Posts Tagged ‘Bureau of Economic Analysis’

Interview with Rick Davis of the Consumer Metrics Institute

Interview with Rick Davis of the Consumer Metrics Institute

 

By Ilene

Introduction: Richard Davis is President of the Consumer Metrics Institute (CMI). At the Institute, Rick measures real-time consumer transactions as an objective indicator of consumer demand and the associated health of the US economy. In this interview, we explore the history behind the government-published numbers and the reasons prompting Rick to devise better ways to measure the state of the economy.

History

Ilene: Rick, what got you interested in measuring economic numbers?

Rick: I first became frustrated with the current state of economic data after learning about the history of the collection process and the government’s continued reliance on 70 year old concepts. The government began collecting economic data during Franklin Delano Roosevelt’s (FDR) second term, around 1937. There was concern that the recovery from the 1937-1938 recession (i.e., a recession nested within the Great Depression) was stalling. The economy had been improving significantly from early 1933 through 1936 before the wheels came off the recovery in mid-1937.  FDR’s administration realized it did not have adequate data to monitor the economy and the administration asked the National Bureau of Economic Research (NBER) to look into this problem. Wesley Clair Mitchell set out to find data that would help FDR’s administration address its concerns about the U.S. economy.

Wesley Clair Mitchell was a once-in-a-generation economic genius when it came to data collection. He collected over 500 interesting data sets measuring items such as sales, employment, railcar loadings--items that would allow him to constantly monitor the health of the economy. Most of these things are still measured, and the numbers have evolved into the core reports put out by the Bureau of Economic Analysis (BEA).

What frustrated me was that the data sets measured by Dr. Mitchell were developed in the 1930s and designed to capture those things that were important to the 1930s economy. They are not geared for today’s economy. Things that mattered in the mid-20th century simply cannot completely describe what is happening in the 2010 economy.

For instance, to find out what was happening in the music industry in 1950, someone could have gone to a neighborhood music store, counted the Doris Day 45’s in the retail bins…
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Strong GDP growth with weak fundamentals

Strong GDP growth with weak fundamentals

Courtesy of James D. Hamilton at Econbrowser

The Bureau of Economic Analysis reported today that the seasonally adjusted real value of the nation’s production of goods and services grew at a 5.7% annual rate during the fourth quarter. That’s great news, but…

Rate of growth of real GDP (annual rates), 1947:Q2 to 2009:Q4. Shaded regions represent dates of recessions as declared by NBER.
gdp_growth_jan_10.gif

Three-fifths of that Q4 GDP growth came from the fact that businesses were drawing down inventories more slowly than they had the quarter before. Firms sold $8.5 billion more goods (at a quarterly rate) in 2009:Q4 than they produced, and met those sales by drawing down inventories by $8.5 billion. This reduction in inventories counts as negative investment spending of -$8.5 billion at a quarterly rate (or -$34 B at the annual rate these numbers are typically reported) for purposes of calculating fourth-quarter GDP. Firms sold $34.8 billion more than they produced in 2009:Q3, which amounted to negative inventory investment of -$139 B at an annual rate for Q3. Since this component of investment spending went from -139 to -34, it counts as positive growth when you compare Q3 GDP with Q4 GDP. This mechanism alone contributed 3.4 percentage points to the 5.7% growth rate for real GDP reported for Q4.

To put it another way, if consumers, businesses, foreigners, and the government had all purchased exactly the same quantity of real goods and services in 2009:Q4 as they had in 2009:Q3, more of those sales would have come out of inventory drawdown in Q3 than in Q4, so even without any gain in final sales we would have had to produce more stuff in Q4 than Q3, specifically, 3.4% more stuff at an annual rate. In fact real final sales to consumers, businesses, foreigners, and the government were not stagnant, but grew at a 2.3% annual rate during the fourth quarter, and the two effects combined give us the 5.7% reported GDP growth.

gdp_compon_jan_10.gif

Just because the production gains can be accounted for in terms of slower inventory drawdown doesn’t mean they aren’t real, and doesn’t mean they can’t continue. I noted in July that we might expect inventory restocking to add 1.6% to the annual GDP growth rate…
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Phil's Favorites

Decoding the Fed

 

Decoding the Fed

Courtesy of John Mauldin, Thoughts from the Frontline

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effe...



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Zero Hedge

The Verdict Is In: "Negative Rates Are A Huge Negative For Savers, Low-Income People, And Investors"

Courtesy of ZeroHedge View original post here.

With the IMF's annual meeting now concluded, few topics discussed during the past week which saw the IMF downgrade its outlook for the global economy to the lowest GDP since the global financial crisis...

... evinced as powerful a response as negative interest rates, and for good reason: long seen as the last "red line" of central banks before they are forced to admit defeat, some $15 trillion in debt now trades w...



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Digital Currencies

Five hurdles blockchain faces to revolutionise banking

 

Five hurdles blockchain faces to revolutionise banking

Shutterstock

Courtesy of Markos Zachariadis, Warwick Business School, University of Warwick

Blockchain is touted as the next step in the digital revolution, a technology that will change every industry from music to wast...



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Chart School

Gold Stocks Review

Courtesy of Read the Ticker

Gold stocks are swinging back forth between the range, and a break out swing higher is due. Gold stocks are holding a near perfect Wyckoff accumulation pattern. All should get ready to play this sector. Yet we must recognize that gold stocks are a one of the most crazy rides at the stock market fair, so play very carefully.

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Important channels around the HUI.
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The Technical Traders

Treasuries Pause Near Resistance Before The Next Rally

Courtesy of Technical Traders

Our research team believes the US Treasuries and the US Dollar will continue to strengthen over the next 2 to 6+ weeks as foreign market and emerging market credit and debt concerns outweigh any concerns originating from the US economy or political theater.  Overall, the major global economies will likely continue to see strength related to their currencies and debt instruments simply because the foreign market and emerging markets are dramatically more fragile than the more mature major global economies.

We believe the US Treasuries may surprise investors by rallying from current levels, near price resistance, to levels above $151 on the TLT chart. 

Our belief ...



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Insider Scoop

48 Biggest Movers From Yesterday

Courtesy of Benzinga

Gainers
  • Hepion Pharmaceuticals, Inc. (NASDAQ: HEPA) shares climbed 43.2% to close at $3.58 on Thursday after the company announced the publication of a research article, "A Pan-Cyclophilin Inhibitor, CRV431, Decreases Fibrosis and Tumor Development in Chronic Liver Disease Models," in the peer-reviewed Journal of Pharmacology and Experimental Therapeutics.
  • Synthesis Energy Systems, Inc. (NASDAQ: SES) rose 26.9% to close at $9.20 after surging 12.24% on Wednesday.
  • Assembly Biosciences, Inc...


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Kimble Charting Solutions

Bank Index Breakout? Stock Market Bulls Sure Hope So

Courtesy of Chris Kimble

One of the most important sectors of the stock market is the banking industry and bank stocks.

When the banks are healthy, the economy is likely doing well. And when bank stocks are participating in a market rally, then it bodes well for the broader stock market.

In today’s chart, we look at the Bank Index (BKX).

As you can see, the banks have been in a falling channel for the past 20 months. As well, the banks have been lagging the broader market during this time as well – see the Ratio in the bottom half of the chart above.

That said, th...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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