Economic News Summary: Unusually Uncertain?
July, 2010
Economic News Summary July 2010
Confidence and stability are critical to a healthy economy. The struggling U.S. economy now faces extremely strong headwinds. Ben Bernanke, Chairman of the Federal Reserve, told the Committee on Financial Services, U.S. House of Representatives, “Businesses cite policy and economic uncertainty as well as possible taxes arising from the debt situation.” He went on to say, “Uncertainty in general is a constraint on their [businesses] activities and their expansion.” He described the economic outlook as “unusually uncertain.” Wow!
The “Index of Small Business Optimism” has been reported by the National Federation of Independent Business (NFIB) in quarterly surveys since 1973 and monthly surveys since 1986. The lowest reading ever recorded by this index was 80.1 in the second quarter of 1980; the second lowest reading in the 35 year history of this index was 81.0 in March of 2009. This month the Index stood at 89, falling again below 90. The persistence of Index readings below 90 is unprecedented. This Index has been below 93 every month since January 2008 (30 months), and below 90 for 23 of those months, all readings typical of a weak or recession-mired economy .
See my grade assigned to each of these economic indicators, A-F just like in school.
My overall grade for July: C
Consumer Price Index-Urban (CPI-U)
July 28, 2010
The consumer price index is extremely low, at an annualized rate of less than 1%-- significantly below the average of 2.6% over the past 10 years. The bigger concern is deflation and one being watched closely by the Federal Reserve. 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 less food and energy.
Personal Income
July 28, 2010
Personal income as of May 2010 was up 4.5% over Q1 2010 and is now above 2008 levels. Grade: B-
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)
July 28, 2010
Personal consumption increased in May 2010 but was up only 0.13% over Q1 2010. Consumer spending can spur an economic recovery. This meager increase demonstrates that this is not happening.
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
July 28, 2010
The rate dropped in June to 9.5%-- the same rate as June of 2009. Job growth in the private sector is still anemic. 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)
July 28, 2010
Gross domestic product for Q1 2010 was revised down to an annualized rate of 2.7% from 3.2%. The “advanced estimate” of GDP for Q2 2010 will be released on Friday. At $13.2 trillion, estimates for the 1st quarter were at an annual rate of 3.24%, down from the revised 4th quarter annual rate of 5.5%. The continued growth in Industrial Production indicates that GDP continues to move in a positive direction. Grade: C
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)
July 28, 2010
The price of West Texas Crude dropped again to $73, down 3%. With the Gulf Oil spill and the summer driving season, it is hard to understand why oil prices are dropping. 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
Industrial Production (IP)
July 28, 2010
Industrial production increased a meager 0.89% in June. A month-to-month increase of less than 1% is very close to negative growth, however, sharp swings are not good. 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.
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