Thursday, May 26, 2011

USA GDP Growth 2nd Estimate +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 Second Estimate The Bureau of Economic Analysis released the Second Estimate of Q1 2011 GDP which remained at +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 (second 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 and indicative of a more robust recovery. 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 yet again, 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 slightly 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 (second estimate) of +1.8% is disappointing and borderline dismal. We had continued to estimate a higher Q1 2011 GDP, a maximum of +3.0%, and had hoped the second estimate to be greater than +2.0% and perhaps close to or at +2.5%. Any such upward revision can only be hoped for now with the final estimate on June 24. Bureau of Economic Analysis Q1 2011 GDP highlights were:
The following components contributed to the slowdown in real GDP:
Imports turned up sharply; the largest contributor was a large upturn in petroleum and products.
Consumer spending slowed, partly reflecting a slowdown in autos and parts.
Government spending, mainly federal defense spending, fell much more in the first quarter than in the fourth quarter.
Business investment slowed, mainly due to a downturn in structures. The first-quarter decrease in structures was the largest since the first quarter of 2010.
These contributions to the slowdown in growth were partly offset by a large upturn in inventory investment.


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

(May 26, 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 "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.1 percent.

The GDP estimates released today are based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was also 1.8 percent (see "Revisions" on page 3).

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.


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USA Weekly Unemployment Claims Increase to 424,000 (Charts) *4-week average dips to 438,500*

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United States Department of Labor: Unemployment Insurance Weekly Claims Report
*** Updated May 26, 2011 for the week ended May 21, 2011 Claims ***


Official Statement by the U.S. Department of Labor (Seasonally Adjusted Data) In In the week ending May 21, the advance figure for seasonally adjusted initial claims was 424,000, an increase of 10,000 from the previous week's revised figure of 414,000. The 4-week moving average was 438,500, a decrease of 1,750 from the previous week's revised average of 440,250. The advance seasonally adjusted insured unemployment rate was 2.9 percent for the week ending May 14, a decrease of 0.1 percentage point from the prior week's unrevised rate of 3.0 percent. The advance number for seasonally adjusted insured unemployment during the week ending May 14 was 3,690,000, a decrease of 46,000 from the preceding week's revised level of 3,736,000. The 4-week moving average was 3,742,250, an increase of 7,750 from the preceding week's revised average of 3,734,500.

Trend The short-term trend has reversed to upwards. The intermediate-term (6 months) is also upwards. The long-term (12 months) trends continue downwards, but at a slower rate. The current weekly unemployment claims (preliminary) are above 400,000 for the 7th consecutive week, after being below 400,00 for 4 consecutive weeks. 2011 average weekly claims year-to-date are lower than 2011 average weekly claims. 

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 4-week moving average is considered a better, smoother measure of trend. 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 until recently, 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 7th consecutive week above 400,000 after 5 consecutive weeks below. The current claims (preliminary) continue above the Post-Great Recession cyclical low of 371,000 for the week ended February 26, 2011. The 4-week moving average (preliminary) continues above the Post-Great Recession cyclical low of 388,500 for the week ended March 12, 2011. The current 4-week moving average is just below last week's 26-week high. The 2011 average weekly claims is 412,286 (preliminary). The 2010 average weekly claims was 457,481.

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 a more robust economic expansion is underway.


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Wednesday, May 25, 2011

Global Recovery Firmly Underway, But Surrounded by Risks (GDP Charts, Video) *OECD Economic Outlook*

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OECD: Organisation for Economic Co-operation and Development


OECD Economic Outlook and Forecast

Official Statement by the Organisation for Economic Co-operation and Development (May 24, 2011) The global recovery is firmly under way, but is taking place at different speeds across countries and regions, according to the OECD’s latest Economic Outlook. Historically high unemployment remains among the most pressing legacies of the crisis. It should prompt countries to improve labour market policies that boost job creation and prevent today’s high joblessness from becoming permanent, the report said. World gross domestic product (GDP) is projected to increase by 4.2% this year and by 4.6% in 2012. Across OECD countries GDP is projected to rise by 2.3% this year and by 2.8% in 2012, in line with the previous forecasts of November 2010.

Risks Remain High
■ Upside risks
Stronger-than-projected final demand momentum
Additional short-term impacts from structural reform
■ Downside risks
Renewed increases in commodity prices
Deeper-than-projected slowdown in China
Continuing concern about public debt sustainability in some OECD countries
Lingering weakness in property markets
Ongoing financial fragility in the euro area
If downside risks interact, their cumulative impact could weaken the recovery significantly.

OECD: The Global Recovery Is Strengthening (May 24, 2011) Global recovery is progressing, but multiple risks remain. OECD chief economist Pier Carlo Padoan talks about the Economic Outlook. For more info: www.oecd.org/oecdEconomicOutlook


OECD: GDP Growth Projections by Quarter (Chart) Below is the OECD GDP Growth Projections by Quarter for the USA, Japan, the Euro Area, and the entire OECD. These are annualized percentage growth rates. The chart is for 10 quarters, from Q3 2010 through Q4 2011. The USA lowest quarter is +1.7% in Q1 2011 and the highest is +3.4% in Q4 2012. The Japan lowest quarter is -3.7% in both Q1 and Q2 2011 and the highest is +5.3% in Q3 2011. The Euro Area lowest quarter is +1.0% in Q4 2010. The highest quarter is +3.4% in Q4 2012. The Total OECD lowest quarter is +2.0% in Q4 2010 and the highest is +3.2% in Q4 2012. Japan has a negative GDP for 3 consecutive quarters, from Q4 2010 through Q2 2011. The Q1 and Q2 2011 negative GDPs for Japan are the result of the catastrophic earthquake, tsunami, and nuclear crisis.


OECD: GDP Growth Projections by Year (Chart) Below is the OECD GDP Growth Projections by Year for the USA, Japan, the Euro Area, and the entire OECD. These are annual percentage growth rates. The chart is for 3 years: 2010, 2011, and 2012. The USA was +2.9% for 2010, a lower +2.6% in 2011, and then increases to +3.1% in 2012.  Japan was a strong +4.0% in 2010, dropping to a negative -0.9% in 2011 as a result of the catastrophic earthquake, and then rebounding to +2.2% in 2012. The Euro Area was a mediocre +1.7% in 2010, continues a flat +1.7% in 2011, and increases slightly to +2.0% in 2012. The Total OECD was an adequate +2.9% in 2010, dropping to +2.3% in 2011, and rebounding to +2.8% in 2012.


OECD: GDP Projections by Year for BRIC (Chart) Below is the OECD GDP Growth Projections by Year for the BRIC countries (Brazil, Russia, India, China). These are annual percentage growth rates. The chart is for 3 years: 2010, 2011, and 2012. Brazil was a strong +7.5% in 2010, slows to +4.1% in 2011, and then increases slightly to +4.5% in 2012.  Russia was +4.0% in 2010, increases to +4.9% in 2011, and then slows to +4.5% in 2012. India was an amazing +10.4% in 2010, slows to a still respectable +8.5% in 2011, and increases slightly to +8.6% in 2012. China was a very strong +10.3% in 2010, slows to +9.0% in 2011, and rebounding to +9.2% in 2012.



Commentary The OECD reports the global recovery is strengthening and firmly underway, but surrounded by risks. Ongoing risks include persistent high oil and commodity prices, sovereign debt sustainability (e.g., USA, UK, Greece, Ireland, Portugal, Spain), weakness in property markets (especially USA), and financial fragility in the Euro Area. The OECD also lists a "deeper-than-projected slowdown in China" as a risk (GDP projected at +10.3%, +9.0%, and +9.2% for 2010, 2011, and 2012, respectively). The OECD projections show Japan with a 2011 GDP of -0.9% for 2011, slumping due to the catastrophic earthquake. Overall, the OECD Economic Outlook is somewhat positive, but a robust recovery is not projected for the OECD.



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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International Monetary Fund (IMF)
* Data courtesy of the International Monetary Fund *

 
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