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Economic News Summary October 2010
The U.S. economy remains flat, with no discernable growth or changes in most of these economic indicators except for a sharp decline in industrial production.  A decline in a leading indicator such as industrial production following its very weak positive showing in August is troubling.  Preliminary estimates of gross domestic product for Q3 2010 are a slight increase over the restated Q2 2010 numbers.  However, the initial estimates of gross domestic product have proven to be high with subsequent revisions moving down.  Declining industrial production is a strong indicator that gross domestic product will also move downward.  In short we are headed to another recession.  My overall grade for October: D- (September was a D).

Consumer Price Index-Urban (CPI-U)
October 29, 2010

Inflation, as measured by the consumer price index (CPI), currently remains below the 2.6% ten-year average.  If we slip into another recession, prices could actually drop, resulting in deflation.  While the Federal Reserve has tools and experience to fight inflation, they seem to feel helpless in a fight against deflation.  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
October 29, 2010

Personal income increased as of Q2 2010. Indications for July and August are up slightly, indicating the Q3 2010 will increase slightly.  However, “economic paralysis” is keeping this extra cash on the sideline.  Grade: D

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)
October 29, 2010

Personal consumption increased in Q2 2010 up a meager 0.48% over Q1 2010.  Again indications from July and August indicate a continuation of the trend, i.e. a slight increase in spending but well below increases in income.  Economic paralysis is holding consumption down.   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)

Civilian Unemployment Rate
October 29, 2010

In the past year, unemployment has remained stubbornly high, in excess of 9.5%, remaining at 9.6% in September.  The drop in industrial production indicates that no new jobs will be created and unemployment will remain high.  While unemployment has not reach the levels of the 1981-82 recessions, the unemployment during this recession went up much faster.  When the 1981-82 recessions ended, unemployment went down quickly a significant difference from our current post recession rates.  If we slip back into recession, unemployment will increase.  Grade: D-

Gross Domestic Product (GDP)
October 29, 2010

The latest gross domestic product (GDP) estimates for Q3 2010, released today, is at an annual rate of 2%, up from the last revised GDP of 1.7% for Q2 2010.  While an increase is good, this is the initial estimate and will be revised downward.  Pressure from the downward movement in industrial production for September will cause a constriction in GDP.  Grade: D-

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.

West Texas Intermediate (WTI)
October 29, 2010

The price of West Texas Crude increased sharply to $81.90 in October from September’s price of $75.30 in month-to-month trading up 9%.  Grade: B-

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

Industrial Production (IP)
October 29, 2010

After a barely discernable uptick of 0.11% in August, industrial production declined a sharp 2.7% in September.  Grade: F

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

Let me know if you have any comments, questions, or suggestions.
Write David W. Weatherholt at david@bnewsviews.com

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

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.)

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.

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.

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®.