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Economic News Summary August 2010

The good news is that the US economy is getting stronger.  As you look through these indicators you will see improvements in most of them-- indicating the normal economic healing process is taking place.  We have made tremendous strides economically in the past year with a slow but steady improvement.  The bad news: the severity of this recession combined with the glacial pace of recovery means there is still a lot of economic pain; all are wary, and recovery is a long way off.  There is simply not a lot of optimism. Most look to the fall elections, hoping it will ease some of the political uncertainty producing these “unusually uncertain” times.  My overall grade for August: D+ (July was a C).

Consumer Price Index-Urban (CPI-U)
August 25, 2010

The good news here is that inflation is not a problem, remaining well below the 2.6% ten year average.  The bad news is that the rate is too close to a deflationary level and the Federal Reserve has no real tools to combat deflation.  My grade for this month dropped over these deflationary concerns. Grade: C.

Grading:  Assigned to each indicator, A-F just like in school. 
Full Title:: All Urban Consumers - (CPI-U): U.S. city average: All items: 1982-84=100
Definition: Monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services less food and energy.

Personal Income
August 25, 2010

Personal income in Q2 2010 is up slightly at 0.23% over Q1 2010.  While growth is good, the pace is very slow and only producing cautious spending.  Grade: C- Full Title: Personal income: Personal Income and Its Disposition: Billions of dollars; seasonally adjusted at annual rates (quarterly)

Definition: Personal income. Income received by persons from all sources.  It includes income received from participation in production as well as from government and business transfer payments.  It is the sum of compensation of employees (received), supplements to wages and salaries, proprietors' income with inventory valuation adjustment  and capital consumption adjustment, rental income of persons with CCAdj, personal income receipts on assets, and personal current transfer receipts, less contributions for government social insurance.

Personal Consumption Expenditures (PCE)
August 25, 2010

The good news is that personal consumption increased in Q2 2010, up a meager 0.40% over Q1 2010.  The bad news is that the glacial pace of growth is too small to spur an economic recovery led by the consumer.  Grade: D

Full Title: 1) Personal consumption expenditures: Real Personal Consumption Expenditures by Major Type of Product, Chained Dollars: Billions of chained 2005 dollars; seasonally adjusted at annual rates (quarterly.  2) Personal consumption expenditures: Percent Change from Preceding Period in Real Personal Consumption Expenditures by Major Type of Product: Percent; seasonally adjusted at annual rates (quarterly)

Definition: Personal consumption expenditures (PCE).  The goods and services purchased by persons.

Civilian Unemployment Rate
August 25, 2010

The good news is that the unemployment rate is not getting worse, remaining at 9.5% for July.  The bad news is that it remains stubbornly high and is slightly worse than the 9.4% rate in July 2009.  While unemployment is a lagging indicator, again the glacial pace of the recovery means that unemployment may get worse before dropping.  Job growth in the private sector is still abysmal.  Grade: D

Definition: Civilian unemployment rate comes from a survey designed so that person age 16 and over that are neither in an institution nor on active duty in the Armed Forces is counted and classified in only one group. The sum of the employed and the unemployed constitutes the civilian labor force.  Persons not in the labor force combined with those in the civilian labor force constitute the civilian noninstitutional population 16 years and over. (There is no upper age limit.)

Gross Domestic Product (GDP)
August 25, 2010

The good news is that gross domestic product for Q1 2010 has been revised upward to $13.1 trillion (or an annual rate of 3.73%) and that gross domestic product for Q2 2010 increased to an estimated $13.2 trillion, and while up overall, in total the annual rate is a meager 2.4%.  While growth of 0.59% is better than no growth, this rate is essentially flat and just barely above recessionary levels. Grade: C-

Full title: 1) Gross domestic product: Real Gross Domestic Product, Chained Dollars: Billions of chained 2005 dollars; seasonally adjusted at annual rates (quarterly).  2)  Quarterly Growth in real GDP at annual rates, as a percentage change.
Definition: Gross domestic product (GDP) price index. Measures the prices paid for goods and services produced by the U.S. economy and is derived from the prices of personal consumption expenditures (PCE), gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment.

West Texas Intermediate (WTI)
August 25, 2010

The price of West Texas Crude increased 7.9% in a month moving from $73 to $78.8 per barrel.  Grade: B 

Full Title: Price of West Texas Intermediate Crude; Monthly NSA, Dollars per Barrel

Definition: West Texas Intermediate (WTI) crude oil is of very high quality and is excellent for refining a larger portion of gasoline.  WTI is the major benchmark of crude oil in the Americas.  WTI is generally priced at about a $5 to $6 per-barrel premium to the OPEC Basket price and about $1 to $2 per-barrel premium to Brent, although on a daily basis the pricing relationships between these can vary greatly.

Industrial Production (IP)
August 25, 2010

Industrial production remains flat, increasing a meager 0.97% in July.  While industrial production like gross domestic product remains positive, both indicators are extremely weak.  Grade: D+

Full Title: Industrial Production Index: Index 2002=100: SA

Definition: Industrial production (IP) includes output, capacity, and capacity utilization in the U.S. industrial sector, which is defined by the Federal Reserve to comprise manufacturing, mining, and electric and gas utilities.

NOTES:

1. This summary contains some quarterly indicators such as personal income, real personal consumption, and gross domestic product and may not have changed from the last issue of B/N&V®.

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Definition from the Bureau of Economic Analysis (BEA)