Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

June 3, 2014 Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:  Missouri’s GDP forecast is derived from the 2007 2008 2009 2010 2...
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June 3, 2014

Economic Forecast OUTPUT AND EMPLOYMENT

WHAT THE TABLE SHOWS:  Missouri’s GDP forecast is derived from the

2007

2008

2009

2010

2011

2012

2013

2014

2015

United States

of the 50 states based on employment

Real GDP $ billions (fourth quarter) % change over the four quarters

national forecast by allocating output to each

$14,996

$14,575

$14,540

$14,942

$15,242

$15,540

$15,942

$16,501

$17,120

1.9%

-2.8%

-0.2%

2.8%

2.0%

2.0%

2.6%

3.5%

3.8%

shares. So, forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state’s GDP share.  Missouri’s recovery has slowed.

Nonfarm employment Job count (fourth quarter) % change over the four quarters Average monthly change

138,246,000 135,493,667 129,877,667 130,652,000

132,642,667

134,853,667

137,247,667

139,694,848

141,679,460

0.9%

-2.0%

-4.1%

0.6%

1.5%

1.7%

1.8%

1.8%

1.4%

101,667

-229,361

-468,000

64,528

165,889

184,250

184,250

184,250

184,250

 Both the economy and jobs are expected to improve a bit in 2014 and 2015.

Missouri Real GDP $ billions (fourth quarter)

$220

$219

$214

$217

$219

$223

$228

$234

$242

% change over the four quarters

1.1%

-0.8%

-2.0%

1.3%

0.9%

1.9%

2.0%

2.9%

3.3%

Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor.

Nonfarm employment Job count (fourth quarter)

KEY MESSAGES:

2,801,600

2,769,367

2,661,567

2,662,333

2,672,600

2,705,467

2,747,133

2,776,794

2,801,201

% change over the four quarters

0.5%

-1.2%

-3.9%

0.0%

0.4%

1.2%

1.5%

1.1%

0.9%

Average monthly change

1,236

-2,686

-8,983

64

856

2,739

3,472

2,472

2,034

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

2

June 3, 2014

The Economy’s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES

WHAT THE CHART SHOWS:  The figure compares the relative importance

14

of selected industries to the state’s economy

12

US industry mix

with the national footprint of each industry

10

Missouri industry mix

(state and national figures reflect the value

8

added of each industry as a percent of

6

aggregate state or US nominal GDP,

4

respectively).  Missouri’s fairly diverse economy is not as

2 Government

Other services

Hotel and food service

Arts, entertainment, and recreation

Health care and social assistance

Educational services

Administrative and waste management services

Management of companies

Professional and technical services

Real estate

Finance and insurance

Information

Transportation

Retail trade

Wholesale trade

Nondudrable manufacturing

Durable manufacturing

Construction

Utilities

Mining

concentrated in real estate as many and that Agriculture

0

is a plus. Now the manufacturing revival is becoming an asset for the state.

KEY MESSAGES:  Missouri’s economy is more diversified than the national economy. Source: US Department of Commerce. Updated through 2011.

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

3

June 3, 2014

Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 2007 Q4 NUMBER

WHAT THE CHART SHOWS:  The figure illustrates trends in bankruptcy

5

5

filings by businesses and persons relative to the number of filings in 2007 Q4, prior to the

4

3

Business bankruptcy filings Nonbusiness bankruptcy filings

All US bankruptcy filings (shaded area)

recession.

4

 Financial strains are back to normal levels.

KEY MESSAGES:

3

 Indicators of financial stress are a useful coincident indication of economic distress.

2

2

 Financial stresses are beginning to wane. Source: Administrative Office of the U.S. Courts; Updated through March 2014.

1

1

0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

0

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

4

June 3, 2014

FRB KC Business Survey REAL GDP (% CHANGE 12 MONTHS EARLIER)

DIFFUSION INDEXES (0 = NO CHANGE)

WHAT THE CHART SHOWS:  The figure traces real GDP growth in

8

30 Forecast

6

25 20

15 4

Missouri along with the Federal Reserve Bank of Kansas City’s survey of local manufacturing conditions.  Business conditions have perked up a llitle recently.

10

5 2

0

KEY MESSAGES:  Business is expected to quicken somewhat in coming quarters.

-5

0

-10 Missouri real GDP (left scale)

-2

FRB-Kansas City's manufacturing survey (right scale)

-4

-15

-20

Note: Survey data are unavailable prior to 2001. Sources: Federal Reserve Bank of Kansas City; US Department of Commerce. Updated through May 2014 (surveys) and 2014 Q1 (GDP).

-25 -30

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity.

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

5

June 3, 2014

Private Business Surveys REAL GDP (% CHANGE 12 MONTHS EARLIER)

DIFFUSION INDEXES (50 = NO CHANGE) WHAT THE CHART SHOWS:  The figures shows the Business Barometer Index, based on the survey of purchasing

6 5

90

(a reading above 50 means the state’s

Forecast

4

3 2 1 0 -1

-2 -3 -4 Real GDP in the Midwest (left scale) -5 Business Barometer Index, Mid-America Purchasing Managers (right scale) -6 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

managers, and real GDP growth in Missouri

80

70 60 50

economy is growing, while less than 50 means the economy is shrinking). The index comprises seven business activity indicators, including production, new orders, order backlogs, inventories, employment, supplier deliveries, and prices paid.  The index, which is a timely measure of the

40

strength of the local economy, has rebounded recently.

30

20 10

KEY MESSAGES:  This index will be a useful leading indicator of the direction of the economy. Note: Business Barometer data are unavailable prior to 1997.

Sources: Institute of Supply Management; US Department of Commerce. Updated through April 2014 (survey) and 2014 Q1 (GDP).

Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity.

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

6

June 3, 2014

Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 2007 Q4 LEVEL

WHAT THE CHART SHOWS:  The figure tracks layoffs in Missouri and the

2.25

2.25

national level of claims.  Weekly layoffs, both the state and national

2.00 1.75

2.00

Missouri US (solid area)

tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of

1.75

1.50

1.50

1.25

1.25

1.00

1.00

0.75

0.75

2007, prior to the recession.  Layoffs are well below pre-recession levels.

KEY MESSAGES:  The low level of jobless claims points to a positive outlook for the state’s job market. Source: US Department of Labor. Updated through May 17, 2014 (state) and May 24, 2014 (US).

Missouri accounts for 1.3% of auto manufacturing employment

0.50 2007

0.50 2008

2009

2010

Regional Perspectives: Missouri Economic Outlook

2011

2012

2013

2014

Commercial Banking

7

June 3, 2014

Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER)

WHAT THE CHART SHOWS:  Real GDP growth in Missouri (the line in the

9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6

Missouri US Forecast

9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6

figure) is superimposed on top of US real GDP growth (bars in the figure).  Missouri’s economy grew more slowly than the national economy for the past 15 years and the same theme is present in the recovery.  Missouri’s recovery has been lagging the national recovery.

KEY MESSAGES:  Missouri’s growth is expected to pick up speed a bit in coming years. Source: US Department of Commerce. Updated through 2012 (state) and 2014 Q1 (US). Quarterly estimates for states after 2012 are interpolated from employment figures (through April 2014), based on the historical correlation of state and national employment changes.

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

8

June 3, 2014

Economic Output REAL GDP LEVEL (RATIO TO 2000 Q4)

WHAT THE CHART SHOWS:  The figure illustrates the evolution of real

1.40

1.40

1.35

Forecast

1.35

1.30

1.30

1.25

1.25

1.20

US

1.10

1.10

1.05

1.05

0.95

the peak of the previous business cycle— that is, at any point in time the lines trace the ratio of real GDP to its level in 2000 Q4.  Missouri’s economy has been steady, if a bit

1.20 1.15

Missouri

economy since the fourth quarter of 2000,

slow since the mid-2000s.

1.15

1.00

GDP of the state and the overall US

1.00 0.95

KEY MESSAGES:  The state’s economy has been affected, like others, by the disruptions in the industrial sector. Source: US Department of Commerce. Updated through 2012 (state) and 2014 Q1 (US). Quarterly estimates for states after 2012 are interpolated from employment figures (through April 2014), based on the historical correlation of state and national employment changes.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

9

June 3, 2014

Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 12 MONTHS EARLIER)

WHAT THE CHART SHOWS:  Employment in Missouri, compared with the

4

4

Missouri US

3

Forecast

2

3 2

nation.  Missouri’s job trends parallel the nation’s but the slowdown in 2011 was a bit more noticeable in Missouri than for the nation.  Job growth has been picking up.

1

1

0

0

-1

-1

-2

-2

-3

-3

-4

-4

-5

KEY MESSAGES:  Employment is forecast to continue to grow at a moderate pace. Source: US Department of Labor. Updated through April 2014 (state) and April 2014 (US).

-5

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

10

June 3, 2014

Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE 2000 Q4 LEVEL)

WHAT THE CHART SHOWS:  The figure illustrates the evolution of employment in the state compared with the

1.07

1.07

nation since 2000 Q4, the peak of the

1.06

1.06

previous business cycle. The lines trace out

1.05

1.05

1.04

US

1.03

1.04 Forecast

1.03

1.02

1.02

1.01

1.01

1.00

1.00

0.99

Missouri

0.99

0.98

0.98

0.97

0.97

0.96

0.96

the ratio of employment at the time to employment in 2000 Q4.  Employment remains well below the 2007 cycle peak.

KEY MESSAGES:  Missouri’s economy is likely to improve gradually in 2014 and 2015. Source: US Department of Labor. Updated through April 2014 (state) and April 2014 (US).

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

11

June 3, 2014

Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2000 Q4 LEVEL)

WHAT THE CHART SHOWS:  Job trends in local communities within the

1.20

1.20

1.18

Forecast

1.18

US forecast

 Missouri’s slow economic performance US

1.16

1.16

1.14

1.14

1.12

1.12

Columbia

1.10

1.10

Springfield

1.08

1.08

1.06

1.06

St. Joseph

Joplin

1.04

1.02

1.02

Jefferson City

1.00

1.00

0.98

0.98

0.96

0.96

0.94

0.94

Missouri forecast

2007

2009

2011

2013

 Economies of some communities are faring

KEY MESSAGES:

economy but some local economies remain strong.

St. Louis Kansas City

2005

state.

 Missouri’s economy has lagged the national

1.04

2003

masks a wide disparity of activity across the

better than others.

Kansas City, MO-KS

2001

state.

Source: US Department of Labor. Updated through April 2014 (state) and April 2014 (US).

2015 Missouri

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

12

June 3, 2014

Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE)

WHAT THE CHART SHOWS:  Unemployment rate trends in Missouri,

12

12

compared with the national average.  Missouri’s unemployment rate is falling faster than the national unemployment rate.

10

10 Missouri

8

Forecast

US (shaded)

KEY MESSAGES:

8

 The unemployment rate is the single best indicator of the relative economic

6

6

performance of a region.  Missouri’s falling unemployment rate is a good sign that the economy is in recovery

4

4

2

2

0 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018

0

Regional Perspectives: Missouri Economic Outlook

mode. Source: US Department of Labor. Updated through April 2014 (state) and April 2014 (US).

Commercial Banking

13

June 3, 2014

Relative House Prices RATIO OF THE STATE’S HOUSE PRICES TO THE NATIONAL AVERAGE (1995 Q2 = 1.0)

WHAT THE CHART SHOWS:  The figure tracks the relative price of houses

1.1

1.1

in the state versus the nation—that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of 1995. A drop in the line means that house prices in the

1.0

1.0

state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in this last decade.  The state’s house prices lagged the boom in

0.9

0.9

the national market in this decade. Prices are back in normal alignment with others, however, as speculative excesses elsewhere are history.

0.8

0.8

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

KEY MESSAGE:  The gap between the state’s real estate market and the national housing market has narrowed some, as inflated housing conditions have corrected. Source: FHFA. Updated through 2013 Q4.

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

14

June 3, 2014

Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 1995 Q2 LEVEL)

WHAT THE CHART SHOWS:  The figure tracks the cumulative percentage

2.00

2.00

selected local markets and compares those

US 1.75

US

deviation in house prices since 1995 in

with the national average.

1.75

 House prices are rising at a moderate pace.

St. Louis Kansas City

1.50

Springfield St. Joseph

KEY MESSAGES:

1.50

most of this decade amid the national

Joplin

housing bubble.

Columbia

1.25

1.25

1.00

1.00

0.75

 Real estate trends have been steady for

Source: FHFA. Updated through 2013 Q4.

0.75 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Regional Perspectives: Missouri Economic Outlook

Commercial Banking

15

June 3, 2014

New Home Building HOUSING STARTS (RATIO TO THE JULY 1990 LEVEL)

WHAT THE CHART SHOWS:  New home building activity compared with

3

3

the national building pace.  Housing activity is shown as a ratio to the

US Missouri

2

1990 level to enable proportionate

2

comparisons with national activity.  Home building is up slightly.

Forecast

2

2

KEY MESSAGES:  Although Missouri did not suffer a bubble in house values, the credit crunch has taken a

1

1

toll on the home building business nonetheless.

1

1

0

Source: Census Department. Updated through March 2014 (state) and April 2014 (US).

0 2000

2003

2006

Regional Perspectives: Missouri Economic Outlook

2009

2012

2015

Commercial Banking

16

June 3, 2014

Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT

WHAT THE CHART SHOWS:  Conditions in local office markets, compared

25

25 Kansas City metropolitan area St. Louis metropolitan area

20

with the nation.  Vacancy rates have stabilized at a high level.

20 KEY MESSAGES:  Commercial real estate conditions remain

15

15

10

5

10

All metropolitan areas (shaded area)

0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Regional Perspectives: Missouri Economic Outlook

challenging. Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through 2014 Q1.

5

0

Commercial Banking

17