The Fed Challenge
Rony Byas, Tina Byrne, Tashdid Hasan,
Changhyon Hwang, Vincent Lo
November 10, 2008
GDP Contracts in the Third Quarter
Source : Federal Reserve Bank of New York
Consumer Confidence Plummets in October
Source : The Conference Board
Consumer Spending Continues to Decrease
Monthly and YoY % Change
3rd Quarter
Personal Consumption
Expenditures
RDI
0.1%
Real Disposable
Income
Shaded areas indicate US recessions
Source : Federal Reserve Bank of St. Louis
PCE
-0.4%
Unemployment Rate Continues to Rise
October
6.5
Shaded areas indicate US recessions
Source : Federal Reserve Bank of St. Louis
Nonfarm Payroll Employment Continues to Decline
Monthly and YoY % Change
Monthly Change
(Left Scale)
% Change
Year Over Year
(Right Scale)
Shaded areas indicate US recessions
Source : Federal Reserve Bank of St. Louis
October
-240,000
ISM Manufacturing Index Experiences a Sharp Plunge
October
38.9
Shaded areas indicate US recessions
Source : Federal Reserve Bank of St. Louis
Housing Starts on a Steep Decline
Monthly Change (Thousands of Units)
817K
544K
Source : U.S. Census Bureau
Housing Prices Have Been on a Gradual Decline
Case-Shiller 10 and 20 Composite YoY %
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
16.6%
17.7%
-20%
CS-20
Source : Standard and Poor’s
CS-10
U.S. Home Foreclosure Filings on the Rise
Monthly Change
September
266,000
Source : RealtyTrac
Housing Problems Concentrated in Key Areas of
the Country
Source : First American CoreLogic
Difference Between 3-Month LIBOR Rate and
3-Month Treasury Yield
TARP passed
Lehman
Brothers files
for bankruptcy
Credit crisis
begins
Source : Bloomberg
Commercial Paper Market in Distress
Risk premiums have
been elevated..
.. and issuance of new
commercial paper has
declined.
Source : The Federal Reserve Board
Numerous Programs Have Been Implemented to
Restore Economic Stability
Source : Credit Suisse
Inflation Starting to Moderate
Core CPI and Core PCE YoY% Change
Core CPI
October
2.5%
2.4%
Core PCE
Shaded areas indicate US recessions
Source : Federal Reserve Bank of St. Louis
Inflation Expectations Have Been Easing
10-Year TIPS Spread
97
bps
Source : The Federal Reserve Board