BMO Financial Group - Outlook 2005(1.1Mb pdf File) - Boardwalk REIT

3
United States Outlook
Economy gains traction in 2004
So far, the recovery train remains on track
towards its destination – full employment –
despite losing some steam amid rising energy
costs. After expanding an outsized 4.4% in
2003, on a fourth quarter-over-fourth quarter
basis, the economy appears to be chugging
along at a 3.9% clip in 2004. Though
moderating from last year’s rapid pace, growth
has been high enough to gradually reduce the
jobless rate even in the face of phenomenal
productivity gains.
Businesses have ramped up spending…
Fueled by surging profits and still-low financing
costs, businesses have surpassed their
customers as the driving force behind the
expansion. Led by soaring demand for
productivity-enhancing information processing
equipment, business spending on equipment
and software soared 14.2% annualized in the
second quarter following an 8.1% spurt in the
first quarter. Recent rapid growth in shipments
of non-defense capital goods points to capital
spending increasing a further 10% in the third
quarter. As well, investment in new buildings
jumped in the second quarter, suggesting that
managers have gained confidence in the
recovery’s durability.
…while consumers have held their own
The economic powerhorse of the last three
years – the American consumer –downshifted
only slightly in 2004. In fact, the estimated
average pace of consumer spending in the first
three quarters of the year (3.1%) is largely
similar to that of the past three years. Flush
with larger tax refunds and spurred on by low
interest rates, personal consumption
expenditure advanced 4.1% annualized in the
first quarter. These two supportive factors
likely advanced purchases from later quarters
and, together with sharply higher energy costs,
slowed the pace of spending to 1.6% in the
second quarter. However, notwithstanding a
further run-up in oil prices, recent retail and
2003 2004 2005
Annual Average
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2003 2004 2005 2006
GDP (q/q % change ann.) 4.2 4.5 3.3 3.8 4.0 3.7 3.6 3.5 3.6
GDP (y/y % change) 4.4 5.0 4.8 3.9 3.9 3.7 3.8 3.7 3.6 3.0 4.4 3.7 3.6
CPI (y/y % change) 1.9 1.8 2.8 2.8 3.1 2.6 1.9 1.5 1.4 2.3 2.6 1.9 1.8
CPI core (y/y % change) 1.2 1.3 1.8 1.8 1.9 1.9 1.7 1.8 1.8 1.4 1.7 1.8 1.9
Unemployment rate 5.9 5.6 5.6 5.4 5.4 5.3 5.2 5.1 5.1 6.0 5.5 5.2 5.0
Fed funds 1.00 1.00 1.00 1.41 1.95 2.55 2.75 2.75 3.10 1.12 1.34 2.79 4.10
3-month Libor 1.13 1.07 1.25 1.73 2.15 2.75 2.90 2.95 3.30 1.17 1.55 2.98 4.29
3-month T-bill 0.92 0.92 1.08 1.49 2.00 2.60 2.75 2.75 3.10 1.01 1.37 2.80 4.10
Prime rate 4.00 4.00 4.00 4.41 4.95 5.55 5.75 5.75 6.10 4.12 4.34 5.79 7.10
2-year Treasury 1.86 1.69 2.45 2.56 2.90 3.50 4.20 4.60 5.00 1.66 2.40 4.33 5.33
10-year Treasury 4.29 4.02 4.60 4.30 4.70 5.00 5.20 5.40 5.50 4.02 4.41 5.28 5.73
30-year Treasury 5.22 4.98 5.40 5.15 5.20 5.30 5.40 5.60 5.70 4.95 5.18 5.50 5.93
30-year mortgage 5.93 5.62 6.11 5.90 6.10 6.50 6.70 6.90 7.10 5.82 5.93 6.80 7.33
10-year less 3-month T-bill 3.37 3.10 3.52 2.81 2.70 2.40 2.45 2.65 2.40 3.01 3.03 2.48 1.63
¥/US$ 108.8 107.2 109.6 109.9 109.0 108.0 105.0 103.0 102.0 115.9 108.9 104.5 99.5
US$/€ 1.191 1.250 1.205 1.222 1.240 1.250 1.270 1.290 1.300 1.132 1.229 1.278 1.323
US$/£ 1.710 1.840 1.810 1.820 1.800 1.810 1.820 1.830 1.830 1.635 1.818 1.823 1.833
Historical data Forecast data