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Tuesday, April 26, 2005
How Perceptions Affect The City If a man was alone in the woods without his wife, is he still wrong? Let's build a city. Ready? This is very interesting, pay attention to this. The Gallup Polls leading story for April 26 was titled “Economic Indicators Continue Downward Slide.” However, outside of oil prices, they don’t measure economic indicators, they poll people for their feelings: The latest Gallup survey shows Americans to be the most pessimistic they have been in two years about where the economy is headed, and the most negative about current economic conditions in almost a year. Higher gas and oil prices appear to be a major factor in the lower ratings over the past two months. Economic ratings are highly related to party affiliation, with Republicans mostly positive and Democrats mostly negative.That last sentence was very revealing. As a Republican, I do perceive the economy is growing not shrinking and confess my party loyalty and private investments — which have been on the increase since 911 — have factored into the measurement. However, before looking into the numbers myself, this claim has been somewhat emotional . . . until today. How do we measure the state of the economy? There are plenty of benchmarks to use, such as GDP growth, the consumer and producer price index, employment, retail sales index, productivity, and consumer confidence. Here are a list of the latest reports from politically neutral sources. Gross Domestic Product The GDP is the most important indicator and is the widest measure of the state of the economy. According to a report released on Mar 3 by the Bureau of Economic Analysis, the GDP adjusted for inflation “increased at an annual rate of 3.8 percent at the close of the fourth quarter in 2004, according to final estimates.” And “Personal income increased $33.2 billion, or 0.3 percent in a February 2005 BEA report. The Consumer Price Index The CPI which is the most widely used measure of inflation. According to a report released on April 20 by the Bureau of Labor Statistics, the CPI “for All Urban Consumers increased 0.8 percent in March, before seasonal adjustment.” The Producer Price Index The PPI as above is one of the two most important ways to measure inflation. According to a report released in March by the Bureau of Labor Statistics, the PPI “advanced 0.7 percent in March, seasonally adjusted.” Employment Indicators The employment indicators, which includes the unemployment rate (the percentage of the work force that is unemployed) measure the number of new jobs created, the average hours worked per week, and average hourly earnings. According to a report released on April 1 by the Bureau of Labor Statistics, “total nonfarm payroll employment increased by 110,000 in March, and the unemployment rate declined to 5.2 percent.” Retail Sales Index The RSI measures goods sold within the retail industry, from huge chains to small local stores. According to a report for March 2005 by the U.S. Census Bureau, “advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $339.3 billion, an increase of 0.3 percent from the previous month and up 5.8 percent from March 2004. Total sales for the January through March 2005 period were up 7.2 percent from the same period a year ago.” The National Association of Purchasing Management index The NAPM measures conditions in the manufacturing sector, a reading of over 50% indicates manufacturing is growing, a reading below 50% means it is shrinking. The Purchasing Managers’ Index (PMI) report released on April 1 by the Institute for Supply Management, the PMI is at 55.2%. “Economic activity in the manufacturing sector grew in March for the 22nd consecutive month, while the overall economy grew for the 41st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On.” Beige Book The Beige Book is part of the Federal Open Market Committee’s preparations for its meetings and serves as a summary of economic conditions in each of the Fed’s regions. According to a report released on April 11 by the Federal Reserve Board, “Reports from all twelve Federal Reserve Districts indicate that business activity continued to expand from late February through early April. Kansas City and San Francisco noted solid growth, Chicago and Dallas characterized growth as moderate, and Atlanta reported a robust pace. By contrast, while citing positive growth, New York and Cleveland mentioned uneven progress across sectors, and Richmond stated that signs of improvement in April followed a restrained March.” Durable Goods Orders This report measures how much people are spending on long-term purchases (products that are expected to last more than three years). Based on a report released March 31, by the U.S. Census Bureau “New orders for manufactured goods in February increased $0.6 billion or 0.2 percent to $380.4 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a slight decrease in January.” The Productivity Report This measures how much output is created by a unit of labor. According to a report released on March 3 by the U.S. Department of Labor, Bureau of Labor Statistics “productivity increased 3.7 percent in the business sector, more than the 2.5 percent preliminary estimate published Feb. 3. In nonfarm businesses, productivity grew 2.1 percent, compared to the preliminary estimate of 0.8 percent.” Does this matter? Nevertheless, you get a different perspective from Gallup survey which found 61% of Americans think economic conditions are getting worse, 58% think now is a bad time to get a quality job, and 19% believe fuel costs have to do with it. This finding is also reflected in the Consumer Confidence Index (CCI) which is considered a crucial part of the economic picture, the report measures how confident consumers feel about the state of the economy and their spending power. According to a report released on April 26 by The Conference Board, “the consumer confidence index, which had declined in March, lost more ground in April. The Index now stands at 97.7 (1985=100), down from 103.0 in March. The Present Situation Index declined to 113.6 from 117.0. The Expectations Index declined to 87.2 from 93.7.” The economy does not rise and fall depending on who is seated in the White House, and fuel costs can not be a singular indicator of its health. Nevertheless consumer confidence is a vital part of the equation, and despite numbers to the contrary it appears doom and gloom prevails. If the Gallup report findings are true, partisanship has much to do with the disfigured perception. And Let me be candid, if the economy is in poor shape so be it. I’m not interested in painting a rosy portrait, only to report the facts as I have discovered them, but perception is 9/10th’s of the law so there is something that can be learned from this. Here it is. What is the economy? The state of our economy is nothing more than millions of citizens who make billions of financial choices every day. The numbers above seem so far detached from us, but in fact they reflect us. If perception can sway an economy, they can build one also, in fact they may build us all a fine city. All descriptions of these various reports were taken from Investor Guide.com Michael Gallaugher blogs at Christian Conservative. Blogger News Network is advertiser-supported, and your visits to our advertisers help BNN to meet its expenses. Help keep us afloat! posted by BNN Archive at 5:09 PM |
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