Saturday, April 30, 2011

USA Weekly Leading Index Drops Below 130 (Charts) *Annualized growth rate dips to +7.5%*

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ECRI Economic Weekly Leading Index and Annualized Growth Rate
*** Updated April 29, 2011 for the week ended April 22, 2011 ***


USA Weekly Leading Index

Overview The USA Economic Weekly Leading Index (WLI) was down -2.4 to 129.3 (preliminary) for the week ended April 22, 2011. This is the largest weekly decrease since May 10, 2010 (-5.0).

Trend The Weekly Leading Index (preliminary) has reversed to a short term downtrend and continues an intermediate term uptrend, and is downtrending long term.

Cycle History The Weekly Leading Index reached a Post-Great Recession peak of 134.9 for the week ended April 30, 2010. A Great Recession low of 105.4 was set for the week ended March 6, 2009.

Weekly Leading Index (Chart) Below is a chart of the ECRI Weekly Leading Index, from the Post-Great Recession cyclical peak 134.9 for the week ended April 30, 2010 through the latest week reported.


USA Annualized Growth Rate

Overview The WLI Annualized Growth Rate (AGR) was down -0.2% to +7.5% (preliminary) for the week ended April 22, 2011. The Annualized Growth Rate has increased or held steady 35 weeks in the past 39 weeks.

Trend The Annualized Growth Rate (preliminary) has reversed to a short term downtrend, the intermediate trend has been upwards, and the long term trend is still below the late 2009 and early 2010 highs.

Cycle History The Annualized Growth Rate reached a Post-Great Recession peak of +27.8% for the week ended October 9, 2009. A Great Recession low of -29.8% was set for the week ended December 5, 2008.

Annualized Growth Rate (Chart) Below is a chart of ECRI WLI Annualized Growth Rate, from the Weekly Leading Index cyclical peak for the week ended April 30, 2010 through the latest week reported. A negative growth % was reached in early June 2010, remained negative for 28 consecutive weeks until the past 18 weeks.


Commentary The current Annualized Growth Rate at +7.5% (preliminary) dipped below last week's 48-week high, the highest since the week ended May 14, 2010 (+9.3%). The current Weekly Leading Index at 129.3 (preliminary) dipped below last week's 49-week high, the highest since the week ended May 7, 2010 (132.0). Both the Weekly Leading Index and the Annualized Growth Rate are in both short-term downtrends, intermediate-term uptrends, and continue at very encouraging levels. The AGR is definitely off the bottom reached in late July, and is holding the gains made. The WLI has dipped again below the benchmark 130.00 level. While this has not been indicative of a robust USA economic expansion, and actually was dismal at the bottom in July 2010, the overall uptrend of the Weekly Leading Index and Annualized Growth Rate is encouraging and indicates an ongoing modest expansion of the USA economy. Per the ECRI, the Weekly Leading Index projects forward approximately 6 months and the Annualized Growth Rate is relative to the WLI. That is, the overall higher WLI in 2010 mitigates some of the formerly negative AGR.


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Economic Cycle Research Institute (ECRI)
* Data courtesy of the Economic Cycle Research Institute *

 
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Thursday, April 28, 2011

USA Weekly Unemployment Claims at 16-Week High (Charts) *4-week average rises above 400K*

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United States Department of Labor: Unemployment Insurance Weekly Claims Report
*** Updated April 28, 2011 for the week ended April 23, 2011 Claims ***


Official Statement by the U.S. Department of Labor (Seasonally Adjusted Data) In the week ending April 23, the advance figure for seasonally adjusted initial claims was 429,000, an increase of 25,000 from the previous week's revised figure of 404,000. The 4-week moving average was 408,500, an increase of 9,250 from the previous week's revised average of 399,250. The advance seasonally adjusted insured unemployment rate was 2.9 percent for the week ending April 16, a decrease of 0.1 percentage point from the prior week's revised rate of 3.0 percent. The advance number for seasonally adjusted insured unemployment during the week ending April 16 was 3,641,000, a decrease of 68,000 from the preceding week's revised level of 3,709,000. The 4-week moving average was 3,697,750, a decrease of 22,750 from the preceding week's revised average of 3,720,500.

Trend The short-term trend is definitely upwards while the intermediate and long term trends continue downwards. The current weekly unemployment claims (preliminary) are above 400,000 for the 3rd consecutive week, after being below 400,00 for 4 consecutive weeks.

Cycle History USA weekly unemployment claims reached a Great Recession cyclical peak of 651,000 for the week ended March 28, 2009. A Post-Great Recession cyclical low of 371,000 was set for the week ended February 26, 2011.

USA Weekly Unemployment Insurance Claims: 4-Week Moving Average (Chart) The chart below shows the 4-week moving average from the week ended August 21, 2010 through the latest week reported. The week ended August 21, 2010 was an intermediate term peak of 488,000. The overall trend had been downwards since this intermediate term peak. The 4-week moving average is considered a better, smoother measure of trend. The 4-week moving average continues both intermediate and long term downtrends. The Great Recession cyclical peak was 643,000 for the week ended April 4, 2009 and the Post-Great Recession cyclical low has been 388,500 for the week ended March 12, 2011.


USA Weekly Unemployment Insurance Claims (Chart) The chart below shows the total weekly unemployment claims from the week ended August 14, 2010 through the latest week reported. A general decline in claims had been indicated, with an intermediate peak of 504,000 reached for the week ended August 14, 2010, the beginning of the chart.


Commentary The latest weekly unemployment claims (preliminary) is the 3rd consecutive week above 400,000 after 4 consecutive weeks below. The current claims (preliminary) are now well above the Post-Great Recession cyclical low of 371,000 for the week ended February 26, 2011. The 4-week moving average (preliminary) is above the Post-Great Recession cyclical low of 388,500 for the week ended March 12, 2011. The current 4-week moving average of 408,500 is a 10-week high and the first time above 400,000 since the week ended February 19, 2011. The short term trend is upwards and the intermediate term and long term trends continue downwards. Claims at  500,000 level is a benchmark, as is the 400,000 level.

Weekly claims first dropped below 500,000 in this Great Recession Cycle for the week ended November 21, 2009 at 477,000. Weekly claims have been below 500,000 since November 21, 2009 with only one exception (504,000 for the week ended August 14, 2010). Claims over 500,000 clearly indicate GDP growth is slowing, if not stalling or contracting, while claims less than 400,000 indicate an economic expansion is underway. Hence the uncertainty over the pace and strength of the USA economic recovery had been heightened as weekly unemployment claims had generally stayed in the mid-400,000s range until recently. Weekly unemployment claims have been below 400,000 for 7 of the past 12 weeks, indicating a continuing economic expansion in 2011.


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USA GDP Growth Plunges to +1.8% in Q1 2011 (GDP Charts) *Qtly GDP $15.01 trillion annualized is all-time high*

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Bureau of Economic Analysis: USA Quarterly GDP Estimate


Official Statement by the Bureau of Economic Analysis is at bottom of this post.

USA GDP Q1 2011 First Estimate The Bureau of Economic Analysis released the Advance Estimate of Q1 2011 GDP which was +1.8% QoQ, for a total GDP of $15.01 trillion (annualized). This is a significant decline from the the Q4 2010 GDP of +3.1%. The Q1 2011 GDP (advance estimate) of +1.8% is the lowest since Q2 2010 (+1.7%). However, the GDP has increased for 7 consecutive quarters, since Q3 2009.

GDP +3.0% Benchmark A +3.0% annualized GDP growth rate is generally accepted as the minimum necessary to generate some jobs growth. Therefore, the USA economic expansion was slowing in Q1 2011 (+1.8%) compared to Q4 2010 (+3.1%), which slows jobs creation and and does not bring down the true, not official, unemployment and underemployment rates. The Big Question: where is the USA economy headed? Three scenarios are usually discussed: 1) a double dip recession whereby the GDP will turn negative, 2) the economy will continue "bottom bouncing" with very slow growth and a continuing high unemployment rate (i.e., less than +3.0% growth), or 3) the bottom is in and GDP growth will accelerate to above +3.0% and continue above, jobs will be created, and the unemployment will continue to decrease. Scenario 2) with USA slow economic growth appears to be the consensus for 2011 with an annual GDP growth projected of approximately +2.5% or greater.

USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), a common GDP measure. As can be seen, there was a negative dip into the Great Recession beginning Q3 2008, a rebound peaking in Q4 2009. The Q4 2010 +3.1% is now the recent recovery peak. The Federal Reserve via the Federal Open Market Committee has resorted to QE2, a second round of quantitative easing, plus indirect quantitative easing in an attempt to boost the economy, increase the GDP, and bring down the unemployment rate. QE2 will be completed at the end of June 2011 although reinvestment of U.S. Treasuries and mortgage-back securities into longer-term securities will continue indefinitely (indirect quantitative easing). The chart covers the USA Quarterly GDP as reported by the Bureau of Economic Analysis from Q1 2005 through the latest quarter reported.


USA Real GDP $ by Quarter (Chart) The chart below is the Real GDP (seasonally adjusted at annual rate) in total current dollars (annualized). As can be seen, the USA economy peaked in Q3 2008, bottomed in Q2 2009, and now has increased 7 consecutive quarters. The Q1 2011 GDP (annualized) has exceeded both 2008 Q3 and the previous peak in Q4 2010 to reach an all-time high. The chart covers the USA Quarterly GDP (annualized) as reported by the Bureau of Economic Analysis from Q1 2005 Q1 through the latest quarter reported.



Commentary The Q1 2011 USA Quarterly GDP (advance estimate) of +1.8% is disappointing and borderline dismal. We continue to estimate a higher Q1 2011 GDP, a maximum of +3.0%, and expect the second estimate on May 26 by the Bureau of Economic Analysis to be greater than +2.0% and hopefully close to or at +2.5%.


The Bureau of Economic Analysis Commentary on the 1st Quarter 2011 GDP (first estimate)

(April 28, 2011) Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.8 percent in the first quarter of 2011 (that is, from the fourth quarter to the first quarter) according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.1 percent.

The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The "second" estimate for the first quarter, based on more complete data, will be released on May 26, 2011.

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a sharp upturn in imports, a deceleration in PCE, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment.


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Tuesday, April 26, 2011

Economic Recovery Stronger Than Projected (GDP Chart, Video) *OECD Interim Outlook*

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OECD: Organisation for Economic Co-operation and Development


OECD Interim Economic Outlook and Forecast:
Economic Growth Perspectives Strengthening As Recovery Becomes Self-Sustained

Official Statement by the Organisation for Economic Co-operation and Development (April 5, 2011) The Growth in the G7 economies outside Japan appears to be stronger than previously projected, with accelerating private sector investment and trade boosting recovery, according to new analysis from the OECD. “The outlook for growth today looks significantly better than it looked a few months back,” OECD Chief Economist Pier Carlo Padoan said during a presentation of the OECD’s latest Interim Economic Assessment. “Growth perspectives are higher all across the OECD area, and the recovery is becoming self-sustained, which means there will be less need for fiscal or monetary policy support.”

Key Points of the report are:
■ Economic growth in the G7 economies outside Japan could rise to an annualised rate of about 3% in the first half of 2011.
■ Unemployment remains problematic, with the OECD-wide unemployment rate 2 percentage points higher than at the onset of the crisis.
■ Inflationary expectations have been creeping upwards, driven by rising commodity prices, but underlying inflation rates are still low, reflecting the large excess capacity that remains in labour and product markets.
■ Instability in the Middle East and North Africa and an associated possible further increase in oil prices could act as a drag on economic activity in the near term.
■ Uncertainty stemming from sovereign debt risks in the euro area periphery could also prove problematic.
■ Non-financial corporate balance sheets look very healthy, which could add momentum to economic growth.

OECD: Momentum Building Behind Economic Recovery (April 4, 2011) OECD chief economist Pier Carlo Padoan says recovery in the major G7 economies (excluding Japan) is stronger than expected, and may no longer be dependent on fiscal and monetary stimulus. Uncertainty and downside risks remain, including impacts of the Japanese natural disasters and nuclear crisis, the risk of inflation and persistent unemployment.


OECD: GDP Growth in the G7 Economies (Excluding Japan) Below is the OECD GDP Actual and Projected by Year for the United States, Germany, France, Italy, United Kingdom, and Canada. These are annual percentage growth rates quarter on quarter (QoQ). The chart is for 8 quarters, from Q3 2009 through Q2 2011. The 2011 data is estimated.



Commentary

The OECD Interim Economic Outlook continues optimistic in reporting the global recovery is gaining strength and is becoming self-sustainable. The reconstruction by Japan as a result of the catastrophic earthquake in March 2011 has been excluded. A positive note in the global economic recovery becoming self-sustained is that the economies reviewed may no longer required monetary and fiscal stimulus.

For Q1 and Q2 in 2011 combined, Canada is projected to have the strongest GDP growth followed by the United States. France and Germany are next followed by the United Kingdom and Italy.


About the OECD

The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world. The OECD has 33 member countries, including the USA and Japan but not China and Russia. OECD brings together the governments of countries committed to democracy and the market economy from around the world to:
Support sustainable economic growth
Boost employment
Raise living standards
Maintain financial stability
Assist other countries' economic development
Contribute to growth in world trade
The Organisation provides a setting where governments compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies.

The 33 OECD member countries are: Australia, Austria, Belgium, Canada, Chili, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, (South) Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, plus the Euro Area and European Union. Accession countries are now are just the Russian Federation. Enhanced Engagement Economies are Brazil, China, India, Indonesia, and South Africa.


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* Data courtesy of the International Monetary Fund *

 
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