Economic News Summary:
|Volume 1, Issue #9 June 2012|
Economic News Summary June 2012
Businesses create, grow and thrive when left to their own devices. Businesses that operate in an abusive, unrestricted manner face immediate feedback, and face reward or retribution directly from their customers. The road to business destruction is quite direct and not that long. Will there be abuses of the process? The short answer is yes. The market has proven over and over that it is best suited to judge and punish. Will government intervention curb abuses? The short answer is no. Customers, not government, are in the best position to determine which company should succeed or fail.
The best recent example: Apple, Inc., where customers voted with their dollars in favor of the company’s products compared to Research In Motion, which is struggling with that negative customer vote. Our government did not pick a winner between these two companies but now resides in the middle of the process. Producing a wrath of new regulations combined with the specter of record-setting tax increases. Businesses both large and small are frozen with “fear of the future” and the resulting uncertainty driven by the government, not the market. Overall grade for June: D (May was a C)
Gross Domestic Product (GDP)
The final GDP release for Q1 2012 remained at 1.9%, well below the once optimistic 2.8% projection for the quarter. Current estimates put GDP at a 2.4% for Q2 2012. My question is-- What has changed in Q2 2012 to support that estimate? In less than a month, July 27th, the “Advance” estimate for Q2 2012 will be released. It will not top Q1 2012 and may be a little lower. The economy is not improving. 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.
Personal Consumption Expenditures (PCE)
Personal consumption expenditures (PCE) finished up with more spending in Q1 2012. April increased 0.3% over March. The increase in March was 0.2%, down 78% from February. The trend is slowing poised for a drop. See chart below. 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)
Personal income (PI) increased in Q1 2012 but has turned down, with a monthly increase going from 0.4% in March, dropping 50% to 0.2 in April. The trend is downward. 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.
Consumer Price Index-Urban (CPI-U)
In May, CPI dropped dramatically, ending at -3.35% annual rates. Falling prices in certain sectors has put us into a deflationary cycle. Look for the Fed to take steps to change this. Their feeling is that slight inflation is much better than deflation. Grade: D+
Full Title: All Urban Consumers - (CPI-U): U.S. city average: All items: 1982-84=100
Civilian Unemployment Rate
Unemployment and underemployment are both creeping upward. Both Gallup and the U.S. DOL are tied at 8.2%. The trend: moving downward is in line with our other indicators, painting the picture of a slowing economy. Grade: C-
Unemployment Rate for Alaska
Alaska’s overall unemployment rate ticked up slightly to 7% in May.
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.)
Industrial Production (IP)
While Industrial Production tanked in March and rebounded in April, it tanked again in May. Going from an annual growth of 12.2% in April, IP sank to -1.13% in May. This is another indicator trending downward, indicating lower GDP for Q2 2012. Grade: D
Full Title: Industrial Production Index: Index 2002=100: SA
West Texas Intermediate (WTI)
The price of Oil on May 14, 2012 was $97.30 per barrel, indicated on the chart below. The price continued to drop on June 26, 2012, ending at $80.21 per barrel. The spot price for West Coast Alaskan North Slope Crude (ANS) on June 28, 2012 dropped to $93.19 a barrel. While our prices are still up, the trend is down. If you have an Alaskan-based business, the future is not looking very good. Oil is still over 30% of our economy. Grade: D
Full Title: Price of West Texas Intermediate Crude; Monthly NSA, Dollars per Barrel
M1 Money Supply
The money supply actually dropped -0.93% in May. The drop in money supply combined with deflation and the slowing economic outlook? Expect the Federal Reserve to infuse more money. Grade: D
Full Title: M1 Money Stock: Billions of Dollars: Not Seasonally Adjusted (NSA)
M2 Money Supply
The money supply when savings is included, i.e. M2, also dropped in May. Down -0.65%, reflecting an actual decrease in savings. Grade: D
Full Title: M2 Money Stock: Billions of Dollars: Not Seasonally Adjusted (NSA)
ECONOMIC NEWS SUMMARY - NOTES:
Grading: Assigned to each indicator, A-F just like in school.
Let me know if you have any comments, questions, or suggestions.
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