Blog   Tagged ‘economic outlook’

More holiday sales = economic growth (Part II)

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Our Chief Investment Officer reports on the outcome of his predictions made before Black Friday.

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Before Thanksgiving, we suggested that today’s consumers are financially healthier than in past years, which, we think, will drive a robust holiday spending season.

Some of the numbers reported appeared to be a bit Grinch-like. The National Retail Federation reported that Thanksgiving weekend sales were down 11 percent and online sales posted negative growth as well.

Our research at UMB leads us to a more cheerful conclusion, for two primary reasons.

  • Black Friday appears to be losing its reserve. You may recall that in the past retailers competed with one another to be the first store to open on Friday morning. Then they began opening the stores on Thanksgiving. Fast forward to today, when many retailers have promotional items on display prior to the holiday. Perhaps Black Friday has become Black November, meaning that the window of shopping days to be analyzed has become longer than just one weekend.
  • Several online retailers announced robust sales gains. We believe online sales are growing nearly 30 percent this season. We think this is due to the adoption of mobile technology. Since online retailers are open 24/7, so is the option to shop. We are also seeing a shift from brick and mortar stores to online retailers and we expect this trend to continue.

The retail sales data, along with other recently released economic data, supports our forecast of greater than 3 percent GDP growth in the fourth quarter, giving us nice momentum into 2015.

In Part I of this report, we anticipated material job growth this holiday season. The non-farm payroll growth in November proved that to be accurate with a gain of 321,000 jobs, again, supporting GDP growth of well over 3 percent.

Clearly the labor market is strengthening. Unemployment stands at 5.8 percent, and we think it will continue to head lower throughout 2015. Job openings are at a level we haven’t seen since 2001.

The labor market, along with higher stock and home prices and lower energy costs, has boosted consumer confidence. So it was no surprise to us that the University of Michigan’s Consumer Confidence Index has risen to a seven-year high.

Lastly, manufacturing data in the United States is hovering around a three-year high, also supporting our GDP forecast.

The bottom line is that all signs are leading us to believe that consumption will continue at a healthy pace. Since consumption is almost 70 percent of GDP, we think economic growth in 2015 will be between 3 to 3.5 percent; significantly higher than what we have seen throughout the last five years.

Given our optimistic economic outlook, we expect to see favorable returns in the stock market. In 2015 we expect 4 percent revenue growth and 6 percent earnings growth — that should lead to 10 percent total returns.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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More holiday sales = economic growth

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Black Friday is only 10 days away! Will you brave the mall? As you stand in the long lines, we’ll give you some tidbits to think about with how your purchases play a part in boosting the economy this holiday season.

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This year retailers are expecting much more than a lump of coal. Major retailers and shipping companies are expecting holiday sales to increase more than 4 percent. We haven’t seen 4 percent growth since 2011. Throughout the last decade, holiday sales have averaged 2.9 percent growth.

Many retailers have already announced significant hiring plans to meet the demand—so seasonal workers may be up as much as 10 percent from last year. A couple of primary shipping companies are even doubling their holiday workforce largely due to demand coming from e-commerce.
1So while you can see that most of the economic data in the United States supports a rather jolly shopping season, we can’t ignore some risks that could shake consumer confidence. A correction in the stock market, or signs of a recession in Europe are events that would in – fact, affect this forecast.

However, we strongly believe that consumers are in better financial health for a number of reasons:

  • Household net worth is at an all time high. This is due to higher stock and home prices.
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  • The labor market is solid. Unemployment is less than 6 percent and job growth has been increasing at a nice pace. These employment gains should continue as there are 4.8 million job openings, a level we haven’t seen since 2001.
  • You are probably noticing lower prices at the pump as well. That translates to more disposable income in consumer’s pockets.
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  • And finally, consumer confidence has been trending up since the Great Recession. And when we feel good about things, we consume.

There are even more factors that point to a better holiday season than last year:

  • Last year the government shutdown in the fourth quarter may have shaken consumer confidence and affected spending – we aren’t facing that situation this year.
  • Unseasonably cold and stormy weather led to some store closings across the nation.
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  • Lastly, in 2013 there were six fewer shopping days between Thanksgiving and Christmas compared to 2012. This year there is one additional day, which makes year over year comparable sale easier to beat.

We think this holiday shopping season will support our forecast of 3 percent economic growth in the fourth quarter.  We also expect to see positive returns in the domestic stock markets.

I wish all of you a happy and healthy holiday season. I’ll be back to deliver part two of this forecast after Thanksgiving.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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Hometown Perspective: Kansas

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You know you can count on us to provide insights into national and global economic outlook, but what about the business outlook where you live? Gil Trout, Chairman & CEO of Kansas and Oklahoma, gives us some perspective on how Kansas is looking this year. Hint: it’s good news.

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Mr. Trout joined UMB in 1988. As Regional CEO for Kansas and Oklahoma, he is responsible for the profitability, leadership development and commercial banking oversight of his regions. Mr. Trout has over 25 years of experience in the financial industry. He earned his MBA from Avila University, and his Executive Leadership Certificate from Washington University.



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The Calm after the Storm? Or the Eye of the Storm?

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Recently UMB Bank Chief Investment Officer KC Mathews and his team connected with clients to discuss some of the market’s most pressing issues. The Fed tapering, our interest rate forecast, the recent movements in the municipal bond market and an updated economic outlook were discussed.

Interested in what was discussed? Listen to the podcast here.

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UMB Investment Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals. UMB Financial Services, Inc.*  is a wholly owned subsidiary of UMB Bank, n.a. UMB Bank, n.a., is an affiliate within the UMB Financial Corporation.

This content is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. Statements in this report are based on the opinions of UMB Investment Management and the information available at the time this report was published.

All opinions represent our judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice. UMB Investment Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Investment Management does not guarantee that it is accurate.

All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results. Neither UMB Investment Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report.

“UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2012. UMB Financial Corporation. All Rights Reserved.

*Investment Products Offered Through UMB Financial Services, Inc

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NOT FDIC INSURED/ NO BANK GUARANTEE/ MAY LOSE VALUE


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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