Sunday, May 1, 2011

USA & Global Economy: Expansion Slows (Review, GDP Charts) *April 2011 Month End Economic Review*


USA and Global Economy: Monthly Economic Review

Overall, both the USA and Global Economy continue expanding, but at a slower rate.

Global Uncertainties
1) First concern for weeks has been high oil prices because of the Libyan revolution and other Arab uprisings. U.S. crude and Brent crude closed April at $113.93 and $126.03, respectively. Persistent higher gas prices are now becoming a drag on USA and Global economic growth.
2) Second concern has been the civil war in Libya plus other uprisings in the Middle East, which then affects the oil prices, the first concern. The civil unrest also increases risk that the USA and EU countries may become more involved militarily.
3) Third concern is the catastrophic earthquake that hit Japan in March, the world's third largest economy. The resulting nuclear radiation crisis and the negative economic impact of this ongoing crisis and possible global implications are beginning to show in economic output both for Japan and on the worldwide economy.
4) Fourth concern is now the USA debt of $14+ trillion, the heated political and social debate, and the S&P cutting the USA to a negative outlook for sovereign credit.
5) Fifth concern is the EU sovereign debt crisis, which waxes and wanes in its effect on equity and bond markets.
6) Sixth concern, a medium and long term uncertainty, is the increasing demand by emerging national economies (e.g. BRIC: Brazil, Russia, India, China) for commodities which then increases prices worldwide.

USA Uncertainties
1) USA financial system continues with problems and weaknesses, including a foreclosure fiasco and crisis. The worst does appear to be over.
2) USA unemployment and underemployment rates remains high. USA weekly unemployment insurance claims are once again at 400,000+. The USA economy is not generating an adequate number of new jobs.
3) USA residential real estate continues in a market depression and commercial real estate is not much better.
4) USA cannot stop deficit spending therefore the USA has an ever increasing national debt.
5) USA local and state governments are in fiscal crisis and there are less government workers.
6) Federal Reserve continues quantitative easing aka monetizing and devaluing the U.S. Dollar. This is to end at June 30, 2010. Indirect quantitative easing, reinvesting principal and interest payments received by the Fed, will continue.
7) USA Q1 2011 GDP (advance estimate by the Bureau of Economic Analysis) of +1.8% is inadequate and borderline dismal.
There does appear to be a Day of Reckoning for the USA on the horizon, although no one really knows when. The aftermath of the Credit Bubble and Great Recession will linger for years. However, the USA GDP has grown for 7 consecutive quarters through Q1 2011, but the growth is not adequate. Currently the risk of a double dip recession appears much diminished, if not totally nonexistent. A stalling of the USA economic expansion in 2011 is now more probable.

USA and World Economic Data
Below are March blog post headlines from Boom Doom Economy,  Financial ControlsBaidu Planet, and Matrix Markets summarizing select economic data and news, in approximately reverse chronological order. This is not a comprehensive list of key economic data. It is selected economic data that gives a general idea of the overall economic conditions, with the exceptions and additional concerns and uncertainties noted in the preceding paragraph. Much is lagging economic data from March and even February. However, trends can be ascertained and it does appear that economic expansion did continue in both the USA and on a Global scale, but at a slower pace.

USA and World GDPs
Further below is the historical and projected USA GDP per the U.S. Bureau of Economic Analysis. Also further below are the projected GDPs for the World, USA, the Euro Area, China and Japan per the latest IMF World Economic Outlook. The economic data for April will now begin and should indicate continuing, but slowing, economic expansion. Q4 2010 was better than initially projected for the USA and Global economy, but not as robust as hoped for. In Q1 2011 there was a pronounced slowing of USA and Global economic expansion. Whether the pace of the economic expansion further slows or accelerates in Q2 2011 is the concern now and is clouded by the high oil prices, the Japan natural disaster, and ongoing Middle East turmoil.

USA Positive Economic Data and News
● S&P 500 Rises to Highest Close Since June 9, 2008! (Chart) *VIX continues near June 2007 lows*
● Federal Reserve: "USA Economic Recovery Proceeding at a Moderate Pace" (GDP Chart) "Labor market improving gradually"
● USA Consumer Confidence Up in April (Charts) "Consumers’ short-term outlook improved slightly"
● USA Monthly Leading Economic Index at Post-Recession High! (Chart) "Strengthening business conditions"
● USA Consumer Sentiment Rises in April (Charts) *Concerns over high gas prices ease*
● Fed Beige Book: "USA Economic Activity Generally Continued to Improve" (Review) "Labor markets generally stronger"
● USA Industrial Production at Post-Recession High! (Chart) *Highest since August 2008*
● USA Monthly Retail & Food Sales at All-Time High! (Charts) *March sales continue upward trend*
● USA Services Sector: Continuing Growth at Slower Rate in March (Chart) *Non-Manufacturing Index expands for 16th month*
● USA Manufacturing PMI: Rapid Growth Continues (Chart) March: Economy expands for 22nd month

USA Neutral and/or Negative Economic Data and News
● USA Consumer Confidence at 3-Month Low (Charts) March: "Sharp decline in expectations"
● Bank Failure Friday: FDIC Seizes 5 Banks! (Charts) *The Park Avenue Bank most costly in 2011*
● Bernanke Conducts First Federal Reserve Press Conference (Review, Video) *Deficit is top priority long-term*
● Federal Reserve Lowers USA GDP Projection for 2011 (Charts) "Unemployment rate estimate lowered for 2011"
● USA Weekly Leading Index Drops Below 130 (Charts) *Annualized growth rate dips to +7.5%*
● USA Weekly Unemployment Claims at 16-Week High (Charts) *4-week average rises above 400K*
● USA GDP Growth Plunges to +1.8% in Q1 2011 (GDP Charts) *Qtly GDP $15.01 trillion annualized is all-time high*
● USA Consumer Credit Increases in February (Charts) *Revolving credit at 77-month low*
● USA Unemployment Rate Drops to 8.8% (Charts) *Jobs growth +216K in March*

Global Positive Economic Data and News
● China Monthly Leading Economic Index Increases (Chart) *Just below post-recession high*
● Economic Recovery Stronger Than Projected (GDP Chart, Video) *OECD Interim Outlook*
● Global Recovery Gaining Strength (Video, GDP Charts) *IMF World Economic Outlook*
● Global Services Sector Expansion Slows in March (Chart) *20th month of expansion*
● Global Manufacturing at 3-Month Low in March (Chart) *Remains robust: 21st month of expansion*
● China Manufacturing Index Up Slightly (Chart) *Pace of expansion has stabilized*

Global Neutral and/or Negative Economic Data and News
● Global Sovereign Risk: The Top 10 Most Risky Debtor Nations (Lists) *April 2011 Month End Review*
● Global Economic Expansion Slows Sharply in March (Chart) "Substantially influenced by Japan"
● High oil prices as a result of the Arab revolutions could materially slow the economic expansion

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. Some additional review is here [USA GDP Growth Plunges to +1.8% in Q1 2011 (GDP Charts) *Qtly GDP $15.01 trillion annualized is all-time high*].

International Monetary Fund: GDP Growth Projections by Year (Chart) Below is the IMF GDP Growth Projections by Year for the World, USA, the Euro Area, China, and Japan. These projections are from the April 2011 IMF World Economic Outlook. Some additional review is here [Global Recovery Gaining Strength (GDP Charts, Video) *IMF World Economic Outlook*].


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