Tuesday, October 16, 2012

Current Conditions Index: August 2012

Below is an abbreviated version of the August Current Conditions Index report. The full report (in PDF format) along with tables and historical reports is available on my web site: http://www.llardaro.com . 


Up until last month, it appeared that Rhode Island’s economy had already seen the long awaited acceleration in activity come and go. Clearly, we improved at the end of 2011, which provided us with momentum through the first quarter of 2012. Then, this  economic momentum began to slow, placing us in the situation with higher levels of many indicators, but their overall  rate of growth was decelerating, a possibility that could potentially move our state’s economy to stall speed at some point in the future. But the August results show some real strength and quite possibly a re-acceleration in Rhode Island’s economic momentum moving forward. So, any discussion of the potential for reaching “stall speed” should be put on the backburner at this point.

For August, eight of the twelve CCI indicators showed improvement, giving a monthly CCI value of 67 using the “official” data that we know is flawed. Based on my simulations, the more correct CCI value for August is 75 (or possibly 83, but that’s too close a call). What I find most encouraging for August is the fact that all of the non-survey based indicators, which don’t suffer from the flaws currently plaguing most of the labor market data, showed significant improvement, something that doesn’t occur very often enough here.

Ironically, the “official” labor market data continue to show an economy that fell off a cliff about a year ago, with payroll employment now declining on a year-over-year basis for twelve of the last thirteen months. Let me renew my challenge to anyone using that data to conclude anything other than the existence of a double-dip recession here. Ironically, though, the “official” labor market data, which typically become more negative starting around this time of year are becoming less so, indicating that the measurement error might now have changed direction. Go figure!

So, the potential re-acceleration reflected in the August data may be showing that Rhode Island’s economy is gaining some momentum just as the US economy is. For both, this is occurring as Europe remains mired in recession and Asian growth has slowed. Monetary policy lags (6-12 months) preclude recent monetary changes by the Fed and ECB from directly causing this momentum, other than positively influencing confidence and investor appetite for risk.

See the full report at: http://www.llardaro.com  .