEI and the CEI. The weaknesses among the leading indicator components have become slightly more widespread in September…The slow pace in the LEI suggests a growing chance that this sluggish economy is going to be here for a while.

Ken Goldstein, another economist with The Conference Board, added the following:

The LEI is pointing to soft economic conditions through the end of 2011. There is a risk that already low confidence – consumer, business and investor – could weaken further, putting downward pressure on demand and tipping the economy into recession. The probability of a downturn starting over the next few months remains at about 50 percent.[68]

Industrial Production

The Total Industrial Production Index (a measure of total output from industrial companies) increased 1.3% in the third quarter of 2011, from 92.88 during the second quarter of 2011 to 94.05 (2007=100, seasonally adjusted). The third quarter increase in Industrial Production followed changes of 0.8%, 1.2%, and 0.1% in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The index increased 3.3% in the last twelve months (from the third quarter of 2010 to the third quarter of 2011). Comparatively, the index had annual growth rates (NSA) of 2.7%, -3.7%, -11.2, and 5.3% in 2007, 2008, 2009, and 2010, respectively.[69]

The Philly Survey predicts the index will increase 3.9%, 3.1%, and 3.3% in the fourth quarters of 2011 and the first and second quarters of 2012, respectively. Furthermore, the Philly Survey projects the index to grow at an annual rate of 3.2% during 2011.[70]

 BAC economists predict the index will experience annual changes of 3.9%, 1.8%, and 1.0% in 2011, 2012, and 2013, respectively.[71]

The capacity utilization rate measures the usage of the total production capacity for 89 detailed U.S. industries (71 in manufacturing, 16 in mining, and 2 in utilities). The capacity utilization rate is calculated by dividing the seasonally-adjusted output index by the capacity index of these industries.[72]

 The capacity utilization rate increased 72 basis points in the third quarter of 2011 (to 77.4%), up from approximately 76.6% in the second quarter of 2011. The third quarter increase came after basis point changes of 60, 72, and -16 in the fourth quarter of 2010 and the first and second quarters of 2011, respectively. The capacity utilization rate increased 188 basis points in the last twelve months (from September 2010 to September 2011). Historically, the rate had annual basis point changes of 60, -321, -861, and 530 in the years 2007 through 2010, respectively.[73]

BAC economists predict the capacity utilization rate will reach 77.1%, 78.1%, and 78.7% in 2011, 2012, and 2013, respectively.[74]

 [75]

DISCLAIMER STATEMENT:

This Decosimo Advisory Services National Economic Conditions report summarizes general economic conditions as of September 30, 2011. It was prepared as of November 4, 2011. Information was gathered from sources we believed to be reliable using data available as of the date shown in the respective footnote. DAS accepts no responsibility for the accuracy of information provided in this summary. No statement in this report is to be considered advice for any purpose. It is the responsibility of the user of this report to verify the accuracy of the information herein and to relate the information contained herein to the particular application of its use. Tables of Data referenced in footnotes are available on request from Decosimo Advisory Services.