Sun, 5 May 2013
In this special presentation touching on consumer spending, employment, natural resources, and more, Morningstar's Bob Johnson details how the U.S. economy can convalesce after tough times.
Note: This video is a recording of Bob Johnson's late-March presentation at Morningstar's Chicago office on the state of the U.S. consumer and economy.
Bob Johnson: Good morning everyone. It's great to be here today to talk about the economy a little bit, one of my favorite topics in the world. Today, we're going to cover a lot of ground. Let me start a little bit on the U.S. economy. My view of the world is, we've been through a very difficult time. We had a great 20-year growth period that was helped along by population growth, by growth in debt, and probably a little bit of a hyperactive housing market, and those things all came to a screeching halt almost together in 2008. And now we are slowly working our way out of that mess.
We've got one of the most flexible and adaptable economies in the world, and I think we are doing a very good job of coming out of the mess that we got ourselves into, as we always seem to. As I've said here, probably even to this audience before, sorry if I'm repeating myself, but I'm a product of the 1970s, and the '70s were such a disaster that this [current situation] looks like a walk in the park. We lost the war in Vietnam. We had a president resign in disgrace. We had gasoline prices go from $0.25 to $1 practically overnight. We had all sorts of food shortages and shipping grain to the Russians and creating all sorts of crazy inflation in the 1970s. New York City went bankrupt for all practical purposes. We were so much worse off then, than we are now, except we didn't have the media around to kind of trumpet all of that, so we probably didn't know how bad it really was unless in retrospect. And we recovered from that. And again, it took a while, it wasn't overnight, and some of it was painful. But we did get through it, and I think we'll get through it this time.
We are more flexible than almost anybody else in the world in terms of the economy, and that's an advantage that's so overlooked. I am an example of that flexibility. I mean, I was a sell-side stock analyst for years. I came to Morningstar as a salesperson. Then I worked as a manager of the technology research team, and now I'm an economist. I mean that's just the kind of normal flow of the world these days. That's not unusual. People don't stay doing what they're doing anymore, and if the jobs aren't there, people flex and move. One thing that I talked about last time, and now I've got some statistics to go with it, in the 1970s, when I grew up, nurses, about 2% of them, were guys, were males. Today that number as people have dropped out of construction and moved into other things, retrained themselves, today 11% of all nurses are now men and that percentage continues to go up, kind of an unbelievable statistic about how flexible we are in our economy.
And some of the economies just aren't as flexible. The guy who cuts my hair is Italian and he was back in Italy recently. He was asking his neighbors in Italy, his old neighbors, what was their biggest expense every month, and he said it was garbage. And he said they get their garbage picked up four times a week in Italy. I mean this is a country that is having trouble meeting various debt obligations and needs to cut back on the government. They are getting their garbage picked up four times a week. One day for this, one day for that, and come to the door and get the trash and they don't have the flexibility to say, "You know what, we are in tough times, we need to cut that down to three or blend one of these." That's some of the flexibility that we have in our economy that the rest of the world doesn't, and that flexibility goes far undervalued.
I'm not jingoistic about it. There are a lot of other economies that have very good things going for them and some of the trends I'll talk about today are benefiting Canada, they are benefiting Mexico. Certainly Australia has a lot of flexibility in their economies and good things in terms of rule of law. So I don't want to be jingoistic about this, but I also want you to feel good about the U.S. economy and also from an investment standpoint that we really do have something a little bit special here.
So now to the boring stuff, the nuts-and-bolts numbers. I think in 2013, gross domestic product will grow about 2.0%-2.5%. Right now, it's actually probably a little bit below consensus, believe it or not. I was actually on a panel on [at the Morningstar Individual Investor Conference], and I was actually the least bullish of three panelists, which really kind of surprised me. So that's not a far-out number to get to 2.0% to 2.5% for this year. The long-term trend is about 3% a year. So we're not that far off of trend. People have this idea that we grew 4% or 5%. Yeah, we might have grown 4% or 5% for six months and then we went back into a recession.
We've had 10 recessions since World War II and recovered from them. Five of those would've already been over by now. We would have this giant rocket ship upward and then we would've headed back down in yet another recession. So I'm not terribly worried about this 2.0%- 2.5% growth rate that's got everybody so panicked as being a horrible number. And keep in mind, some of the times when we had 3%-4% GDP growth, we had population growth which was about 1.5%. So that adds to GDP. You can do it [on a per capita basis], but the numbers I'm quoting are not done per capita.
Now the population growth is only about 0.7%. Lower birth rates and lower immigration both combined to really pop that rate down. So again, it's not surprising that we're growing a little slower. I mean people paint this as a terrible disaster. It's not necessarily a disaster. I wish it were a little faster, and it's not going to help the people who are unemployed. It's not going to help my daughter who is out of school and trying to find a job any better. But nevertheless, it is a rate that's not totally surprising.
The really good news is on inflation. We will have a whole slide on that and we will talk about that a little bit more. But inflation is running around 1.9% right now. We have had prices in gasoline and a few food commodities come down recently. So I think we will probably be under that 2% level for the full year. But again if we have a geopolitical issue or a drought that number can go crazy in a relatively short period of time.
I put employment growth in there. I put it on the slide because everybody hears reports come out every month, and they are in these numbers that are usually between 100,000 and 200,000 jobs added. But that number, I ask you to think about it a little bit. As a percentage, that's about 2% growth, just under 2% growth. So if we have an economy that's growing at about 2.25%, you'd expect employment to grow under that because of productivity of something like 1.8% to 1.9%. And that's a kind of what that 180,000 [additional jobs-per-month forecast] represents.
And again with all numbers, I caution you--and this is another lesson that I want you all to take away today and to make you better consumers of data--that these monthly numbers are so subject to revision. They have a lot of seasonality factors in them that have been really shifting. I mean the auto industry used to take off huge months in the summer and huge blocks of times when they didn't produce anything and now it's narrowed down to a few number of weeks and it's actually a little later than it used to be. And it's not all at the same time.
Yet the seasonal adjustment factors reflect the old way of the world. And I think I have told the story in this group even before, about a neighbor that used to run a root beer stand. It used to be in Wisconsin Dells. It was open from June until August, and then he shut down That's kind of built into the seasonal-factor numbers. Now because of all the things that you have to have in a restaurant these days, that you didn't have to before, the costs are high and people have to operate year-round, he doesn't shut down any more. He doesn't get his eight weeks of vacation down in Florida like he used to.
And again the employment numbers don't jump around the way they used to for the very same reason, yet the statistical data reflects that and even really weird stuff affects the data. Now that Target and Wal-Mart are selling so many groceries, and groceries aren't sold in grocery stores but in things that are typically called a department store, think about how that messes up the seasonality of all the factors.
I mean the department stores' worst month of the year is July, and grocery stores best month of the year is July. Can you imagine as those things shift around to try to get the seasonality factors right on it? It's impossible. So I like to look at all the data on a year-over-year basis, three-month moving average, and that tells you a lot more truth about the data than kind of say, well, it's up 1/10, it's up 2/10, it's up 3/10. That's why everything I see charted, I'm converting to this three-month moving average-type of deal. It's so important to do, and employment is kind of one where it really shows up.
The one number where I'm really off consensus is, I think, we'll be down to a 7% unemployment rate by the end of the year. Again, not necessarily for all the right reasons, I'm a little bit higher on jobs growth, but I'm also thinking that participation rate may not go up. It typically does in a recovery, and I'm thinking it might not so much this year. The reason I believe this is that more and more people are heeding our advice and staying in school longer and getting more education, so that's in a positive way decreasing what we call the participation rate, the number people actually looking for work, and at the same time we've got a lot of baby boomers retiring. And so that's also bringing down the number of people that are participating in the labor force, and that will help bring the number down, as well. And I think we'll be at 7% at year-end, and I think the Fed will have to be looking at tightening at that point, even though the forecast today says that's not going to happen until the middle of 2015.
The consumer is a key driver; I've already hit on it. They're growing about 2% last year, 2%, the year before; they'll grow 2% this year. I think there we'll talk about some of the headwinds, but I think that number is pretty good.
I think housing--and again, this is the where the personal thing comes in a little bit--the housing market, I think, is really beginning to explode. We'll begin to talk about some of the detailed data in that and you'll have some slides you can look at on the Web to kind of take home with you. It's too much data to digest here.
But again, housing remains incredibly affordable, more affordable than it has at any time in history. And I don't think home prices can hardly go down from here because of corporate buyers, because of low rates, because of just demographics. So, I really think, if you're looking for housing, now is the time to get off the dime. I think many of you probably know this, rents have gone up a lot again, and it's not making any sense to do anything other than own a home. So, I commend you all to at least look at that.
The other strong sector of the economy has obviously been autos. So far, autos have been the biggest contributor to the recovery. Housing is just beginning to kick in. Usually, they both kind of move in tandem real early in the recovery; this time we got an auto recovery kind of on cue, if you will, but the housing recovery has been like way far behind. And that's also why the recovery has been a little bit slower than one might have expected this time because housing hasn't come back. And half the jobs--we lost 9 million jobs--directly or indirectly 4.5 million of those jobs were related to housing and construction. So, it's no surprise that it's taken a little bit longer to come back. And certainly, I have talked about inflation as kind of one of the real positives on the economy.
The key thing to look at to see when a recovery might end, it's when inflation gets sky-high again and stopped every recovery dead in its tracks.
Again, exports aren't going to be wonderful. Don't panic about that. I mean, Europe is 3% of our GDP, China is 1%. A lot of it is gasoline and soybeans and Boeing jetliners; they are not things that are going away. They're under long-term contracts. So, I really am not worried. The only reason to worry about Europe, for example, is if it ruins our whole financial system, which there is a 10% probability, but from just a GDP standpoint, there's next to no impact.
Manufacturing has been a little bit slow recently. It was a key part of the recovery early on as it is in every recovery as kind of they rebuild their inventory. That's why even though manufacturing is not bigger part of an economy, when it flips from declining inventories to increasing inventories and they start building more stuff, it's absolutely critical to the recovery, and it's the most important thing to watch. As we move toward the end of a recovery, manufacturing is nearly irrelevant, and so I think people are paying undue attention to it, though the good news is actually I think manufacturing might be getting just a little better during the short run.
Business spending, I'm going to skip that one for now, because I think we're actually doing a little bit better than I thought on that front, and government remains a complete total disaster for GDP growth. We've had, since the recovery started, again my words are right, recovery started, we have lost 600,000 government jobs. That's a lot of jobs. I mean, we lost 8 million some jobs in the whole recession for the whole economy. Now, in government alone we've lost 600,000. That's never happened before. I mean, we've had a little slowdown when the Korean War ended and a little bit when the Vietnam War ended, but nothing of the magnitude of these numbers. I mean, we all get that housing killed part of the recovery, but the other part that people don't get is that this is kind of unprecedented. And then the problem, by the way, for government is worse in Europe than it is here. Here it's only about 20% of our economy; there it's 40% of the economy. So, that's why I think Europe has got some real problems yet, and we haven't heard the last of it.
Why I'm optimistic about the consumer? Well, obviously, I've talked about it and I have implied, you know how volatile the monthly numbers are. In one month you'll see no employment growth, then next month you'll see 250,000 [jobs added], and then you'll see 120,000 [jobs added], and then you'll see 250,000 [jobs added]. But you do this technique where I use a three-month moving average and look at year-over-year numbers. That takes out the seasonality and that takes out like the one month of strikes, and we've got that very strong asymptotic relationship with 2% employment growth, and I think we are there. And that's the wherewithal for the consumers to spend money. There is one thing in this country, if the consumers get money, they'll spend it. And where do they get their money? Primarily from their jobs and their employment. So, I'm really pleased about this and employment has been a very steady-state grower despite what you read about the month-to-month stuff. I don't care if it's down 10 and then up 200. I mean, everyone right now is on the excited end of the curve. They were all excited about [February's employment report]. Well, you know what, it could just as easily be a disaster the next month, and I don't care as long as my two-month moving average kind of stays right in that 2% range.
So, we've got the wherewithal. Now, we've got the inflation, and like I have said, inflation has killed almost every recovery we've ever had. It may not be the root cause, like the housing was probably the root cause of the problems this time around or maybe it was the imbalance with China, pick your choice. We had issues, but the thing that pushed us over the cliff, if you will, was inflation getting over 4%. That red line [on the chart displayed in the slides] is about 3.95% or so inflation. Every time we've gone over that line, we've moved into recession. For example, right here you can see we crossed that magic 4% line and this pink bar is a recession. So, we started moving into a recession shortly after we crossed that pink bar. Even here we did the same thing. Even our housing thing, the last thing that pushed us over the edge was a huge rally in oil and food prices in 2008. And that just turned the economic thing that might have been salvageable into a complete utter disaster that we had, and we had the recession shortly thereafter.
The one thing that it didn't capture was the little spike in inflation we had in 2011. It didn't push us into a recession, probably because we had some tax cuts in 2011. We didn't get all the way to 4% either, but we got close. If I'd been in the office, I might have been a little bit more worried, but I was on my sabbatical.
So we've got the consumer income. We've got the lack of inflation. Now we're going to turn to the consumer's asset side of the house and housing prices are up. Housing prices are already up 10% from the bottom. So you have already missed a little something. And I think the numbers will only get better in terms of housing in the months ahead.
And again it's not every market, not every block, but I will tell you that year-over-year, the Federal Housing Finance Administration breaks all the country down into the most regions and I think they have nine. And I think, all nine of the regions are up year-over-year, some of them only 1% or 2%. Some of them 14%, but on average, in that metric, we're at 6% or 7%. So some very good numbers there, and that's more money.
And I can't tell you how good this is. I mean, it makes people feel better about themselves. It gives them confidence to spend the money they have from the regular income, knowing, "I've built up a little savings in my house now." It allows people to refinance. So many people wanted to take advantage of these cheap rates but couldn't, because they couldn't get an appraisal. You can probably get an appraisal now. I think that's really great news. So that helps on the refinancing side.
People before wouldn't want to remodel their homes. Why should I? It's going down, it's money down the hole. Well now it's no longer money down the hole, no longer money down the hole. And we've seen a tremendous run in some of the stores like Home Depot and Lowe's which our equities team was fortunate enough to spot. I think there is probably even a little bit more life in it. I know they think it's probably pretty fairly valued in here. But those are the types of things that are taking advantage of this. So, you've got the remodeling end of it.
So, you've got that confidence. And now people can get home equity loans, people can cash out mortgages, people can move to now sell their home and move to a bigger home. And people can move to take jobs, something that was almost unprecedented and not happening during the last recovery. People couldn't move to a new city to take a job because they couldn't sell their old house. So this just adds a lot of economic flexibility to this whole situation. So that's some other really good news.
And here this is the one I want you to all spent time with on the Web or at home or I can send this to you. This is just a whole broad range of economic data on housing. Some of it's pricing, some of it's inventory, some of it's starts, some of it's existing homes. All of them are up a lot. And this isn't an accident. There isn't one little thing that's better. This is kind of across the board and very consistent. Inventories are down 20%, 25%. That means prices have to go up. Because you have got nothing to sell, the price has to go up to make supply and demand meet up with each other.
In fact, right now there is actually a shortage of homes for sale in many, many markets. So, typically, you want to have four to six months of supply inventory. Right now we are kind of at the low-end of that at four months. In the recession we were well over 12 months' worth of supply. In some cities in California, and in some parts of Chicago you are under two months, which is not healthy. Prices are going up. And again, take time with this. It's too noisy to talk about it here, but the concept is that everything is up.
Also, remaining on the asset side, the stock market's up 133% off the bottom, and now I can actually say, we're actually above where we were the last time around. And so there are more assets in consumers' pockets from the stock market as well. By the way a lot of people would say the market's way overvalued, and it's come so far so fast. I would just add, that this time around, our earnings today on the S&P 500 are considerably higher than they were the last time we made our peak, so I don't think there is an automatic case that we're overvalued or headed back down into this terrible crazy valuation mode.
Another database that we have and needs more talk about is our price/fair value database, and it suggests we're about 97% of fair value that the markets still has a little bit of room left in it. We also point out between 2004 and 2007, it showed that the market was probably pretty fairly valued. So, we can continue a pretty long period of time with the market fairly valued. It's when it gets kind of 10% overvalued, 12% overvalued according our metrics that we really get into a little bit of trouble. And we're not there yet, not even close.
I talk about housing, and I talked about how much it has improved in some of things that we've seen, and again kind of like some of the things I'm implying on the stock market, but even more or so in housing, there is a lot of runway room in front of us here. Housing is typically that red line that you see across the [displayed slide] at about 4.5% there. That's the long-term average percentage of money that people spend on their houses, so that's buying a house, remodeling a house, brokerage commissions. There are a few things that go in there, but it runs about 4.5% of GDP on average, and you can see it ranges kind of usually from 6% to 4%.
We got all the way down to 2% this time, and I keep on talking about how much better it is and how excited I am. You'd think, what am I crazy here, it's hardly off the bottom yet. Well, we've turned the corner, and I think that we've got a lot of room in front of us.
I have been really excited about what's happened in the auto industry, but right now with autos, we're back to producing about 15 million units a year in autos. I mean, we typically run at a peak between 16 million and 18 million autos. So, we're kind of starting to burn out on that trend just a little bit. But in residential housing, we've got long ways to go, which is good news.
We're not worry-free. Again, I've alluded to in much of my talk is that the financial media, to help sell papers, and just because the way the data is presented and so forth, it looks volatile as all heck. You think we were in some type of yo-yo. But I have showed you the employment data, and I could do the same thing for retail, and I could do the same thing for industrial production that shows you that we're steady-Eddie on a year-over-year, three-month moving average basis. Maybe the trend on manufacturing is down just a little bit, but it's not yo-yo.
Yet, you look at the GDP numbers, and again, that last one [on the slide] has changed. We now have a 0.1% growth, not decline. But that's not reality. I assure you that in the second quarter of 2011 we didn't grow 4.1% and then in the third quarter we didn't grow 1.3%. We probably grew something close to 2% in both of them.
Right now, the latest thing is the market is getting all revved up. GDP in the first quarter--because of some bounce-back in government spending, the nature of way of how a few different accounts lined up, that inventory is likely to build because manufacturers didn't manufacture enough in the fourth quarter and they were way short--means there is going to be a huge or potentially huge, we all argue a little bit, but it seems to me the consensus coming around to 2.5% to 3.0% growth in the first quarter of this year.
But again, I would suggest that maybe if we get to the 3.0%, then well what you really have to do is average with that minus 0.1%, and you'll get something that's more like 2.0%. Don't think that the 3% that you see is the new normal. And I can already see the headlines. I mean, we're already building up for kind of a good first quarter just because the way the data stacks up and some unusual things with inventory. And I can already see it, a great winter season and by the way Easter is early this year too, so that's going to help the first quarter out because they won't measure that properly.
And then, in the spring when there's no Easter and whatever and the inventory thing is kind of done, maybe we grow at 1.5% to 2.0% again and then everybody says "We had our usual spring slump after a great winter" or whatever. Not reality. The reality is we are growing at a pretty steady 2% rate, and people that love to sell newspapers love to create tension in the headlines and they're doing it in spades and our government statistical agencies aren't helping us any.
Gasoline prices spiked again. Thank goodness they've turned the corner again. It's the first thing I do when I come in the morning, I go to AAA.com and look at what gasoline prices do. This is my biggest number-one worry is gasoline prices right now. Luckily, I think we've kind of turned the corner for now, but boy, I got scared because we went up a little faster than I thought we might this time around. I thought maybe things would be a little bit tamer this spring.
And this is the one where the seasonal adjustments are all wet. One year it's February, one year it's March, and one year it's April. You always have a big spike in the spring when they cut over from manufacturing one grade of gasoline to another. But the month that it happens always seems to be a little different. And again, the statisticians aren't allowed to call the gas stations and ask, "Well, how did you do it this time around?" They use some magic formula that does moving averages and compares them with other moving averages, and here's how we do the adjustment. They don't want to have any independent thought in doing the adjustments, and they don't. And that's why the data is so screwed up.
The weather has been screwing up all the economic data. Hurricane Sandy was certainly part of what was wrong in the fourth quarter and why we are likely going to have such a great first quarter. The snowstorms this year probably means that some of the first quarter won't look quite as strong as if we look at first quarter data a year ago because last year was really, really warm. So, it's going to shift things. We're going to have more of a normal spring. We've had issues with the taxes and the fiscal cliff. They have certainly been big issues. And you know what, you think of all the scares. This is my other big bugaboo is that everybody is saying, "Oh, the U.S. economy is fragile. Oh it's fragile." B.S. I mean gasoline prices went from like $2.80 to $4. We had a tsunami in Japan and shut down our automobile industry. We lost New York City for a week due to something like the movie [The Day After Tomorrow] practically happening in New York City and our prime retail market was shut down for five days. I mean five days out of a month is like 25% or some of the working days. And when you don't grow fast little things make a big difference to the statistics, and that's what people don't really realize.
Again how many crises have we had? Let's see, we had the budget and the deficit last August 2011. That put us down and then we had, let's see, we had the fiscal cliff, and then we had the, let's see, the sequester. Oh I missed the debt ceiling yet again in February, but they ticked that down the road. I mean, the things that people try to scare people with, it's really kind of frightening, and none of them seems to really panic anybody anymore. And Europe is in that mess by the way.
So let me talk just a little bit about the fiscal cliff. I mean, I think it's really important for you all to understand that we've made a lot of progress on the deficit. The worst period of time, the deficit was at about $1.4 trillion on an annual basis. This year it looks like it will be about $800 billion. So not quite cut in half, but we're getting there. So we've made a lot of progress. And this year, the deficit reduction was going to be led by some of the things that were in the fiscal cliff, which were about $235 billion.
As you can see in that far left hand column there [on the slide], a bunch of stuff we permanently took off the table, thank goodness because it would have been too much to handle at once. And some were kind of put off for another day, and right now the sequester did happen. I was really shocked by this, and it got no headlines: The House and the Senate agreed and passed the law that they are going to continue to incorporate the sequester at least through September. Then in September, we will have to revisit it yet again.
But basically, we got the savings from the sequester. So we really added probably another $85 million or $90 million to the deficit cutting. So we were at over $300 billion of deficit reduction this year. That's a big deal. That's a really big deal. And that is very strong fiscal tightening. And I think that is impacting the economy a little bit. I think it will impact the economy. I think at first people were too worried. Now, I think they are not worried enough. I think people saw one month of retail sales and thought it was no big deal. And I think that's probably just a little bit premature. So those are those numbers.
The payroll tax, which we all are observing, we in Illinois got a little practice on this. We had a 2% tax increase probably two or three years ago that we all had to live through, and it didn't ruin Illinois entirely. And I think that would be my take that this helps balance the budget. It hurts people at the low end of the budget scale, probably more than it should unfortunately. But for most of us, we hardly noticed the difference. But it does bring down disposable income and it has certainly impacted retail sales.
I apologize for the detailed numbers. I usually do a graph but I decided to do numbers just so you could exactly see the trend. But we have been trending, kind of 3% was the multiyear average on the week-over-week growth. Now we have slowed to about 2%. And luckily I've got one more number in this series, since I made the slide. The next number in that series is 2.6%. So, it looks like the worst of the payroll tax impact is over. It hasn't been a killer. But certainly in an economy that's only growing 2%-3%, a 1% reduction in spending is not nothing.
One other thing that made me feel very optimistic about this whole payroll tax situation is that we have had an incredible and sudden improvement in initial unemployment claims. We're now at the lowest level we have been since 2008 on this metric, and it's about 0.26% each week of the workforce getting laid off. And again we were close to 0.5% at one point in time. So, we have cut that in half, and we had been at 350,000- 370,000 job losses on initial unemployment claims. Now, we have kind of found the new normal, it looks more like 330,000 to 350,000.
So, employers certainly don't seem to be scared. And part of that I think is what [Morningstar analyst] Paul Swinand in Morningstar's retail equity research group kind of pointed out to me, that a lot of businesses said, "You know what, we've had this worry, we've had that worry and I haven't done anything. And now I got to do something, because Amazon.com is knocking at the door." And I think that a lot of businesses are saying, "You know what, I have sat here and done nothing for two years with all of these scares and now I'm doing something." And I think that probably explains part of that graph, and I think it's part of why the payroll tax hasn't had as big an impact as some people feared.
I want to talk a little bit about the things are going right in the U.S. I'm not doing this jingoistically. There are a lot of positive trends here that we haven't gotten lot of other places in the world. I think it's kind of important to understand some of them.
I think I talked to my last presentation about the oil and gas market. Oh my god, it's just absolutely incredible in this country what we've done on that. I think we're just kind of beginning to see some of the benefits of that. I mean it's beginning to reduce the trade deficit.
It's certainly adding to employment; it's probably added 200,000 to 300,000 jobs. North Dakota is in boom times. I mean it's incredible. It's $20 an hour if you want work in a Burger King or McDonald's. If you want to work in the oil industry, it might mean a $100,000. You might have to live in the tent in North Dakota, which isn't a fun this time of the year. It's a difficult work environment. But it's something that is truly booming, and it impacts a lot of numbers.
We can all kind of see things at the pump, which is actually not that good because it's world commodity, but in terms of our trade deficit we can really see it, in terms of natural gas here in homes we can see it. One of the other real surprises is kind of what it does to electricity prices, and our electricity prices are probably half to a third of what they are in rest of the world. And I think it's going to help the manufacturing sector in this country and I think it helps you and me. When we look at all the negative things we have to deal with and all the price increases and different things, keep in mind that electricity and natural gas have certainly done well for us and this is all really big deal to us. I mean it's just incredible. I mean I mentioned I'm a product of the '70s, and oil ruined us. This time I think oil may save us.
One of the other things that makes the U.S. a little bit unique and again this is something you might in Canada, in Australia, and maybe even Mexico, there is room to expand, and we've got land mass. I mean in Italy for example because there is no place to put the garbage, because of the mountains and so forth, there is really no place for those people to expand. They can't dream of having construction be 7% of their economy. Here that's certainly something that we have and nobody else has.
And then, again, we've got a good supply of natural resources, be it copper, be it coal, I mean we're not necessarily self-sufficient in all of them, but again, there are a lot of countries with no resources and countries with resources that won't exploit them. I mean, France and then now I think even Poland are talking about not allowing fracking. So, that's clearly an advantage that we have here in the U.S.
We're a leader in agriculture. By the way, Brazil is nipping at our heels. They'll probably do better than us in a couple of crops this year in terms of exports. So, we've got to watch that a little bit. But again, so many countries have to import their food or at least a portion of their food needs, and we're a very big exporter. And we're kind of just getting rolling there. I mean, we haven't even begun to roll out like double-row cropping, and again, a few things that Morningstar's agricultural equity research team tells us that could happen over time if prices got high enough and the needs got high enough that there is a lot more that we could do that a lot of other parts of the world just can't just because of our technology.
And certainly, in that same boat is aircraft. I mean there are two aircraft manufacturers in the world for all practical purposes. Boeing and EADS are the two companies, and certainly that provides a lot of technology. You think of the carbon fiber stuff, some of the battery stuff which right now is a problem. That could turn into a benefit. Those are things that we have that nobody else has. Each aircraft, by the way, on the Boeing 787 is a couple of hundred million dollars. You do 10 of those a month, and it's kind of a GDP-moving number, which a lot of people don't really realize.
Our manufacturing industry is really strong and big, but an awful lot of it is because of autos and aircraft. Those are really the two big ones. And autos have done exceptionally well. And again because we've got a lot of land mass, we need to drive more, we need more cars, autos have been an absolute key here. Autos are an absolute key here, and autos are an absolute disaster in Europe right now. I think car registrations in Europe are down. In France it's down something like 10%. I think if you looked in Spain, they're probably down 30%- 40%. Their auto industry over there is in shambles. And unfortunately, their average age of fleet is probably quite a bit lower than ours, probably more in the seven- to eight-year range. We're more like 10- to 11-year range. So, again, that's another advantage U.S., if you will.
Again, I said, we're not alone in this. I don't want to be jingoist. I mean, Australia has a bunch of natural resources. They have a lot of land mass. Canada has a lot of resources and a lot of land mass. So, again, I don't want to be too narrow-minded on this, but these are advantages that we have. And it shows up in a lot of the data, and I could extend this one more month in Europe to March. I've got the March data as of last week. Then if you turn to Europe, the next number in that series starts with the 46 [Markit PMI reading]. China did rebound a little bit. They are back up to where they were in January, and the U.S. is up again to something like 54.8. So, again, in terms of manufacturing, the things I talked about; autos and Boeing and the oil and gas industry in general, we are doing heads and shoulders above the others in manufacturing right now compared with where we were.
This is the first recovery I think in the last three where we've actually added manufacturing jobs in the recovery. And again, it showed up in the data last year. The red data [on the slide] is all the countries that showed either down growth or a worse growth rate than the year before. Only the United States and Japan showed improvement in 2012, and Japan was coming off the tsunami disaster the year before. So that's a really great number.
It's partially in the stocks. The U.S. was the best-performing stock market of many of the majors last year. I think maybe India did a little better. And again, if I had stopped this in December, the U.S. would have been the very top on some of the mission accomplished-type statements from European Central Bank president Mario Draghi. Europe has really rallied in the first couple of months of the year and came back a little bit, but now unfortunately, I'm a little afraid like President George W. Bush, the "mission accomplished" came probably just a little bit too early as Cyprus reminded us all [in March].
So, with that that's where I think we are. You've all been a great audience. Thank you so much all for coming.