Q2 2011 Gross Domestic Product, First Revision

This is it.  The ur-metric.  The Platonic form of economic figures.  Everything else we look at is just an aspect, a shadow, of the Gross Domestic Product.  Everything else measures portions of the economy, but the Gross Domestic Product is the economy.

 

Of course, what we have today isn't all that impressive.  Last month, we got an initial release of data, subject to revision twice.  That data showed that GDP grew at an annual rate of 1.3% for the quarter (substantially missing expectations), and that the GDP price index increased at an annual rate of 3.2% (also badly missing expectations).  Current-dollar personal income increased 4.2%, personal current taxes increased $22.6 billion, and personal outlays increased 3.1%.

 

This month, we get the initial revisions.  So we're a little closer to knowing how the economy actually performed in Q2, but we won't have any actual number until this time next month.  The Econoday-surveyed analysts are pessimistic, expecting the Q2 GDP growth to be revised downwards to 1.1%, although they are also expecting the GDP price index growth to be revised downwards to 2.3%.

 

The Bureau of Economic Analysis provides the actual numbers in their Gross Domestic Product, 2nd quarter 2011 (second estimate) report, and it is a gut punch.  The first revision has adjusted GDP downwards to an annual rate of 1.0% (missing expectations, but still better than Q1's 0.4% growth), while the GDP price index has been adjusted upwards to 3.3%.  Yes, that means that economic growth is trending downward while costs are increasing.

 

So, yeah.  Not a good sign, and I would expect the markets to react in a negative fashion.  Any overwhelming hysteria will probably hold off until around 10:30 or so, because Federal Reserve Chairman Ben Bernanke will be speaking on the economy at a Kansas City Fed conference at 10 AM today.

First Time Jobless Claims

Oh my gosh!  Did he finally write a market news post?  Yes he did!  Wow!

 

Self-sarcasm aside, it's time for the oft-depressing First Time Jobless Claims report.  If you recall from last week, we had a week of bad news.  The 8/6 initial jobless claims were adjusted downwards to 399,000, but the 8/13 advance figure for seasonally adjusted claims came in at an expectations-missing 408,000.  The unadjusted number of actual initial claims for 8/13 was at 342,669 (down 8,701 from the previous week), and the total number of people claiming benefits in all programs fell to 7,336,178 (a decline of 143,737, which we established wasn't as much good news as it sounds like).

 

For the week ending 8/20, the Econoday-surveyed analysts are anticipating tepid improvement.  They're looking for a consensus estimate of 405,000 new claims, with the range between a low of 400k and a high of 415k.

 

For the news on whether or not the analysts are right, and on whether or not crippling despair is likely to crush the spirit of the marketplace, we turn now to the Unemployment Insurance Weekly Claims Report.  Said report begins with the ominous statement:  "Special Factor: As a result of a labor dispute between Communications Workers of America and Verizon Communications, at least 12,500 initial claims were filed in the week ending 8/13/2011 and at least 8,500 initial claims were filed in the week ending 8/20/2011 ."  This has had a noticeable impact on the report.

 

First of all, the initial claims figures for 8/13 have been revised upwards to a level of - wait for it - 412.000.  Yes, that is a 13,000 upwards revision, and it is almost entirely driven by that labor dispute mentioned above.

 

Next, the seasonally adjusted initial claims for 8/20 have missed expectations by a significant degree, coming in at 417,000.  Taking the Verizon news into account, this means that we might have seen the initial claims come in at 409k if the special factor hadn't become a factor.  That would have still been disappointing, of course, but probably not as bad.

 

As far as the actual number of claims go, the total number of initial claims for 8/20 was 341,436, an extremely modest decline in the rate of new claims.  Finally, the number of people claiming benefits in all programs fell (almost) 45k to a level of 7,290.189.  Whether that is good or bad news is left as an exercise for the reader.

FW: First Time Jobless Claims

And, of course, we have the first time jobless claims.  If you're new to this, this report is a measure of how many people filed for unemployment insurance in the previous week.

 

Last week, the figures for the week ending 8/6 were better than expected.  New claims for 7/30 were revised upwards to 402,000 - technically putting us at 20 upwards revisions in 24 weeks, although it did only increase by 2000 this time.  The seasonally adjusted 8/6 initial new jobless claims figures came in at 395,000 (beating  while the actual numbers came in at 351,370.   and the total number of people claiming benefits in all programs fell to a level of 7,479,915.

 

But all that was last week.  For the week ending 8/13, our Econoday-surveyed analysts are a little less optimistic, and are expecting 400,000 new claims.  To check the accuracy of the prediction, we turn to the US Department of Labor's Unemployment Insurance Weekly Claims Report.

 

Right off the bat, the DoL breaks with tradition by revising the 8/6 seasonally adjusted initial claims downward to 399,000[1].  That's nice to see.  On the other hand, the advance figure for seasonally adjusted initial claims for the week ending 8/13 comes in at 408,000, missing expectations.  The unadjusted number of actual initial claims for 8/13 comes in at 342,669 (down 8,701 from the previous week), and the total number of people claiming benefits in all programs comes in at 7,336,178 (a decline of 143,737)[2]..

 

The markets will probably see beating expectations on new claims as a win.  Will it be enough of a win to offset the CPI results?  We should start finding out here in about 5 minutes.

 

[1]  Improving their batting average to 20 upwards revisions in 25 weeks.

[2]  Sounds nice, doesn't it?  But here's your weekly dose of economic malaise:  the Employment Situation report for July 2011 shows an increase in nonfarm payroll employment of only 117,000.  Now, in the month of July, there were 2,060,000 first time jobless claims.  So 2 million people lost jobs, and only 117 thousand people found jobs.  The operative phrase here is "net loss".

Consumer Price Index News Release

 

Bureau of Labor Statistics

The latest Consumer Price Index news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/cpi.pdf and also archived at http://www.bls.gov/news.release/archives/cpi_08182011.pdf. Highlights are below. Consumer prices rise 0.5% in July as gas, food, and shelter prices rise 08/18/2011 On a seasonally adjusted basis, the CPI-U increased 0.5 percent in July after falling 0.2 percent in June. The index for all items less food and energy rose 0.2 percent in July after increasing 0.3 percent in June. HTML | PDF | Local and Regional CPI

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Consumer Price Index

Yesterday, we got to see what inflation is doing to consumers.  Now, it's our turn.  It's time for the CPI, and that means inflation.

 

Well, technically it could also mean deflation.  But nobody really expects that, because the Fed distinctly dreads and detests deflation[1].  And also because, low interest rates notwithstanding, there is a huge sum of money sitting out there waiting to roll out and transform our economy.

 

June's inflation results were, and I seem to be saying this a lot, a mixed bag.  Headline inflation - the Consumer Price Index for All Urban Consumers (or CPI-U) - declined 0.2%, which was right in line with expectations.  Core inflation - the CPI-U sans food and energy - increased 0.4%, which was twice the expected increase.  Most of the decline in headline inflation was driven by declining energy costs, as energy CPI dropped 4.4%.  All of which meant that, looking at the rolling year, CPI-U increased 3.6%, core CPI-U increased 1.6%, food CPI increased 3.7% and energy CPI increased 20.1%.

 

So that was June.  For July, the Econoday-surveyed analysts are feeling a little bearish.  They're calling for a 0.2% increase in CPI-U, and a 0.2% increase in core CPI-U.  But, to find out if they're right, we turn to the Consumer Price Index Summary from the Bureau of Labor Statistics.  And, wow.  They weren't bearish enough.

 

CPI-U increased 0.5% in July, badly missing expectations, driven by a 0.4% increase in food CPI-U and a 2.8% increase in energy CPI-U.  For what it's worth, core CPI-U hit right in line with expectations, coming in at a 0.2% increase.  So yes, the Fed will say that inflation is only 0.2%.

 

For the rolling year, CPI-U is still up 3.6%, core CPI-U is up 1.8%, food CPI is up 4.2%, and energy CPI is up 19.0% (with gasoline up 33.3%).

 

So, yeah.  The markets probably won't be happy with this.  Let's see if First Time Jobless Claims improve their mood.

 

[1]  Say that ten times fast.  I dare you . 

World News!

China

• With US Vice-President Joe Biden getting ready to arrive in China, our single largest sovereign debt holder has spelled out exactly what they want to hear from its debtor:  "As the United States' largest foreign creditor, China has much at stake over US economic policy changes and a stable US dollar[1].  Therefore, Washington's handling of all the related issues in a responsible manner will contribute to the steady growth of China-US ties and the stable development of the world economy given the mounting concern about European and US debt woes and fragile global economic recovery."
• Remember the report from a couple of days ago, claiming that Pakistan had given China access to the wrecked stealth helicopter used in the raid that killed Bin Laden?  The Chinese defence minsitry has denied it, and US officials have been unable to confirm the story.

Libya

• Rebel forces have attacked the oil refinery at Zawiyah, one of the last sources of fuel for loyalist troops and the city of Tripoli.  In related news, the rebel National Transitional Council has also denied negotiating a peaceful conflict to the civil war with the Libyan government.

Syria

• The good news is that "shelling and the sound of tank machineguns [are] subdued today".  The bad news is that Syrian "security personnel" are rounding up hundreds of people in Latakia and forcibly interring them in a stadium.  Condemnations continue to trickle in from the rest of the world[2], with Turkey taking the hardest line to date:  "if the operations continue in Syria and the operations become a regional problem Turkey can naturally not remain indifferent".

United States

• Texas governor and Republican presidential candidate Rick Perry declared that it would be "treasonous" if Ben Bernanke "prints more money between now and the election".  He didn't quite advocate murder as a response, but it's hard to interpret the following comment in a different light:  "If this guy prints more money between now and the election, I don't know what y'all will do to him in Iowa, but we would treat him pretty ugly down in Texas."
• President Obama's response to Governor Perry's remarks?  "You know, Mr. Perry just got into the presidential race.  I think that everybody who runs for president, it probably takes them a little bit of time before they start realizing that this isn't like running for governor or running for senator or running for Congress, and you've got to be a little more careful about what you say.  But I'll cut him some slack.  he's only been at it for a few days now."
• Warren Buffett - yes, that Warren Buffett - has suggested that the US "Stop Coddling the Super-Rich".
• In "you know, they were called coffin nails in the 19th century" news, RJ Reynolds Tobacco, Lorillard Tobacco, Commonwealth Brands, Liggett Group and Santa Fe Natural Tobacco have filed suit against the Food and Drug Administration to stop a new law that would require them to place graphic health warnings on cigarette packets.  The suit claims that the law violates their constitutional right to free speech.

[1]  To quote Xinhua:  "Among China's more than 3 trillion dollars foreign exchange reserves, 1.16 trillion dollars were US Treasuries bonds as of May, according to the US Treasury Department.  'If the greenback devalues by 10 percent to 20 percent, China will suffer another loss of as much as 200 billion to 300 billion in the near future,' according to Chen Xiankui, a professor at Renmin University of China."

[2]  Polonius:  What do you read, my lord?

     Hamlet:  Words, words, words.

Producer Price Index News Release

 

Bureau of Labor Statistics

The latest Producer Price Index news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/ppi.pdf and also archived at http://www.bls.gov/news.release/archives/ppi_08172011.pdf. Highlights are below. In July the PPI for finished goods increases 0.2% and finished core advances 0.4% 08/17/2011 The Producer Price Index for finished goods rose 0.2 percent in July, seasonally adjusted. This advance followed a 0.4-percent decrease in June and a 0.2-percent rise in May. Prices for finished goods less foods and energy rose 0.4 percent. HTML | PDF

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