Tag: Real GDP

Agriculture Output Trended Downward 2009 to 2012 – Will There Be a Turn Around in 2013

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Real Agriculture output peaked in 2009 for both Colorado and the U.S. and it has trended downward for the period 2009 to 2012.

Between 1997 and 2012, the Bureau of Economic Analysis statistics show:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and the U.S. Agriculture sector increased annually at a rate of 1.7%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1%. The Colorado Agriculture sector increased annually at a rate of 1.5%.

Although Colorado private sector output expanded at a significantly faster rate than the U.S.between 1997 and 2012, Agriculture output for the state grew at a slightly slower rate.

Between 2009 and 2012, the data shows:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and the U.S. Agriculture sector decreased at an annualized rate of -6.9%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2%. The Colorado Agriculture sector declined annually at a rate of 11.7%.

Farmers and ranchers have their fingers crossed that the downward trend will be reversed in 2013.

©Copyright 2011 by CBER.

Construction Output Declined for Eleven Years – Reversed in 2012

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Real GDP for the Construction sector finally rebounded in 2012, after decreasing for eleven years, 2001 to 2011.

Between 1997 and 2012, the Bureau of Economic Analysis statistics show:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and the U.S. Construction sector declined annually at a rate of -1.5%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1%. The Colorado Construction sector declined annually at a rate of -2.4%.

For this period, the Colorado Construction sector was hit much harder than the U.S. In addition, the recovery was much slower for Colorado.

Between 2009 and 2012, the data shows:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and the U.S. Construction sector increased at an annualized rate of 0.5%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2%. The Colorado Construction sector declined annually at a rate of -1.4%.

Preliminary data suggests that 2013 Colorado Construction output will again be positive and that it will be stronger than the nation.


©Copyright 2011 by CBER.

Policy and Prices Impact Output for Extractive Industries – Is Colorado Closed for Business?

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The extractive industries are an important and visible part of Colorado’s economy. In 2012, Colorado’s GDP was 1.76% of the U.S. GDP and Colorado’s Mining sector output was 3.58% of the U.S. Mining sector output.  In other words, Colorado’s extractive industries critical components of both the state and the national economy.

Between 1997 and 2012, there were stark differences in the state and national output for the extractive industries and the private sector.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and the extractive industries were -0.6%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1% and the extractive industries grew at a rate of 3.6%.

Nationally sector output trended downward from 1997 to 2005 and trended upward from 2005 to 2009. Between 2009 and 2012, sector output trended downward again.

In Colorado sector output  trended upward from 1997 to 2009; however, it has trended downward since 2009.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and extractive industry output was -2.0%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2% and extractive industry output was -4.0%.

The variance in output has been caused by changes in prices, supply and demand, and policy. Recently, the latter has had the most detrimental impact on the industry in Colorado.  Policy and anti-fracking efforts are likely to further suppress output in the months ahead. In addition to reducing output, this will create the perception that Colorado is not a business-friendly state.


©Copyright 2011 by CBER.

Will Colorado Output Continue to Expand as Slower Rate than U.S.?

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Between 1997 and 2012, the Private Sector Real GDP and job growth for Colorado outpaced the nation.  For this period, data released by the Bureau of Economic Analysis and the Bureau of Labor Statistics shows:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and private sector wage and salary employment expanded at a rate of 0.5%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1% and private sector nonfarm jobs grew at a rate of 0.9%.

More recently, the data tells a different story.  Colorado did not fare as well as the nation between 2009 and 2012.  While the rate of job growth was similar, U.S. output expanded at a faster rate.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and private sector wage and salary employment expanded at a rate of 1.1%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2% and private sector nonfarm jobs grew at a rate of 1.1%.

Time will tell whether the Colorado output will continue to grow at a slower rate than the U.S. or if this is a short-term variance that will reverse itself in 2013 or 2014.

Private Sector Real GDP
©Copyright 2011 by CBER.

Are We Better Off Than We Were Four Years Ago? – Colorado

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This election season has featured an abundance of discussion about where the state is better off now than we were four years ago. In some cases, we are better off today and in other cases we are not.  The following data provides a snapshot of key metrics that fit into both categories.

Colorado Population
People like to visit and live in Colorado. Continued population growth is projected on a long-term basis.
• Although Net Migration has slowed, Colorado’s population continues to grow at a steady pace.
Colorado Employment and Unemployment
Increased population growth points to long-term job gains and lower employment.
• During the 69 months between January 2007 and September 2012 Colorado only gained jobs in 34 months (seasonally adjusted data).
• In 2012, Colorado employment is well below employment of 2007 and 2008, but it is trending upwards.
• In 2012, jobs are being added at a faster rate than they were in 2008, but not 2007.
• The number of unemployed workers is more than twice as much in 2012 as it was in 2007. It is also greater than 2008.
• The unemployment rate in 2012 is twice the 2007 rate and much higher than in 2008.
• In 2012, the unemployment rate and the number of unemployed workers is trending downward, whereas, it was trending upward in 2008.

Colorado Employment by Sector
Segments of the economy are healthier than they were in 2008.
• Projected annual state employment for 2012 will be about 56,900 less than the total for 2008. The following sectors have greater 2012 employment than 2008: Private Education and Health Care, Higher Education, Tourism, K-12 Education, Corporate Headquarters (MCE), Federal Government, Employment Services, State Government, Extractive Industries, and Professional and Scientific and Technical Services.
Colorado Job Creation
Improved firm and job creation is necessary if the economy is to recover at a faster rate.
• Gross job losses and job gains for 2011 are less than 2008. Improvement in net job gains is more a result of decreased layoffs than actual job creation.

Income and Wages
Recent wage and income data is mixed.
• Per Capita Personal Income – The 2011 average is slightly below the value for 2008.
• Colorado Median Household Income – The 2011 median is below the value for 2008.
• Average Annual Wages – The 2011 average is above the value for 2008.

Colorado Output
Increased employment and wages will point to increased demand for goods and services. This in turn will push output upwards.
• Colorado Real GDP was greater than the U.S. for 2007 to 2011.
• The following sectors have shown steady growth since 1997 and 2011 output is greater than 2007 and 2008: Retail Trade; Professional, Scientific, and Technical Services; Health Care; Finance and Insurance; and Information.
• Real output for the Construction sector was greater in 2007 and 2008 than 2011 for both Colorado and the U.S.

Colorado and Inflation
Overall inflation has been minimal; however, inflation in key areas has been noticeable.
• Overall inflation has been minimal since the beginning of the Great Recession. Apparel and Housing are the only sectors that have grown at a lower rate than All Items for Coloradans.
Construction and Housing
There is improvement in the Construction and Housing markets.
• The number of permits in 2012 is greater than 2008, although they are well below the levels shown in the 2000s.  Most importantly, permits are slowly trending upwards.
• 2012 Colorado housing prices are approaching 2008 levels.
• Home ownership rates in 2011 are below the rates in 2008. More importantly, they are trending downwards.

General Fund and Retail Trade Sales
Gross General Fund Revenue is trending upwards because of stronger job gains (income taxes) and retail trade sales (sales taxes).
• Retail Sales are improving. Projected Sales Tax Revenue for the fiscal year ending June 2013 will exceed revenue for FYE 2008 (not adjusted for inflation). This tax accounts for about one-fourth of Gross General Fund Revenue.
• Projected Net Individual Income Tax for the fiscal year ending June 2012 will exceed FYE 2008 (not adjusted for inflation). This tax accounts for about two-thirds of Gross General Fund Revenue.
• Projected General Fund Revenue for the fiscal year ending June 2012 will match FYE 2008 (not adjusted for inflation).

For more detailed analysis of the state of the economy compared to four years ago, visit https://cber.co or click here.

 

©Copyright 2011 by CBER.

Are We Better Off Now Than We Were Four Years Ago? – The United States

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During this election season the politicians have raised the question, “Are we better off now than we were four years ago?” It is easy to find data that supports or rejects the notion that “we” are better off today, but it is difficult to provide a clear cut answer either way.

U.S. Output
• Real GDP output is stronger than 4 years ago, although it is increasing at a less than desirable rate.
• Since 1930 Real GDP has increased 64 of 82 years, or 78% of the time. It has declined in back-to-back years from 1930 to 1933, 1945 to 1947, 1974 to 1975, and 2008 to 2009. It is very simple. Because the U.S. population is growing there is increased demand for goods most of the time, hence increased output.

U.S. Debt
• From 1966 to 2000, the Federal debt rose from $.3 trillion to $5.8 trillion. By mid-2012 it has reached almost $16 trillion.
• From Q3 2008 to Q4 2010 consumers began deleveraging. Since then, they have continued to take on debt at a pre-2008 pace.
• While an argument can be made that it was necessary for the U.S. to incur a portion of the debt to prevent a depression, it is difficult to justify the over-consumption by consumers.

U.S. Employment and Unemployment
• During the 69 months between January 2007 and September 2012 the U.S. lost jobs in 31 months and gained jobs in 38 months.
• In 2012, total U.S. employment is below total employment in 2008; jobs are being added at a faster rate than they were in 2008.
• In 2012 the number of jobs added is trending upward, whereas it was trending downward in 2008.
• The number of unemployed workers is much higher in 2012 than in 2007 and 2008.
• The unemployment rate in 2012 is much higher than in 2008.
• In 2012, the unemployment rate and the number of unemployed workers is trending downward, whereas, it was trending upward in 2008.
• Since 1940 U.S. employment has increased 54 of 72 years, or 80% of the time. Five of the 14 declining years have occurred in the past decade (2002-2003 and 2008-2010). The increase in population coupled with the increase in demand for goods and services has generally resulted in an increase in jobs.

Financial Well-Being
• The 2012 Credability Consumer Distress Index is above the 2008 level and trending upwards (this is good news).  Consumers are still “At Risk.”
• Health Care Coverage – The 2011 percentage of coverage is slightly below the 2008 level.
• Dow Jones Industrial Average – the DJIA is about 4,800 points above its level at this time (October) in 2008.
• Housing prices – Nationally, 2012 housing prices are below 2008 levels.

Transportation
• Average gas prices for 2008 were $3.21 per gallon. Through the first 44 weeks of 2012, average prices are $3.57 per gallon.
• After bottoming out in early 2009 U.S. auto sales have trended upward and are approaching 15 million a year.  Sales in 2012 are better than 2008.

For more detailed analysis of the state of the economy compared to four years ago, visit https://cber.co or click here.

 

©Copyright 2011 by CBER.

Historical Colorado Output Growth Greater Than U.S.

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The Bureau of Economic Analysis recently released 2011 State Gross Domestic Product (GDP) data by NAICS sector. Last year the top industries for the U.S. and Colorado were similar, but they were ranked in different order.

United States Gross Domestic Product 2011 (Sum of States)
• $14.981 trillion.
• Private sector is 87.4% of total GDP; Government is 12.6%.
• Manufacturing; Real Estate/Rental/Leasing; Finance/Insurance are 32.4% of total GDP.
• Professional/ Scientific/Technical; Health Care/Social Assistance, and Retail Trade are 21.6% of the total.
Colorado Gross Domestic Product 2011
• $264.308 billion.
• Private sector is 87.2% of total GDP; Government is 12.8%.
• Real Estate/Rental/Leasing; Professional/Scientific/Technical; and Information are 30.1% of total GDP.
• Manufacturing; Finance/Insurance; and Health Care/Social Assistance are 20.7% of the total.

A quick and dirty historical analysis shows that
• Colorado’s Real GDP (2.9%) grew at a faster rate than the U.S. Real GDP (2.1%) from 1997 to 2011 as well as from 2007 to 2011 (0.7% vs. 0.0%).
• Both the private and public sector real output for Colorado grew at a faster rate than the U.S from 1997 to 2011, as well as from 2007 to 2011. Colorado is listed first in the following comparisons.
o Private sector for 1997 to 2011  3.1% vs.2.2%.
o Private sector for 2007 to 2011  0.5% vs. -0.1%.
o Public sector for 2007 to 2011  1.1% vs. 0.8%
o Public sector for 2007 to 2011  2.2% vs. 0.6%.

For the period 1997 to 2011, four sectors had negative annualized growth in the U.S.: Construction, Utilities, Mining, Construction, and Administrative/Waste Management. Construction is the only sector that posted a decline in Colorado. Colorado outperformed the nation in all sectors except Transportation/Warehousing, Real Estate/Rental/Leasing, Administrative/Waste Management, and Arts/Entertainment/Recreation.

It is important to note that some of the sectors with strongest output growth were sectors that incurred declines in jobs over this period. The Manufacturing and Information sectors are two key examples).

For a detailed analysis of the state GDP, click here (Special Reports section) or go to cber.co.

©Copyright 2011 by CBER.

Conference Board Points to Slower Growth in 2012

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Over the past 18 months, The Conference Board  has provided a depressing, but accurate assessment (unfortunately) of the performance of the U.S. and global economies. Overall TCB points to slower growth in the world economy in 3.2% in 2012 vs. 3.6% in 2011.

TCB divides countries into two groups – advanced and emerging. The U.S., Japan, and the E.U. 15 are the major players in the advanced group. The emerging group includes China, India, the remaining Asian countries, Latin American, Middle East, Africa, Russia and other CIS countries, and Central and Eastern Europe. The advanced economies account for 50.3% of global output and the emerging economies are responsible for the remainder, 49.7%.

In 2012 the advanced regions are expected to expand by 1.1%, whereas the emerging countries, will post a much stronger gain, 5.1%. TCB feels that parts of Europe are in a recession. The depth of that recession is likely to be determined by the magnitude of their debt crisis.

Japan is the only region that is showing an increase in the rate of output for 2012. As they recover from the tsunami and power plant tragedy that occurred last year, they will experience minimal growth of 0.7% in 2012. In 2011, their output posted a change of -0.5%.

About 22% of U.S. exports go to Europe. As well, Europe provides about half of the income earned abroad for U.S. multinational companies. A decrease in European demand could lower the rate of U.S. GDP growth and the strength of our economy. On the other hand opportunity exists for American companies exporting goods and services to the emerging economies.

Despite this dismal outlook, the U.S. posted job gains of 200,000 in December 2011. Time will tell if this increase is an anomaly, based on TCB’s dismal outlook or if we will look back to December and see it as a turnaround point for sustained U.S. growth at a higher rate.

 

©Copyright 2011 by CBER.

Is a Recession on the Horizon?

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The Wall Street Journal recently reported that The Conference Board has put the chance of a recession at 45% within the next 12 months. This is higher than other polls, which are more in the neighborhood of 1-in-3. TCB Chief Economist Bart van Ark’s projection is up from 1-in-3 in August and 1-in-6 in July. The WSJ noted, “For the last 23 years, a downturn has followed every time The Conference Board’s estimate topped 40 %.”

This news is significant because for the past year The Conference Board has unfortunately has more accurately projected the performance of the U.S. economy than such groups as Kiplinger’s, Moody’s, and the National Association of Business Economists. In some cases, these groups provided projections that pointed to a recovery.

The Conference Board’s outlook for the remainder of 2011 and 2012 is:

Real GDP
2011 1.6%
2012 1.8%
A slight improvement is on tap for the second half of 2012.

Consumer Spending
2011 2.1%
2012 1.9%
The consumer will not jumpstart the economy

Capital Spending
2011 6.9%
2012 5.5%
The private sector will be less than robust over the next 18 months.

Net Exports (billions)
2011 -$398.3
2012 -$370.6
Slight improvement in the trade deficit.

This is not a pretty picture!

 

©Copyright 2011 by CBER.

Contribution of Consumer to Real GDP Continues to Increase

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There are an abundance of data sets that are useful in evaluating the performance of the U.S. economy. If only one could be used to measure overall performance it would be Real GDP, or the inflation adjusted output of the economy. The current Real GDP is approximately $13.4 trillion.

There are 4 components of the GDP. Mathematically speaking GDP= C+I+G+X.

The following analysis briefly looks at the change in the composition of output for each of these four components over the past two decades. As such, it is not intended to depict the total amount of output or changes in that output.

Consumers (C) are the primary drivers of the U.S. economy. As can be seen, the importance of the consumer has increased:
• Q1 1990 Personal consumption was 65.8% of Real GDP.
• Q1 2001 The go-go 1990s treated the consumer well – too well. Consumption rose to 69.4%.
• Q1 2003 Consumers were encouraged to keep spending as a way to pull the country out of the 2001 recession. Consumption rose to 70.2%. Creative financing helped sustain auto sales and allowed home owners to use their dwellings as ATMs. As a result consumers saved less, spent more, and  became overleveraged.
• Q1 2008 The Great Recession and the accompanying housing bust caused sharp declines in Investment (I). That decline increased the importance of government and consumer spending (70.3%).
• Q1 2011 The reliance on consumers continued as housing markets remained weak and government spending tapered off. Consumption rose to 71.1% of Real GDP.

Investment (I) includes business spending and the housing markets. The ups and downs of the contribution of investment follow:
• Q1 1990 Investment was 15.4% of Real GDP.
• Q1 1992 After the 1991 recession, investment dropped to 13.1%.
• Q1 2000 Investment rose during the go-go 1990s to 17.4%.
• Q1 2002 The 2001 recession pushed investment down to 15.5%.
• Q1 2006 With the recovery, business activity increased and investment rose to 17.7%.
• Q1 2009 Investment dropped to 11.7% as a result of the Great Recession and the fallout in the housing market.
• Q1 2011 With the recovery, a slight rebound has been seen. Investment has risen to 12.5% of Real GDP.

Government (G) spending was 20.3% of real GDP in Q1 1990. Shortly after, expenditures related to the first Iraq war and the 1991 recession temporarily drove the percentage up slightly. For the remainder of that decade, the strength in personal consumption and investment decreased the relative importance of government spending. Its percentage of real GDP declined to 17.5% in Q1 2000. Since then, it has risen steadily as a result of the wars in Iraq and Afghanistan and efforts to offset the effects of two recessions. Government spending was 20.2% of real GDP spending in Q1 2011.

Finally, net exports (X) have subtracted from Real GDP, i.e. there has been a trade deficit for over 20 years. In Q1 1990, Real GDP was -1.6% of Real GDP. As the trade deficit increased, net exports reached -5.9% of Real GDP in Q1 2006. In Q1 2011, net exports were -3.8% of Real GDP.

This zero sum analysis illustrates how declines in the relative importance of one GDP component require increases in the relative importance of other components. In short, this analysis shows the role of the consumer (C) in the recovery and the drag placed on the economy by the decline in the contribution of investment (I), particularly the housing market.

Looking to better times in the months ahead and an economy that has more balanced output.

©Copyright 2011 by CBER.