Economic News Summary:
Revised Downward
By:  David W. Weatherholt, MBA

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Economic News Summary November 2011

Economically, are you better off today than a year ago?  The numbers tell the story.  Gross domestic product for Q3 2010, a weak 2.5%, continued to slide into a 2.3% Q4 2010 rate.  The slide continues: Q1 2011 was revised down to an abysmal 0.4%, clawing its way back to a meager 1.3% in Q2 2011.  The final estimate for Q3 2011, 1.8%, was another significant downward revision. The first estimate was 2.5%.  An accurate description for 2011 is “Revised Downward.”

The hope to show positive economic growth produces optimistic initial estimates.  For example, first quarter estimates went from an advance estimate of 1.8% but dropped to 0.4%-- a stunning 78% drop!  The second quarter initial report of 1.8% wound down to 1.3%.  What will the fourth quarter bring?  While optimism is running high, the “Advance” estimate will be released January 27, 2012 with lots of hype. It will undoubtedly exceed 2%.  The third estimate will be released March 29, 2012. My guess is that it will slip silently into history as a downward revision.  We were not better off in 2011.  Overall grade for December: D (November was a D)

Gross Domestic Product (GDP)
December 27, 2011

The “Advance” estimate for Q3 2011 GDP was a weak 2.5%.  The “Second” estimates were revised down to an even weaker 2%, with the “Third” estimates dropping to 1.8%, a cool 28% downgrade.  With Q4 2011 almost in the bag, my guess is that it will not be in the robust 3.5% growth range.  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.

Personal Consumption Expenditures (PCE)
December 27, 2011

In Q3 2011, consumption was a positive 2.31% for the quarter.  PCE remained positive, with 0.1% month increases for October and November. The Q4 2011 consumption number will be released January 30, 2012 and, while remaining positive, will show flat or no discernible growth for Q3.  Grade: C

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.

Personal Income
December 27, 2011

A quarterly indicator, Personal income (PI) is still trending in a positive direction, but increases are slowing substantially.  Personal income for Q3 2011 grew at an annual rate of a meager 0.6% rate compared to Q3 2011’s rate of 2.7%.  October was up, followed by a significant drop in November-- trending down for end of the year. 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.

Consumer Price Index-Urban (CPI-U)
December 27, 2011

The monthly CPI rate for November was -0.21%, for an annual rate of -2.52%.  Negative categories counter positive indicators, resulting in an aggregate indicator with a negative value.  There are titanic forces working against each other in the CPI, e.g. inflation vs. deflation.  Minimal inflation is okay. Deflation is not.  Grade: D-

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.
Goods & Services Covered by CPI:  The CPI represents all goods and services purchased for consumption by the reference population i.e. Urban, BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups.  Major groups and examples of categories in each are as follows:

Civilian Unemployment Rate
December 27, 2011

While an 8.6% rate down from a stubbornly high 9% rate should be great news, the drop isn’t the result of an expanding labor market, i.e. new jobs filled by the unemployed, but rather those no longer filing for unemployment.  Gallup’s “Underemployment” is the more accurate indicator, reflecting no movement joblessness.  Grade: D-

Unemployment Rate for Alaska
December 27, 2011

The seasonally adjusted unemployment rate for November was 7.3%. 

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 – American workers are classified as underemployed it they are either unemployed or working part-time but wanting full-time work.  These findings reflect more that 18,000 phone interviews with U.S. adults aged 18 and lover in the workforce, collected over a 30-day period.

Industrial Production (IP)
December 27, 2011

Industrial production went negative in November, finishing at -2.65%. That’s down an 8.23% in October.  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.

West Texas Intermediate (WTI)
December 27, 2011

The price of oil is creeping higher, finishing at $98.90 per barrel.  Consider these higher oil prices, and we still have a negative CPI.  Grade: C-

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.

M1 Money Supply
December 27, 2011

In November, the supply of money increased 1.8% over October, which is an annualized rate of 21.6%.  Last month’s good news, that M1 growth was moderating at an 18% annual rate is no longer true.  Grade: D-

Full Title:  M1 Money Stock: Billions of Dollars: Not Seasonally Adjusted (NSA)
Definition :  M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.

M2 Money Supply
December 27, 2011

The savings rate in November was up a meager 0.85% over October.  This slowing savings rate combined with shrinking personal income means personal consumption will either keep growing from credit spending or will stop.  Grade: D+

Full Title:  M2 Money Stock: Billions of Dollars: Not Seasonally Adjusted (NSA)
Definition :  M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

ECONOMIC NEWS SUMMARY - 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@waconsult.com

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