Economic News Summary June 2011
The US Economy remains stagnant, staggering on the thin line separating recovery from recession, while consumer confidence and small business optimism slide downward. The post-recession pain is as bad as-- if not worse than-- the pain suffered during the recession, and, while technically the economy is growing, it doesn’t feel quite right. Although a quick review of my key indicators doesn’t change the prognosis: we have not slipped into another recessionary dip. Not yet at least! Overall grade for June: D+ (May was a D-)
Consumer Price Index-Urban (CPI-U)
June 29, 2011
Inflation as measured by the Consumer Price Index dropped to an annual rate of 1.9% in May, down from a 5% annual rate registered in April. However, prices are up dramatically compared to May of 2010, when we were actually in the grip of deflation with an annual rate of negative, that’s right, -1.7%. The impact of prices moving from a negative to a positive partially explains the paradox between low inflation and rising prices. Grade: C
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:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) |
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses). |
Personal Income
June 29, 2011
Personal income (PI) headed up during Q1 2011 and is expected to return to a 3.6% annual rate in Q2 2011. The fluctuation is due to the impact of QE2, i.e., more dollars into the system. 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)
June 29, 2011
Personal consumption expenditures (PCE) for Q2 2011 will be lower than Q1 2011, down about 17%. The savings vs. spending trend is a natural outcome when PI exceeds PCE. Consumers will not power an economic recovery now, but armed with strong savings, they will be in a better position in the future. 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.
Civilian Unemployment Rate
June 29, 2011
Looking at two different charts on unemployment may be confusing, but they are somewhat consistent-- with “bleak” being the best descriptor. Keep in mind we have not had rates this high for this long since the Great Depression of the 1930’s. 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.)
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.
Gross Domestic Product (GDP)
June 29, 2011
Gross domestic product took an unexpected, virtually unexplained plunge in Q1 2011, finally settling at a 1.9% annual rate. GDP for Q2 2011 should be up slightly but still below the rate needed for a robust economic growth. 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.
Industrial Production (IP)
June 29, 2011
Industrial production in May is now equal to the January & February levels. Moving from a negative annual rate to a positive 1.3% annual rate is an improvement but not a real confidence builder. 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)
June 29, 2011
The price of oil, as measured by the WTI, dropped to $97.30 per barrel in June. A 4% drop, combined with last month’s 7% reduction, is good news, in the short term. To keep this in perspective, last June the price of oil was $75.40 per barrel-- up 29% in 12 months. Grade: D+
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
June 29, 2011
M1 increased 1.8% in May 2011 over April and is up over 13.8% since May 2010. In the chart below, note the sharp, almost vertical, trajectory of M1 Money Supply since 2009. The sharp climb is the result of TARP, Bailouts, Stimulus, QE1 and QE2. Grade: C-
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
June 29, 2011
The M2 Money Supply grew at an annual rate of 7.3% in the month of May 2011, almost double the 4.5% annual rate of April. Consumers are a powerful economic force. For now, consumers remain on the sidelines for the short–term, not only keeping their “powder dry” but increasing their supply, which is good news in the long-term. Grade: B
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:
- 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®.
- Pink Band: Indicates recessionary period.
- Grading: Assigned to each indicator, A-F just like in school.
Let me know if you have any comments, questions, or suggestions.
Write David W. Weatherholt at david@bnewsviews.com
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