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A review of leading economic indicators for the retail industry by Walter Bialas, Vice President of Research of Madison Marquette.
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Economic Watch for the Retail IndustryMay 2009
Walter S. BialasVice President – Market Research
Madison Marquette
Home Prices Still Declining, But…
• The Case-Shiller Index is a lagging economic indicator because it reflects a 3-month moving average.
• The February Index reflects a 30% decline from peak home prices and a further slippage of 3% since January data.
• New home sales in February and March showed improvement as buyers took advantage of lower prices and tax credits.
• These factors suggest that we may be at or near a bottom in home pricing.
• Begin to look for stability in this Index as the Spring selling season is reflected in the data.
CASE-SHILLER NATIONAL HOUSE PRICE INDEX (Composite for 20 Markets - January 2000 = 100)
100
120
140
160
180
200
220
Source: Standard & Poor's - Case-Shiller; Economy.com; Madison Marquette Market Research.
Recession Begins - December 2007
30% Decline - Thus Far
Recession - March to
November 2001
Initial Claims Remain Uncomfortably Elevated…
• From a typical weekly pace of 350,000, initial unemployment claims rose quickly to over 600,000 in early 2009.
• After peaking at almost 660,000 in early April, claims have recently declined to under 640,000.
• While an improvement, job erosion continues to be a serious threat to consumer confidence.
• This level needs to decline to below 500,000 before any real economic stability will be realized.
INITIAL UNEMPLOYMENT CLAIMS (4-Week Moving Average)
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
700,000
Source: U.S. Department of Labor; Economy.com; Madison Marquette Market Research.
Recession - March to
November 2001
Recession Begins - December 2007
Consumer Confidence Up, but Still Near Historic Lows…
• After its historic low of “25” in February, Consumer Confidence improved during March and April.
• The Index now stands at “39.2”, essentially unchanged from where it was after its initial decline in October 2008.
• Confidence can improve quickly. Although still low, this is one of the first positive signs that we may have passed the bottom.
• Until this level increases to around “85”, consumers will remain stressed.
CONSUMER CONFIDENCE INDEX (1985 = 100)
0
20
40
60
80
100
120
140
160
Source: The Conference Board; Economy.com; Madison Marquette Market Research.
Recession - March to
November 2001
Recession Begins - December 2007
TED Spread Shows Modest Improvement…. • The TED Spread is a measure of risk & investor
confidence in the US.
• Since its 450-basis point high last fall, it has improved significantly.
• The consistent improvement stalled in March and reversed slightly, ticking up to around 100 basis points.
• April saw slight declines in Treasury yields and LIBOR, resulting in the spread moving back to 90 basis points.
• If the economy has bottomed, look for continued slow improvement back to the historic average.
"TED SPREAD": DIFFERENCE BETWEEN 3-MONTH LIBOR & TREASURY BILL YIELDS
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Source: Economy.com; Federal Reserve Board of Governors; Thompson ONE; British Bankers Association; Madison Marquette Market Research.
Bear Hedge Funds
Liquidate
TAF Established
Bear Sterns Collapse
Lehman Failure
TARP Fails to Pass Congress
Bank Funding Problems Develop
GSE Takeover
TARP Abandoned
Avg. Long-Term TED Spread = 40 - 50 bps
Stimulus Passed / Obama
Addresses Congress
GGP Bankruptcy
About Madison Marquette
Madison Marquette is a Washington, D.C.-based investor, developer and operator of retail and retail mixed-use real estate throughout the United States. The company specializes in creating unique retail destinations that respond best to consumer preferences. With regional offices in Philadelphia, New York, Charlotte, Fort Lauderdale, San Francisco, Los Angeles, San Diego, and Seattle, Madison Marquette seeks investment opportunities in growing markets. The company maintains a sophisticated in-house operating capability and oversees 23 million square feet of retail real estate. This diverse national portfolio includes many properties that Madison Marquette manages and leases on behalf of third-party owners. For more information about Madison Marquette, please visit http://www.madisonmarquette.com
Walter Bialas oversees Madison Marquette’s research needs. He has more than 25 years of real estate research experience. Walt currently serves as chair of ICSC’s North American Research Task Force and has been an active member of ULI’s Panel Advisory Services program. He can be reached at 202-741-3800 or by e-mail at [email protected]
