Dollars and Jens
Friday, July 30, 2010
In the second quarter Americans spent more money, but mostly overseas; imports took a clean 4 percentage points off the annualized GDP number. Housing investment picked up a bit, but it was nonresidential fixed investment that provided the biggest boost to demand. Inventory accumulation continued to accelerate, though not as quickly as before.
II 07III 07IV 07I 08II 08III 08IV 08I 09II 09III 09IV 09I 10II 10
Gross domestic product3.22.32.9-.7.6-4.0-6.8-4.9-.
Nondurable goods-.03.27.07-.50.31-.91-.78.06-.
Durable goods.38.31.20-.92-.23-.95-1.79.35-.211.35-.07.62.53
Change in private inventories.90-.28-.77-.49-.48-.12-2.31-1.09-
Fixed investment.62-.18-.76-.98-.69-1.83-4.01-5.71-1.26.12-.12.392.09
Net exports of goods and services.01.873.21.841.04-.631.502.881.47-1.371.90-.31-2.78
Government spending.


Tuesday, July 27, 2010
Monetary Policy and Inflation in India
The Reserve Bank of India (RBI) on Tuesday... raised the repo rate—at which it lends to commercial banks—by 25 basis points (bps) to 5.75%. The reverse repo rate—or the rate at which banks park excess cash with RBI—has been raised by 50 bps to 4.50%.


Inflation continues to be the main concern for the central bank. In fact, it has raised the inflation projection for March 2011 to 6% from 5.5%.
If "inflation continues to be [your] main concern", I would think you shouldn't be targeting negative real interest rates.

Incidentally, last summer (when I was in India) the monsoon largely failed, causing severe shortages of domestically produced food. I have seen elsewhere that the government is hoping that food prices will come down for their own reasons after this year's harvest. That should be baked into an "inflation projection for March 2011", though.

Friday, July 02, 2010
What will the economy do?

Reasons for optimismReasons for pessimism

  • Steady rise in income, including from employment compensation
  • Some drop in the unemployment rate
  • Continued high weekly unemployment claims
  • Continued drop in the number of jobs / people employed
  • Expiration of government stimulus
  • (Premature?) contraction of the Fed balance sheet
  • Sovereign credit issues in Europe
  • Production has caught up with final sales; recent inventory investment likely to run out

I expect to continue to edit this over the course of the first week of July. Suggestions for addenda are welcome.


Employment report
The household survey shows a big drop in the participation rate, with both the number of employed people and the number of unemployed people in the labor force dropping by about 300,000 people. (The payroll survey showed a smaller decrease in the number of jobs, with an increase in the number of private sector jobs; note that a lot of census jobs disappeared between May 12 and June 12.)

This is all seasonally adjusted, incidentally. I would imagine if the unemployment rate (which dropped to 9.5%) works its way down below 9% that the participation rate will start working its way back up. I wonder to what extent the drop in participation rate is connected to the long-term unemployed losing their unemployment benefits; it's certainly easier to keep looking (without success) for a job when you're getting paid to do so. (It's possible, contra what I said earlier, that the people dropping out of the work force are disproportionately not the sort who would be at the top of any employers' lists for new hiring; if they know that, they might stay out of the labor market until the rate drifts closer to 7% or 6%.)

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