Tag Archives: Economic Analysis

News, Politics, Government

Second Quarter GDP Beats Expectations At 1.7%, Bernanke Still Set To Taper This Year

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By Agustino Fontevecchia, Forbes Staff

The U.S. economy continues to muddle along, failing to gain momentum in the face of fiscal drag caused by Washington’s sequester.  The Bureau of Economic Analysis released its first second quarter GDP estimate on Wednesday, showing real output expanded 1.7%, substantially above estimates.  Yet downward revisions to the past four quarters suggest underlying trend growth hasn’t picked up at all.  The silver lining: demand, which pushed up imports and supported consumption spending.  In terms of what this means to Fed Chairman Ben Bernanke, it suggests he will move forward with plans to taper quantitative easing (QE) before the end of the year. …read more

Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

Comprehensive GDP Revision and Advance Estimate for the Second Quarter of 2013

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By Alan B. Krueger

This morning the Bureau of Economic Analysis released a comprehensive revision to the National Income and Product Accounts, covering the full history of data since 1929. The revision showed that the recovery from the Great Recession has been slightly faster than previously reported, with real gross domestic product (GDP) expanding by a cumulative 8.5% from 2009:Q2 to 2013:Q1, compared to the previous estimate of 8.1% growth over that period. Including the advance estimate for 2013:Q2, real GDP has risen by 9.0% since the business-cycle trough in 2009:Q2 (see chart). In addition, real GDP surpassed its pre-recession peak in 2011:Q2, two quarters sooner than was reported prior to the revision, and is 4.4% higher than it was at the business-cycle peak in 2007:Q4.

The revision also showed that while the contraction during the Great Recession was slightly less severe than previously reported, it remains the largest decline since quarterly data became available in 1947. Cumulatively, real GDP fell by 4.3% during the recession, less than the 4.7% drop previously reported. The steep drop in economic activity caused by the recession makes it imperative that more work is done to raise economic growth and speed job creation.

The comprehensive revision to the national accounts, which is the first since July 2009, includes additional source data received by the Bureau of Economic Analysis, as well as methodological changes designed to better reflect the evolving nature of the U.S. economy. For instance, the GDP data released today incorporates input-output tables derived from the once-every-five-years Economic Census, and adopts an expanded definition of business investment that includes spending on research and development (R&D) and the creation of original works of art like movies. All told, these and other changes raised the level of GDP in the first quarter of 2013 by $551 billion at an annual rate (or 3.4%), from $16.0 trillion to $16.5 trillion.

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Source: FULL ARTICLE at The White House

Business, Finance, Occupation & Industry

This State Quietly Became an Economic Powerhouse

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By Travis Hoium, The Motley Fool

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Over the past decade, no state has grown faster than North Dakota. It leads in GDP growth and personal income growth, and it has a wide lead in oil production growth. So how did one of the coldest, flattest, least populated states in the country become an economic hot spot?

The bang that led to a boom
Oil was discovered in western North Dakota in the Bakken formation in 1951, and for a long time there’s been a limited amount of drilling in that part of the state. Until recently, the technology didn’t yet exist to extract most of the oil trapped between rocks — shale oil — at an economical cost.

In the early to mid 2000s, companies such as Halliburton developed the technology to extract both oil and gas from shale plays economically, unlocking energy plays across the country. One of the largest plays in oil was the Bakken Shale in western North Dakota and eastern Montana, and companies flooded in to pick up as much land as possible.

Today, Continental Resources , Whiting Petroleum , Statoil , and Kodiak Oil & Gas have access to nearly 2 million combined acres ,equivalent to 1,280 square miles. They’re dotting the plains of western North Dakota with drilling rigs and production wells. All of this drilling has led to massive growth in oil production, which brings economic development and jobs to this once forgotten state. For a visual showing how fast oil production grew, click here to see a 25-year EIA time lapse of energy production in the Bakken. 

All of this oil production has been fabulous for the economy and the residents of North Dakota. Over the past decade, North Dakota‘s GDP has grown at an annual rate of 4.04%, which compares with 0.54% nationally. Only Oregon can compare, with 3.36% growth. Every other state in the country has grown at a compound rate of less than 2% over that time.

More jobs than the prairie can handle
The explosion in GDP growth hasn’t been enjoyed just among the oil big wigs: There’s been huge growth in personal incomes as well. According to the Bureau of Economic Analysis, since 2005 per capita personal income has grown at a compound rate of 7.25% in North Dakota, which is more than a 50% increase in salary over six years. That compares with just 2.69% in the U.S. and 4.19% in second-place Louisiana, which also benefits from the growth in oil production. Here’s a look at the top five states for personal income growth since 2005. 

Amazingly, there are 11 counties in North Dakota that have seen per capita personal income grow 11.48% or more per year over that time, nearly doubling salaries.

If you’re interested in one of these high-paying jobs, you might have to find a home on

From: http://www.dailyfinance.com/2013/04/14/how-north-dakota-quietly-became-an-economic-powerh/

Business, Finance, Occupation & Industry

Let's Not Rely on This Outdated Metric

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By Dan Newman, The Motley Fool

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We live in the Information Age, but do our economic indicators? Does GDP capture the outputs of every new technology, especially when so many new technologies seemingly charge nothing for their use? And how does paying attention to GDP over other measures affect economics, policy, and society? 

A closer look is needed.

Hidden value
GDP has long ignored many value-creating activities like parenting. Such a value, though, is likely to be relatively constant over centuries. But recently, as more value arises from computers, the Internet, and information proliferation, GDP may not be measuring a huge economic shift. Take a look at the make-up of GDP over the period in which the Internet and computer use became mainstream:

Source: Bureau of Economic Analysis.

The percentage of GDP added by information, communications, and technology-producing industries has remained remarkably constant, hovering around 4%. This, while the number of Internet users increased from 36% of the population to nearly 80% — while our society transitioned from yearbooks to Facebook, newspapers to iPads, and mail to Gmail. This is the “Clothesline Paradox,” explained well by Tim O’Reilly:

You put your clothes in the dryer, and the energy you use gets measured and counted. You hang your clothes on the clothesline, and it “disappears” from the economy. It struck me that there are a lot of things that we’re dealing with on the Internet that are subject to the Clothesline Paradox. Value is created, but it’s not measured and counted. It’s captured somewhere else in the economy.

O’Reilly argues that GDP is good at measuring value capture instead of value creation. As an example, take Japan. Since 1989 the country has averaged GDP growth of 1%, which earned the intervening era the nickname “the lost decades.” But even though GDP was slow to grow, life expectancy and trade increased — along with, arguably, the overall quality of life in the country. While Japan‘s GDP demonstrates a slightly-better-than-stagnant economy, plenty of other measures paint a different picture.

Capturing versus creating
Those companies that have captured some of the value of the Information Age have performed spectacularly. Companies that have failed to transition are fighting to hold on to traditional revenue streams, and GDP might become distorted as a result. Look at News Corp. , which recently threatened to pull its over-the-air broadcasts and move to cable because of a start-up, Aereo, that captures its broadcast with small antennas and streams the content wherever a user might be. News Corp. typically captures value through fees for rebroadcasting its content, but Aereo disrupts that revenue stream, and although News Corp. still creates the content, Aereo collects the value. The measured GDP value of those rebroadcasting fees disappears and may not be totally recaptured or built upon by Aereo, because Aereo gives away a limited version of its service for free.

Former executive Irving Wladawsky-Berger writes on another example of creating value versus capturing value internally at IBM :

The bulk of the value of

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

The Fight Between Wages and Profits: When Will It End?

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By Morgan Housel, The Motley Fool

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Wages and salaries have been growing slower than the overall economy for decades. After-tax profits have been growing much faster than the economy. 

It’s time for an update of a chart we’ve posted before:

Source: Federal Reserve, Bureau of Labor Statistics, Bureau of Economic Analysis.

The drift between these two adds up to an enormous sum. Peter Orszag wrote last year: “If labor compensation hadn’t fallen so much as a share of national income, American workers would be enjoying about $750 billion more in take-home pay.”

Now, this chart isn’t as simple as it looks. Part of the reason wages take up a smaller share of the economy is because benefits like health insurance take up a larger share of workers’ total compensation. And part of the reason corporate profits have grown as a share of the economy is because of a shift from industrial-commodity corporations to technology firms that naturally have higher margins.

But there is no doubt that part of the swing between wages and profits is explained by one growing at the expense of the other. This is natural — we’ve been through two other cycles since 1900 — but I wonder how long the current cycle can last. Take this recent story about Wal-Mart :

Walmart, the nation’s largest retailer and grocer, has cut so many employees that it no longer has enough workers to stock its shelves properly, according to some employees and industry analysts. Internal notes from a March meeting of top Walmart managers show the company grappling with low customer confidence in its produce and poor quality. “Lose Trust,” reads one note, “Don’t have items they are looking for — can’t find it.”

There comes a point where it is in capital’s best interest to increase labor’s share of output. If Wal-Mart is any indication, we’re probably pretty close to that point. 

The article The Fight Between Wages and Profits: When Will It End? originally appeared on Fool.com.

Morgan Housel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Commerce Department Releases Personal Income and Spending Data for February

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By Eric Volkman, The Motley Fool

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Americans became incrementally richer this past February. According to the Commerce Department‘s latest release on personal income and outlay data compiled by the Bureau of Economic Analysis, the category grew during the month by $143.2 billion, or 1.1%, over January’s level. Disposable personal income also advanced, as did personal consumption expenditures. The growth in those categories was by $127.8 billion (1.1%), and $77.2 billion (0.7%), respectively, over that same time frame.

The fortunes of those indicators were mixed on a month-over-month basis in January. Personal income dropped by $513.5 billion (3.7%), while DPI fell by $498.3 billion (4%). On the other hand, PCE climbed by $40.8 billion ( 0.4%).

The article Commerce Department Releases Personal Income and Spending Data for February originally appeared on Fool.com.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Bank of America's Taking a Breather Today

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By John Maxfield, The Motley Fool

BAC Total Return Price Chart

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That shares of the nation’s second largest bank by assets, Bank of America , are down today, is no reason for concern. In the absence of a specific catalyst, it seems more likely that the trend is related to profit taking more than anything else.

As you can see in the chart below, B of A has convincingly outperformed its peers since the beginning of 2012. Including dividends, its shares are up 112% over this time period. The runner-up in this regard is Citigroup , followed by JPMorgan Chase  and Wells Fargo , respectively.

BAC Total Return Price data by YCharts.

Although shares of B of A are only higher by 1.75% since the beginning of this year, they’ve lately been riding on the coattails of its performance in the Federal Reserve-administered CCAR results, which cleared the bank to return $10.5 billion in capital to shareholders over the course of this year via stock buybacks.

It’s for this reason, in turn, that many traders may feel like now is the time to take some profits — and particularly in light of the impending three-day weekend, over which any number of things could happen in Europe or elsewhere to upset the proverbial applecart.

The one thing that could be pointed to on the macroeconomic front is a disappointing jobs report. For the week ended March 23, initial jobless claims rose 16,000 to 357,000. This underperformed both the previous week, in which 341,000 unemployment applications were filed, and the consensus estimate among economists calling for a figure of 339,000.

On the other side of the equation, however, was news that the economy grew at a faster clip in the last quarter of 2012 than originally estimated. According to the Bureau of Economic Analysis, the output of goods and services produced domestically increased at an annual rate of 0.4% compared to the preceding three-month time period. The growth rate had been pegged previously at 0.1%.

Getting back to B of A, then, the next big thing to watch is its earnings from the first quarter of this year, which are due out on April 17. And more specifically, shareholders will want to closely examine its progress at originating mortgages, cutting expenses, and insulating its trading profits from the ongoing turmoil in Europe.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Oppenheimer Sees Transports Continuing to Lead the Way Higher (FDX, UPS, NSC, CSX, JBHT, SWFT, XTN)

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By 24/7 Wall St.

Trucks

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There is a big difference between a market rally and a bull market. Bear market rallies often happen when the stock market is so oversold that short sellers or deep value investors feel they have to be buyers. True bull market rallies depend on leadership from sectors. One sector that has helped lead the charge and confirming a bull market rally to a new high for the Dow Jones Industrial Average is the transportation sector. In a report out today, Oppenheimer initiates coverage of the two top air transport names. Plus we also take a look at other leaders in the sector.

The analysts at Oppenheimer initiate coverage of FedEx Corp. (NYSE: FDX), a global leader in parcel and freight services, with an Outperform rating and a price target of $124. FedEx closed yesterday at $107.91. The Thomson/First Call consensus target is $113. In their report, the analysts point out that investors appear to be discounting FedEx’s potential to deliver revenue growth while achieving restructuring profitability goals. They anticipate significant appreciation potential as FedEx demonstrates progress over the coming years.

The team at Oppenheimer also initiates FedEx largest competitor, United Parcel Service Inc. (NYSE: UPS), at Outperform. The analysts point out that UPS entered 2013 with a record of consistent operational and financial execution, and a gradual economic recovery should bolster the U.S. domestic package segment. UPS closed yesterday at $82.93. The Oppenheimer price target is $95, and the Wall St. estimate is at $91.

Air transport stocks are not the only transport names nearing 52-week highs and helping to boost the market rally. Strong performance by the railroad stocks are pushing the average as well. Coal transportation leader Norfolk Southern Corp. (NYSE: NSC) trades at a reasonable 14 times earnings and sports a tidy 2% dividend. The consensus target for the stock is $76.

Jacksonville, Fla.-based CSX Corp. (NYSE: CSX) also offers investors good value despite the strong rally. Closing yesterday at $23.58, CSX trades at a modest 13.19 times earnings and pays a 2.40% dividend. The consensus estimate is $26.

Another segment of the transports that is critical to moving inventory around the United States is the trucking industry. In fact, The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 2.9% to 125.2 in January, the highest on record. The trucking industry represents a very important component of the U.S. economy. According to the U.S. Bureau of Economic Analysis, the trucking industry adds about 5% to the gross domestic product each year.

Trucking leader J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) is another name bumping up against 52-week highs. Providing service in the United States, Canada and Mexico, J.B. Hunt closed yesterday at $70.20. The consensus target is $70.50.

Investors may also want to consider Swift Transportation Co. (NYSE: SWFT). Moving everything from retail merchandise to perishable and nonperishable food, this Phoenix-based industry leader closed at $13.93 yesterday. The consensus target is $16.50.

In a diverse and well-rounded portfolio, individuals need to consider owning transportation stocks. One …read more
Source: FULL ARTICLE at DailyFinance