Economic News Summary:
Milk Toast Economy
By:  David W. Weatherholt, MBA

Printer Friendly
View as PDF

Economic News Summary January 2012

My mother would always give me milk toast when recovering from a bout of stomach flu.  This temporary, bland remedy was meant as a transition to a better diet.  Yet after ten straight quarters of economic recovery, we are still eating “milk toast,” economically speaking.  The post-recession economic recovery from the 1982-1983 recession, after ten quarters, showed 13.4% growth in Gross Domestic Product.  Ten quarters into our current post-recession recovery that rate is a tepid 6.2%-- less than half of our previous recovery.  Why do you think we are still eating “milk toast?”  Overall grade for January: D (December was a D)

Gross Domestic Product (GDP)
January 30, 2012

The “advance” estimate for Q4 2011 GDP is 2.8%.  The “second” estimate will be out February 29, 2012.  My expectations? There will be another downward revision similar to last year, when the 3.2% “advance” estimate turned into 2.3%.  Tepid, the adjective used to describe economic growth, may seem too optimistic.  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)
January 30, 2012

Personal consumption expenditures are reported quarterly.  The 4Q 2011 number will be released January 30, 2012, or while you are reading this summary.  My estimate, 0.30% increases over 3Q 201.  This translates into an annualized rate of 1.2% up ever so slightly from a 1.1%.  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
January 30, 2012

A quarterly indicator, Personal income (PI) has the same release date as PCE, i.e. January 30, 2012.  My projection is that PI grew, in 4Q 2011, 0.30% over 3Q 2011.  Personal income, while still positive, is growing at a much slower rate.  Going from 3.5% annual growth rate to 1.2%.  The money supply, see M1, had a significant increase over the same period.  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)
January 30, 2012

Inflation as measured by the consumer price index in December was up 0.01%, a positive increase over the negative or deflationary November rate.  The Fed increased the money supply, see M1, to combat deflation, and it appears to have worked.  Grade: B+

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
January 30, 2012

The unemployment rate continued dropping, moving down to an 8.5% December rate.  Several months ago, we added the underemployment rate, produced by Gallup, to this chart.  While the Department of Labor has not changed their method of calculating the unemployed, it certainly does not paint the whole picture.  Grade: D-

Unemployment Rate for Alaska
January 30, 2012

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)
January 30, 2012

Industrial production increased in December with a rate of 5.4%.  While monthly volatility is hardwired into this index, the overall trend from the end of the 2008-2009 recessions is down.  Contrasted with the 1982-1983, see graph, which trended upward.  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)
January 30, 2012

The price of oil, still creeping higher, is rising to $101.10 per barrel.  High oil prices are good for Alaska’s oil economy, but they can wreak havoc on the larger U.S. economy.  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
January 30, 2012

The supply of money increased 2.1% in December,  skyrocketing to a 25.2% annualized growth rate.  While an increase in the supply of money curbed deflation, see CPI, it seems like killing mosquitos with a shotgun.  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
January 30, 2012

Savings increased again in December, up a mere 0.98% over November for an annualized rate of 11.8%.  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 Getting Down to Business®.
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

Copyright © 2012 Weatherholt & Associates, LLC all rights reserved worldwide.
Getting Down to Business® is a registered trademark of Weatherholt & Associates, LLC