Archive for January, 2013

10 Thursday PM Reads

My afternoon train reads:

Bill Gross: Be very afraid of the markets (The Buzz) but see Low Volatility Here to Stay? VIX Futures Say Yes (MarketBeat)
• Why the GDP Drop is No Big Deal (The Daily Beast)
• R-Word For U.S. Economy in 2013 is Rebound Not Recession (Bloomberg)
Australia: The New Saudi Arabia? (The Diplomat)
• To Fix the U.S. Economy, Fix Immigration (Bloomberg) see also Meeting America’s Growth Challenge (Project Syndicate)
• The perpetualization of debt (FT Alphaville)
• Republicans think sequestration is better fight (Politico) but see The Idiocy of Sequestration (Slate)
WTF?! Four US states considering laws that challenge teaching of evolution (theguardian)
• 14 Things We Learned from Facebook’s Earnings Call (The Fiscal Times) see also Steve Jobs biopic will be must-see for techies (MarketWatch)
• The Secret To Being Creative (bclund)

What are you reading?



Taxing Transport

Source: The Economist

Category: Financial Press

Comparing Apple vs. Amazon Valuations

Consider these headlines: Reuters: “Amazon shares set record after strong quarterly profit” Fortune: “Amazon profits take a dive“ Than ask yourself: “What is wrong with this pictures?”     click for larger graphic Source: Fortune

Category: Digital Media, Earnings, Valuation

Job Growth, Productivity and Labor Force

Job Growth, Productivity and Labor Force Source: J.P. Morgan Guide to the Markets, December 31, 2012

Category: Digital Media

January 2013 Withholding Tax +13.5% Over 2010

Source: Daily Jobs Update     Matt Trivisonno points us to the latest tax-withholding data. He compares January 2013 with January 2010 — before and after the FICA payroll holiday:   In January 2011, the federal Social-Security tax-withholding rate was slashed by 2%. That tax-cut remained in force for all of 2011 & 2012. In…Read More

Category: Employment, Taxes and Policy

10 Thursday AM Reads

My morning reads: • Wanna Make Real Money? Buy Risk (MarketBeat) • Head Wind Into Tail Wind? (Barron’s) but see also Bull market or prelude to a bust? (msn Money) • “We Are Doneski Gorgeous!” – How Bond Trading On Wall Street Really Works (Zero Hedge) • The only chart you need on the GDP…Read More

Category: Financial Press

Corruption scandal allegedly involves Spanish PM

Japanese industrial output rose by +2.5% in December M/M (+1.4% in November), though lower than the +4.1% gain expected. Production declined by -7.8% Y/Y. The data suggests that the most recent GDP forecast of +2.5% for the current year, issued by the Japanese government is (hopelessly?) optimistic; Some Chinese press reports suggest that a trial…Read More

Category: Think Tank

US & UK Economies CONTRACTED in Q4 2012

Anglo-American Economies Contract Again We’ve noted for years that the U.S. – and the entire globe – faces a another leg down. Last week, we pointed out that Britain was in a triple dip, with its economy contracting .4 percent in the fourth quarter of 2012, and that the British economy is now worse than…Read More

Category: Economy, Think Tank

100 Feet Tall Wave Largest Ever Surfed

Garrett McNamara of Hawaii rode a giant wave in Nazaré, Portugal yesterday. It was claimed to be 100 feet high, although the Guinness Book of World Records has not yet confirmed the measurement (the official measurement is usually smaller than initial estimates). Nazaré has unusual conditions for making huge waves … an undersea trench narrows…Read More

Category: Sports, Weekend

Have Americans Forgotten How to Debate ?

Customer: Um…now look…now look, mate, I’ve definitely had enough of this. That parrot is definitely deceased, and when I purchased it not ‘alf an hour ago, you assured me that its total lack of movement was due to it bein’ tired and shagged out following a prolonged squawk . . . This parrot is no…Read More

Category: Markets, Politics, Psychology, Really, really bad calls

Don’t Expect Consumer Spending To Be the Engine of Economic Growth It Once Was
By William R. Emmons
The Regional Economist | January 2012


Can American consumers continue to serve as the engine of U.S. and global economic growth as they did during recent decades? Several powerful trends suggest not, at least for a while. Instead, new sources of demand, both domestic and foreign, are needed if we are to maintain healthy rates of growth. Unfortunately, this won’t be easy because consumer spending constitutes the largest part of our economy, and replacements for it—more investment, more government spending or more exports—either can’t be increased rapidly or might create unwanted consequences of their own.

How We Got Here: The Consumer-Driven U.S. Economy

It is no exaggeration to say that consumer spending was the dominant source of economic growth in the United States during recent decades. For example:

  • During the 10 years ending in the last prerecession quarter (third quarter of 2007), inflation-adjusted personal consumption expenditures (PCE) grew at a continuously compounded annual rate of 3.47 percent, while overall inflation-adjusted annual growth of gross domestic product (GDP) averaged only 2.91 percent.
  • During that period, the remainder of the economy—consisting of investment (I), government purchases of goods and services (G), and net exports (NX)—grew at only a 1.70 percent inflation-adjusted annual rate.
  • Expressed in terms of its contribution to average quarterly real GDP growth during the decade ending in the third quarter of 2007, PCE accounted for 81.3 percent, while the other components (I, G and NX) contributed only 18.7 percent.
  • Over the quarter-century ending in the third quarter of 2007, consumer expenditures grew, on average, at a 3.50 continuously compounded annual rate, while the rest of the economy (I, G and NX) grew at a 2.79 percent annual rate.
  • PCE accounted for 70.8 percent of average real GDP growth during those 25 years (1982: Q3 through 2007: Q3), while all other components (I, G and NX) contributed
    29.2 percent.

Consumer spending accounts for a majority of spending in all advanced nations. What makes the U.S. experience of recent decades unusual is that the share of consumer spending in GDP was relatively high already before it began to increase substantially further during the 1980s, 1990s and 2000s. In dollar terms, PCE’s share of GDP in the third quarters of 1977, 1987, 1997 and 2007 were 62.5, 65.9, 66.7 and 69.5 percent, respectively. (See Figure 1.) Thus, consumer spending was a large and increasingly important part of the American economy during the decades preceding the recession and remains so today.

Figure 1

Personal Consumption Expenditures (PCE)
as Share of Gross Domestic Product (GDP)

PCE of GDP Chart

Click to enlarge

SOURCE: Bureau of Economic Analysis; quarterly data through 2011:Q3.

International dimensions of U.S. consumer spending. As consumer spending grew rapidly in the U.S., we imported consumer-oriented goods and services even more rapidly. Imports of all goods and services increased at an annual, inflation-adjusted rate of 6.5 percent during the decade ending in the third quarter of 2007. But imports of consumer goods—44 percent of all imports—increased at an annual average rate of 7.5 percent. U.S. imports contributed importantly to growth in many exporting countries around the world. U.S. consumers, therefore, served as the locomotive not only for the U.S. economy but for the global economy. Because we incurred large trade deficits, we required a corresponding inflow of foreign capital to finance them.

These three facets of U.S. and global economic growth—high-spending and low-saving American consumers, large U.S. trade deficits, and substantial inflows of foreign capital—are important contributors to the so-called “global imbalances” long noted by international economists and policymakers. These imbalances may have contributed to the U.S. housing bubble, the global financial crisis and the ensuing Great Recession.1

A neighborly comparison: the U.S. and Canada. To illustrate how striking the growth of consumer spending in the U.S. has been, Table 1 shows decade averages of the four major sectoral expenditure categories for the U.S. and Canada since 1961.

Read More

Category: Think Tank