Flash Update
FLASH UPDATE - Jan. 21, 2007
JOHN WILLIAMS' SHADOW GOVERNMENT STATISTICS
FLASH UPDATE
January 21, 2007
__________
Weather Distorts Data
4th-Quarter Production Contracts
Annual Alternate Inflation at 25-Year High
M3 Growth Continues to Accelerate
__________
The SGS Alternate Data pages for the CPI and the ongoing M3 have been updated. The CPI includes the annual averages for 2006. In response to popular demand, we shortly will be publishing unadjusted monthly index levels for the SGS Alternate Consumer Price Measure. The M3 file reflects the Federal Reserve's annual benchmark revisions to M1 and M2. -- Best wishes to all, John Williams
Economic Activity Has Not Turned Positive
December's unusual weather patterns appear to have distorted monthly growth to the upside not only for payrolls -- touched upon in the prior Flash Update -- but also for retail sales, industrial production and housing starts. Actual economic activity does not turn quickly or sharply without advance indications. Continued distortions are likely, with the data swinging back the other way in the next couple of months. That said, the inflationary recession has continued to deteriorate.
On the economic front, most of the skewed, seasonally-adjusted 0.88% (+/- 0.7%) monthly gain in December retail sales was due to a downward revision in the level of November sales. Net of revisions, December retail sales were up just 0.27%, well shy of the 0.55% gain reported in December's seasonally-adjusted CPI. Of course. real (inflation-adjusted) growth in December's retail sales was 0.35%, as reported.
The skewed 0.4% monthly gain in December's industrial production followed a downward revision to November's growth, from an initial 0.2% gain to a 0.1% contraction. Consistent with declining economic activity, seasonally-adjusted average industrial production for the fourth quarter fell at an annualized 0.55% pace from the third quarter, where the third quarter was up 4.04% from the second, and the second was up 6.52% from the first. Annual growth for December slowed to 3.7% from 4.7% in November.
Seasonally-adjusted housing starts showed skewed monthly gains in November and December of 6.4% and 4.5%, respectively, but annual change was down 26.2% and 18.0% for the same months in this volatile series. On a three-month-moving-average basis, annual change was down 24.1% in December, versus a 24.6% contraction in November, a contraction consistent with a deep and ongoing recession.
The seasonally-adjusted November trade deficit narrowed to $58.2 billion, from $58.8 billion in October, thanks to a continued, exaggerated decline reported for the prices of petroleum products. Net of those price changes, the goods deficit widened. It is the inflation-adjusted deficit that is used in GDP calculations. At such time as oil prices stabilize in the trade reporting, the deficit will surge anew to record highs.
The money supply measures M1 and M2 went through their annual revisions. As noted by the Fed, "For both M1 and M2, the revisions decreased growth in the first half of 2006 and increased it in the second half." Since M2 represents about 60% of M3, the same pattern applied with the no-longer-published broad measure. The updated SGS Ongoing M3 Measure was up year-to-year by 10.8% in December, versus a 10.5% gain in November, and the growth appears to be accelerating further in January. Such normally would be tickling the financial markets' inflation concerns.
On the inflation front, both the PPI and CPI showed some catch-up, slightly topping market expectations for December. Seasonally-adjusted PPI rose 0.9% for the month, following a 2.0% gain in November. Annual PPI inflation rose to 1.1% in December from 0.9% in November.
The seasonally-adjusted December CPI gained 0.55% (0.15% unadjusted) after being reported as unchanged in November. Unadjusted, year-to-year December CPI was up 2.54% versus 1.97% in November. The annual average inflation rate for 2006 was 3.23%, slightly lower than the 3.39% in 2004, which was the highest annual inflation rate since 1991.
Net of the methodological gimmicks added to CPI reporting in recent decades, annual inflation for the SGS Alternate Consumer Price Measure was 10.0% in December, up from 9.4% in November. The average alternate inflation rate for all of 2006 was 10.2%, up from 10.1% in 2005, and at its highest level since 1981.
Recent actions by the Saudis to talk down oil prices is suggestive not only of some unusual global political factors at play, but also of some possible looming perils for the global markets. Further details follows in the January SGS.
___________________________________________
January's "Shadow Government Statistics" monthly newsletter is targeted for month-end release.
FLASH UPDATE
January 21, 2007
__________
Weather Distorts Data
4th-Quarter Production Contracts
Annual Alternate Inflation at 25-Year High
M3 Growth Continues to Accelerate
__________
The SGS Alternate Data pages for the CPI and the ongoing M3 have been updated. The CPI includes the annual averages for 2006. In response to popular demand, we shortly will be publishing unadjusted monthly index levels for the SGS Alternate Consumer Price Measure. The M3 file reflects the Federal Reserve's annual benchmark revisions to M1 and M2. -- Best wishes to all, John Williams
December's unusual weather patterns appear to have distorted monthly growth to the upside not only for payrolls -- touched upon in the prior Flash Update -- but also for retail sales, industrial production and housing starts. Actual economic activity does not turn quickly or sharply without advance indications. Continued distortions are likely, with the data swinging back the other way in the next couple of months. That said, the inflationary recession has continued to deteriorate.
On the economic front, most of the skewed, seasonally-adjusted 0.88% (+/- 0.7%) monthly gain in December retail sales was due to a downward revision in the level of November sales. Net of revisions, December retail sales were up just 0.27%, well shy of the 0.55% gain reported in December's seasonally-adjusted CPI. Of course. real (inflation-adjusted) growth in December's retail sales was 0.35%, as reported.
The skewed 0.4% monthly gain in December's industrial production followed a downward revision to November's growth, from an initial 0.2% gain to a 0.1% contraction. Consistent with declining economic activity, seasonally-adjusted average industrial production for the fourth quarter fell at an annualized 0.55% pace from the third quarter, where the third quarter was up 4.04% from the second, and the second was up 6.52% from the first. Annual growth for December slowed to 3.7% from 4.7% in November.
Seasonally-adjusted housing starts showed skewed monthly gains in November and December of 6.4% and 4.5%, respectively, but annual change was down 26.2% and 18.0% for the same months in this volatile series. On a three-month-moving-average basis, annual change was down 24.1% in December, versus a 24.6% contraction in November, a contraction consistent with a deep and ongoing recession.
The seasonally-adjusted November trade deficit narrowed to $58.2 billion, from $58.8 billion in October, thanks to a continued, exaggerated decline reported for the prices of petroleum products. Net of those price changes, the goods deficit widened. It is the inflation-adjusted deficit that is used in GDP calculations. At such time as oil prices stabilize in the trade reporting, the deficit will surge anew to record highs.
The money supply measures M1 and M2 went through their annual revisions. As noted by the Fed, "For both M1 and M2, the revisions decreased growth in the first half of 2006 and increased it in the second half." Since M2 represents about 60% of M3, the same pattern applied with the no-longer-published broad measure. The updated SGS Ongoing M3 Measure was up year-to-year by 10.8% in December, versus a 10.5% gain in November, and the growth appears to be accelerating further in January. Such normally would be tickling the financial markets' inflation concerns.
On the inflation front, both the PPI and CPI showed some catch-up, slightly topping market expectations for December. Seasonally-adjusted PPI rose 0.9% for the month, following a 2.0% gain in November. Annual PPI inflation rose to 1.1% in December from 0.9% in November.
The seasonally-adjusted December CPI gained 0.55% (0.15% unadjusted) after being reported as unchanged in November. Unadjusted, year-to-year December CPI was up 2.54% versus 1.97% in November. The annual average inflation rate for 2006 was 3.23%, slightly lower than the 3.39% in 2004, which was the highest annual inflation rate since 1991.
Net of the methodological gimmicks added to CPI reporting in recent decades, annual inflation for the SGS Alternate Consumer Price Measure was 10.0% in December, up from 9.4% in November. The average alternate inflation rate for all of 2006 was 10.2%, up from 10.1% in 2005, and at its highest level since 1981.
Recent actions by the Saudis to talk down oil prices is suggestive not only of some unusual global political factors at play, but also of some possible looming perils for the global markets. Further details follows in the January SGS.
January's "Shadow Government Statistics" monthly newsletter is targeted for month-end release.