Thursday, July 19, 2012

Current Conditions Index: May 2012

This is an abbreviated version of the full Current Conditions Index report for May. The complete version, which includes the indicator performance table and the report in PDF format, can be found on my web site: .

Rhode Island’s economic outlook in May is similar to that from April: the current tepid recovery is continuing, although signs of a loss of momentum have become more readily apparent. The good news is that Rhode Island is still in the recovery that began in February of 2010, which as of May reached its 27th month. The concerning news is that like the US, our rate of improvement has slowed.

In discussing this, I am not referring to the questionable “official” labor market data currently being released by the DLT. According to those figures, payroll employment here has now either declined or remained unchanged on a year-over-year basis for ten consecutive months. I challenge anyone who chooses to believe those numbers to reach any conclusion other than that Rhode Island has already entered a double-dip recession. In fact, even the DLT has admitted publicly that a number of those published year-over-year employment declines never occurred — they will be eliminated when the data are revised in coming months.

Fortunately, if we focus on more accurate data and the Current Conditions Index, which is a broadly based index, it is clear that some of the momentum we witnessed as 2011 ended and we moved into 2012 has begun to fade. While the pace of economic activity here isn’t all that great, my econometric models show that payroll employment has slowed to an annual growth rate of around 0.3 percent. The Current Conditions Index for May, based on the “official” data, shows a reading of 58, once again in the expansion range. The other displayed value, 67, is the likely value when the “official” data are eventually revised. Based on those alternate values, the CCI has now moved from values around 75 down to 67. As I have noted for several months now, it is the persistence of these expansion range CCI values that matters the most for now.

On a year-over-year basis, four of the five non-survey-based CCI indicators improved. Only three of the five showed improvement on a monthly basis, though. Retail Sales surged by 9.9 percent compared to last May, its ninth consecutive improvement. To some extent this is weather related. The skilled Rhode Islanders we rent out to neighboring states who bring their income home with them also directly impacts this indicator. Overall, such substantial Retail Sales momentum argues against making any recession call.  ......

The remainder of this report and the complete version, which includes the indicator performance table and the report in PDF format, can be found on my web site: .

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