economic indicators

Q3 Chinese Growth

Q/q Chinese growth in 2018Q3 is estimated at 1.6% (not annualized), after downwardly revised 1.7% rate in Q2. Y/y growth was 6.5%. [1] [2] Source: TradingEconomics. There are two things to remember. First, reported GDP growth is implausibly smooth; even so, this is not proof that GDP is overstated. There is widespread belief that services are undercounted; hence the level of GDP might be higher than reported, even if the growth rate is lower. On this second count of growth rates, we might profitably refer to alternative estimates. The Li Keqiang index (40% electricity consumption, 40% outstanding loan growth, 20% rail freight) is the most common reference. This index provides a different perspective. Source: Ailing Tan. Fernald, Malkin and Spiegel (2013) show that the Li Keqiang index corr...

Is California in Recession? (Part IX)

August employment figures are out. Time to re-evaluate this mid-December Political Calculations assertion that California was in recession. Going by these [household survey based labor market] measures, it would appear that recession has arrived in California, which is partially borne out by state level GDP data from the U.S. Bureau of Economic Analysis. [text as accessed on 12/27/2017] The release provides an opportunity to revisit this question (the 2018Q1 state GDP figures are discussed here). It’s (still) unlikely that a recession occurred. Figure 1: Nonfarm payroll employment in US (black), and in California (blue), both in logs, normalized to 2011M01=0. Blue arrow at timing of Political Calculations recession conjecture. Source: BLS and author’s calculations. According to my work wit...

Manufacturing Employment and Output

Today’s employment situation release depicted a picture of continuing recovery in the labor market. One interesting aspect is what is happening to the tradables sector, which I proxy with the manufacturing sector. There, the advance data indicate a slight decline. Figure 1: Manufacturing production (NAICS) (dark blue), manufacturing employment of production & nonsupervisory workers (red), aggregate hours of manufacturing employment of production & nonsupervisory workers (green), all in logs, normalized to 2017M01=0. Source: Federal Reserve, BLS, via FRED. One observation is not a trend, so of course, one wouldn’t want to infer too much from these data points. However, if manufacturing output follows employment, and next month’s employment numbers follow this month’s trend, then it’...

The Investment Boom…or Not

Fixed nonresidential investment is rising at a rapid clip. However, there are some nuances to the headline story. Figure 1: Nonresidential fixed investment, in billions of Ch.2012$ (blue), and in billions of dollars (red), both SAAR, both on log-scale. Source: BEA, 2018Q2 2nd release. Some sizable portion of recent investment is associated with the mining/drilling/fracking phenomenon. Figure 2: Contributions to overall nonresidential fixed investment growth of structures investment in mining (red), and all else (blue). Source: BEA, 2018Q2 2nd release, and author’s calculations. For the moment, investment looks like it should be sustained. However, should oil prices decline, or the spigot of cash diminish (see McLean/NYT today), then the support coming from this sector might disappear. (Thi...

Thinking about that Surge in Growth

Two points from the 2018Q2 2nd release: GDO is smoother, and a breakout has not yet appeared. First, consider real GDP and real GDO (average of GDP and GDI) growth, q/q SAAR. Figure 1: Real GDP growth (blue), and real GDO growth (red), both q/q SAAR, in log terms. Light orange shading denotes Trump administration. Source: BEA, 2018Q2 2nd release, and author’s calculations. While the quarter-on-quarter GDP growth is high, it’s not unparallelled (see discussion in this post). In addition, GDO, which has shown itself to be a better predictor of revised values of GDP, indicates less rapid growth (see Justin Fox’s article today). Second, returning to GDP, is there evidence of a breakout in growth? Consider recursive one-step-ahead regression residuals. OLS regressions Δyt = const are estimated ...

Yikes! Trade and Economic Policy Uncertainty

First, overall (news-based) economic policy uncertainty: Figure 1: Economic Policy Uncertainty index (blue), and centered seven day moving average (red). Source: policyuncertainty.com accessed 6/11, and author’s calculations. Second, how the trade policy component has jumped in the Trump era. Figure 2: Economic Policy Uncertainty index (blue), and trade policy categorical index (dark red), through March 2018. Source: policyuncertainty.com accessed 6/11.

Measurement and Forecasts of the Puerto Rico Economy

As one of the largest social and humanitarian disasters in the American homeland, remarkably little coverage has been devoted to evaluating the economic consequences of Hurrican Maria. Here is a high frequency index, the GDB-EAI (Government Development Bank-Economic Activity Indicator): Source: Government Development Bank for Puerto Rico. The growth rate of this indicator with GNP at the annual frequency over the 1982-2016 fiscal years is 0.78, R2 = 0.91. It is based on nonfarm payroll employment, electricity generation, gasoline sales and cement production. The indicator is calculated in a manner similar to that used by the Conference Board for its coincident index (description here). The decline from August to December was 14.3% (log terms), or an annualized rate of 43%. Estimates of agg...

Is California in Recession? (Part V)

Back in mid-December, Political Calculations asked if California was in recession. Following last week’s state-level GDP release for 2017Q4 and Philadelphia Fed indices from a week and a half ago — it’s likely no recession occurred, and is currently not occurring. Figure 1: California GDP in millions of Ch.2009$ SAAR (blue, left log scale), California coincident index (red, right log scale). 2018Q3 observation is forecast implied by Philadelphia Fed leading index. Source: BEA, Philadelphia Fed, author’s calculations. California GDP continues to rise, with the most recent period of q/q negative growth in 2017Q1, not in the latter part of the year suggested by Political Calculations. Hence, by the rule of thumb of two consecutive quarters of negative q/q growth, no recession has occurred in ...

Arthur Laffer’s RSPS Economic Outlook Ranking and Subsequent State GDP Growth

Using today’s state level GDP release, we can assess how highly ranked states like Kansas performed subsequently, as compared to poorly ranked states like California. Figure 1: Log California real GDP (blue), Kansas (red), and US (black), normalized to 2011Q1=0. NBER defined recession dates shaded gray. [##] denote Rich States, Poor States 2013 Economic Outlook rankings for 2013 (based on 2012 data). Source: BEA, May 2018, NBER, ALEC, and author’s calculations. Notice that California was ranked 47th in economic outlook by ALEC’s Rich States, Poor States, 2013, using data for 2012. Hence, this ranking should reflect policies enacted by the Brown administration. Kansas ranked 11th in that year, reflecting 2012 data and policies of the Brownback administration. If one wanted to take into acco...

Six Pictures of the US Macroeconomy

Nowcasting the US Economy: Figure 1: Reported GDP (blue bars), Atlanta Fed GDPNow (red), NY Fed nowcast (green), and Macroeconomic Advisers (black), all in billions Ch.2009$ SAAR, on log scale. Source: BEA 2018Q1 advance; Atlanta Fed (4/26), NY Fed (4/27), Macroeconomic Advisers (4/26). See Jim’s recent post on the advance release. Tracking GDP using GDO: Furman (2016) notes the fact that GDO better predicts GDP than lagged GDP. Figure 2: GDP (blue), GDI (red), GDO (green), as average of GDP and GDI, all in billions Ch.2009$ SAAR, on log scale. Source: BEA 2018Q1 advance. The fact that GDO growth is lower than that of GDP is suggestive for what 2018Q1 will be revised to. Conditional vs. Unconditional Forecasts: Figure 3: GDP (blue), ARIMA(1,1,1) dynamic forecast over 1967-2018Q1 (red), ARI...

A little slower growth

The Bureau of Economic Analysis announced today that U.S. real GDP grew at a 2.3% annual rate in the first quarter. That’s a modest slowdown from the 3.1% average we saw over the previous 3 quarters. 3.1% is also the average growth rate for the U.S. economy over the last 70 years. But the Q1 reading is pretty much on par with the 2.2% average growth since the Great Recession ended in 2009. Real GDP growth at an annual rate, 1947:Q2-2018:Q1, with the 1947-2018 historical average (3.1%) in blue and post-Great-Recession average (2.2%) in red. Slightly softer first-quarter growth is something that’s become pretty typical in the recent data. Since 2010, first-quarter real GDP growth averaged 1.3% at an annual rate, compared with 2.5% for the other three quarters. We get a smoother impression lo...

Yield Curves Flattening in High Income Countries

A recent article on the predictive abilities yield curves (Shrager/Quartz) includes a nifty interactive which allows you to look at yield curves over time. Below, I do a snapshot comparison, across the world. Figure 1: Ten year-three month term spread (blue bars), as of 9 July 2016. China observation is Five year-three month term spread. Euro ten year rate is for Germany. Source: Economist, data as of April 18. It’s hard to compare across countries, particularly without knowledge of what is the average term premium in each country. (See Chinn and Kucko (2015) for a cross country assessment of the predictive power of yield curves for eocnomic activity and recessions.) However, one can easily compare what the spreads have done since a last check (in this case July of 2017). This is shown in ...

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