Policy Points

19.01.2010 Policy Points Comments Off on GDP Projections – 2009, Quarter 4

GDP Projections – 2009, Quarter 4

On January 29th, the U.S. Bureau of Economic Analysis will release its advance estimate of the Gross Domestic Product during the fourth quarter of 2009. The estimate, which will be subject to two revisions, will feature prominently in assessments of the national economy’s health and debates over the future direction of national policy. However for several reasons, the advance estimate may prove to be relatively high and paint a portrait of an economy that is stronger than it actually is.

Explains Calculated Risk:

In a research note released last night, Goldman Sachs raised their estimate of Q4 GDP from 4.0% to 5.8%. They cautioned that the ‘headline will be an eye-popper’, but that this growth is mostly due to inventory changes: ‘More than two-thirds of our estimated increase comes from a sudden stabilization in inventories’. They also noted ‘anything between 4½% and 7% is possible given the volatility of the inventory data’.

The rest of the note cautions on 2010, and Goldman still sees sluggish growth of just under 2.0% with the unemployment rate peaking in early 2011.

This is what we’ve been discussing – GDP boosted by inventory changes in the 2nd half of 2009, followed by sluggish growth in 2010.

Meanwhile, Paul Krugman of The New York Times places the potential “blip” in historical context:

[Calculated Risk] asks when we last saw growth that high combined with rising unemployment, and says 1981. That’s true. However, the last time we saw an initial report of 5.8 percent growth combined with rising unemployment is much more recent: the first quarter of 2002. The quarter’s growth was later revised down, but at the time there was much unwarranted celebration (unemployment didn’t peak until summer 2003).

19.01.2010 Policy Points Comments Off on November Balance of Trade

November Balance of Trade

In November, the United States imported more goods and services from abroad than it exported, according to the most recent report from the Bureau of Economic Analysis. Compared to the revised October data, the November trade deficit was greater and the levels of of both imports and exports were higher

graph1The graph (left) shows the changes in American imports and exports that have occurred since the start of the recession in December 2007.

The recession has reduced American demand for foreign goods and services and foreign demand for American goods and services (though the fall in the dollar’s value likely is boosting American exports).

Compared to a year ago (seasonally adjusted), U.S. imports were 5.5 percent lower while exports were 2.3 percent lower. In recent months, both imports and exports have been trending upwards, as has been the trade deficit.

graph2Last month, the  U.S. imported $36.4 billion more than it exported (graph right).  When imports of petroleum products are excluded, the trade gap was $27.1 billion.

Compared to one year ago (seasonally adjusted), the non-petroleum trade deficit is 17 percent lower and the overall trade deficit is 15 percent lower.

18.01.2010 Policy Points Comments Off on Around the Dial – Jan. 18

Around the Dial – Jan. 18

Economic policy reports, blog postings, and media stories of interest:

18.01.2010 Policy Points Comments Off on North Carolina’s Achievement Gap

North Carolina’s Achievement Gap

A new report from the North Carolina Budget & Tax Center looks at the progress that North Carolina has made to close the racial achievement gap among public school students. Using  results from end-of-grade tests, high school end-of-course tests, the Scholastic Aptitude Test, and the National Assessment of Educational Progress, the report concludes the following:

These limited efforts have not only failed to fulfill the promise to close the achievement gap, a decade later the gap has not even narrowed. On every measure, minority students are still failing to achieve the success of their peers. American Indian, black, and Hispanic students continue to have significantly lower standardized test scores than white students. They have higher dropout rates and lower graduation rates, are under-represented in programs for the gifted and disproportionally disciplined with suspensions and expulsions.

18.01.2010 Policy Points Comments Off on December Consumer Price Index

December Consumer Price Index

From the U.S. Bureau of Labor Statistics’ report on changes in the consumer price index in December 2009:

On a seasonally adjusted basis, the December Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 2.7 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad based, with the indexes for food, energy, and all items less food and energy all posting modest increases. Within the latter group, a sharp rise in the index for used cars and trucks was the largest contributor to the 0.1 percent increase, while the indexes for airline fares, apparel, and lodging away from home rose as well. In contrast, the indexes for rent and owners’ equivalent rent were unchanged and the index for new vehicles declined.

In an analysis of the data, economist David Rosnick of the Center for Economic and Policy Research observes that low levels of consumer price inflation in recent months are attributable to the fallout from the housing bubble. Writes Rosnick:

After three months of decline, the price indices for rent and owner’s equivalent rent each remained flat in December.  The oversupply of housing resulting from the housing bubble mean these components have been a significant source of price restraint overall.  The non-rent core CPI grew at an annualized rate of 2.5 percent over the last six months compared to 1.3 percent in the overall core.

The fall in rents has been particularly pronounced in the South.  In Washington, DC, where real house prices have fallen more than 34 percent since the peak in early 2006, (non-seasonally-adjusted) rents have fallen at a 1.2 percent rate since September.  In Miami, rents are falling at a 2.6 percent annualized rate, having seen a 50 percent fall in real house prices.  Atlanta, where the housing bubble was less pronounced (having fallen 24 percent in two years), has seen rent fall at a 4.7 percent rate over the last three months.