Real Gross Domestic Product and Industrial Production - Essay Example

The rise in GDP in 2004 was undergirded by substantial gains in labor productivity. The economy suffered from a sharp increase in energy prices in the second half of 2004. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups. (See Appendix 1)

Industrial Production
Industrial production increased 0.9 percent in October after a drop of 1.5 percent in September. Hurricane-related recoveries in many industries and the resolution of a strike at a major aircraft producer contributed significantly to the increase in output. At 107.9 percent of its 2002 average, output in October was 1.9 percent above its year-earlier level. Manufacturing production increased by 1.4 percent, a rise that more than reversed its September decline of 0.7 percent. Output also moved down in the industries for machinery and furniture and related products. Production increased slightly in the industries for textiles and products, for paper, and for printing and support, while output was unchanged in the food, beverage, and tobacco products industries. (See Appendix 2)

Real Personal Consumption Expenditures
Real personal consumption expenditure increased by 3.4% in Q2 2005, compared with an increase of 3.5% in Q1. Durable goods purchases increased by 7.9% (2.6% in Q1), while nondurable goods purchases increased by 3.6% (5.3% in Q1). Notably, domestic investment dropped by 3.7%. (See Appendix 3)
Real Private Fixed Investment (1 decimal) (See appendix 4)

2: Labor market data that includes:
Unemployment Rate
The unemployment rate has ranged from 4.9 to 5.1 percent since May. The unemployment rates for adult women (4.6 percent), teenagers (15.9 percent), whites (4.4 percent), and blacks (9.1 percent) showed little or no change over the month. The jobless rates for adult men (4.3 percent) and Hispanics or Latinos (5.8 percent) both declined from September. Nonfarm payroll employment was little changed (+56,000) in October, and the unemployment rate was essentially unchanged at 5.0 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Average hourly earnings of production or nonsupervisory workers on private nonfarm payrolls rose by 8 cents over the month. For major indicators of labor market activity, seasonally adjusted refer to Appendix 5 and 6, where numbers are in thousands.

3: Price data includes:
Goods and Services
GDP Deflator
The GDP deflator has been averaging in the low 2% range for much of this decade. As the table below indicates, everything from housing prices, food, utilities, medical costs, gasoline, and retail goods have been rising at much higher rates. By understating inflation, government statisticians have been overstating GDP growth.
The consumer price index (CPI) during May decreased by .1 percent (one-half of one percent). The rate of increase in the consumer price index over the past twelve months has been 2.8 percent. In May, the core consumer price index, which excludes energy and food prices, increased by .1 from April. The core index has increased by 2.2 percent over the last twelve months. (Appendix 7)

PPI
The PPI shows the same general pattern of inflation as does the CPI, but is more volatile. The PPI can be roughly viewed as a leading indicator. It often tends to foreshadow trends that later occur in the CPI. The Bureau of Labor Statistics of the U.S. Department of Labor reported that the seasonally adjusted Producer Price Index for Finished Goods advanced 0.7 percent in October. This gain followed a 1.9- percent jump in September and a 0.6 percent rise in August. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 3.0 percent, after increasing 2.5 percent in the preceding month.

4: Financial data

One-Year Treasury Rate
This week Month ago Year ago
One-Year Treasury Rate 4.35 4.14 2.47
Ten-Year Treasury Rate 4.6 4.45 4.22
An index published by the Federal Reserve Board based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a one-year maturity. Yields on Treasury securities at constant maturity are determined by the U.S. Treasury from the daily yield curve. That is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market. (Appendix 8 and 9)
Conventional 30-Year Mortgage Rate
Sometimes called a Reduction Option Loan (ROL) or Reducing Interest Loan (RIL), this mortgage can give borrowers the option of reducing their loan's interest rate following a specified drop in rates, enabling you to reduce the long-term cost of the loan (Appendix 10)

Standards & Poors 500 Stock Price Index
Standards & Poor's 500 Stock Price Index is a world-renowned index that includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, it is also an ideal proxy for the total market. Read More