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Economic News Summary September 2010

The National Bureau of Economic Research (NBER) tracks the movement in business cycles and officially determines when a recession begins and ends.  This private, nonprofit, nonpartisan research organization has been tracking the U.S economy since 1920.  Their September 20, 2010 press release states;"At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009.  The trough marks the end of the recession that began in December 2007 and the beginning of an expansion.  The recession lasted 18 months, which makes it the longest of any recession since World War II."  This "expansion" may turn out to be the weakest recovery since the 1929-1934 depression. Back then the US economy went through 12.5 quarters of “expansion” before slipping back into another depression.  Our fragile recovery has been described as "unusually uncertain" at times, almost as if we are all collectively holding our breath - leading to "economic paralysis."  My overall grade for September: D (August was a D+).

Consumer Price Index-Urban (CPI-U)
September 28, 2010

Inflation currently remains below the 2.6% ten year average while deflation seems to be controlled by the low Fed Funds rate.  The Fed’s artificially low rate, combined with an increased money supply, means we could return to 1970’s style inflation.  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
September 28, 2010

Personal income increased. 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)
September 28, 2010

Personal consumption increased in Q2 2010 up a meager 0.48% over Q1 2010.  Economic paralysis reduced consumption as a percentage of personal income by 1% between the first and second quarter.   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
September 28, 2010

In the past year, unemployment has remained stubbornly high, in excess of 9.5%, and moving up to 9.6% in August.  Notice that the unemployment rate continued to rise for a quarter after the1981-82 recession and then dropped dramatically, see chart below.  Small businesses in economic paralysis are not creating new jobs.   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)
September 28, 2010

The National Bureau of Economic Research (NBER) uses gross domestic product as the key measure to determine recession and growth cycles.  NBER reported that the recession ended in 2Q 2009. One year later, GDP estimates for 2Q 2010, while positive, have been revised downward 32% to an annual rate of just 1.61%.  This may be the one indicator not in paralysis.  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.
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)
September 28, 2010

The price of West Texas Crude dropped in month-to-month trading, constrained slightly by economic paralysis.   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)
September 28, 2010

With a barely discernable uptick of 0.11%, industrial production has stalled.  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®.
2. Pink band indicates recessionary period.

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

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