July 2011 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate crude oil eked out a slight gain, rising by $0.90 (0.9 percent) to $97.19 per barrel. That gain coincided with a weaker dollar and a modest drop-off in crude stocks during July, but occurred despite a decrease in consumption of 250,000 barrels per day (BPD) -- to 18.4 million BPD -- during May.
 

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July 2011 Currency Exchange Rates

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The U.S. dollar gained ground against the euro (0.9 percent) but depreciated against Canada’s “loonie” (2.2 percent) and the yen (1.5 percent). On a trade-weighted index basis, the dollar lost 0.7 percent against a basket of 26 currencies. The dollar is now at its weakest since January 2000 against all but the euro.
 

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2Q2011 Gross Domestic Product: First Estimate

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The Bureau of Economic Analysis (BEA) estimated 2Q2011 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of 1.3 percent, up from a downwardly revised rate of 0.4 percent in 1Q2011. Private domestic investment (PDI) and net exports (NetX) contributed virtually all of the growth while government consumption expenditures (GCE) subtracted from it. Personal consumption expenditures (PCE) were a essentially a “wash.”
 

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The BEA revised data back to 2003; the magnitude of some of those changes can be seen by comparing the top graph in this post against this. At least part of the reason why 1Q2011 GDP growth was revised so much lower stemmed from the fact that the GDP deflator (which removes the influence of price changes from nominal GDP) was bumped higher than previously estimated (from an annualized quarter-to-quarter change of 1.9 percent to 2.7 percent). As the chart below indicates, the disparity between the 1Q2011 GDP deflator and producer price index (PPI) is still quite large, but less so than before. For more information on this topic and the derivation of the chart below, please click here.
 

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Quite frankly, we find the latest GDP report to be rather mystifying. In particular, if -- as the Federal Reserve acknowledged -- the economy slowed between 1Q and 2Q2011, how can GDP growth have increased?

May 2011 International Trade

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According to data compiled by the Netherlands Bureau for Economic Policy Analysis, world trade volume recovered by 2.3 percent in May from the previous month, following a revised fall of 2.2 percent in April. Imports of all major regions and countries increased strongly. However, exports of the emerging countries declined further with the exception of Latin America. Exports of the advanced economies recovered to the highest level since the outbreak of the financial crisis, but are still 4 percent down on the pre-crisis peak. U.S. exports declined in May, while Japanese exports recovered further from the blow caused by the March earthquake.

Prices slipped 0.3 percent between April and May, but remained 24.4 percent above their February 2009 low.
 

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The U.S. goods and services deficit expanded by 15.1 percent (to $50.2 billion) in May, its widest gap since October 2008. Exports totaled $174.9 billion (down from $175.8 billion in April), while imports totaled $225.1 billion (up from $219.4 billion in April).
 

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Paper exports decreased by 56,000 tons (1.7 percent) in May, while imports rose by 24,000 tons (6.3 percent). Exports remained 462,000 tons (16.7 percent) and imports 8,000 tons (2.0 percent) above year-earlier levels.
 

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Softwood lumber exports rose by 12 MMBF (8.2 percent) in May while imports retreated by 49 MMBF (6.2 percent). Exports were 41 MMBF (36.7 percent) higher than year-earlier levels, but imports were 83 MMBF (10.1 percent) lower.

June 2011 U.S. Treasury Statement and Debt Overview

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Outlays of $292.7 billion and receipts of $49.7 billion added another $43.1 billion to the federal budget deficit in June, a month that typically sees revenue slightly exceeding outlays. The U.S. federal debt held by the public stood at $14.343 trillion at the end of June.
 

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Foreigners held $4.514 trillion, or a little less than one-third of the U.S. public debt at the end of May. China remained the largest foreign creditor ($1.160 trillion). The United Kingdom was the biggest buyer in both absolute ($13.5 billion) and percentage change (4.1 percent) terms. Holdings by the “other” (aggregated) category have been trending lower since last November, dropping $81 billion over that time period.
 

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The Federal Reserve put more distance between itself and both China and Japan during May in terms of U.S. Treasury holdings. Moreover, were the Fed to maintain its May rate of Treasury purchases for a year, it would nearly double its current holdings. Both China and Japan’s added modest amounts to their holdings.

More recent data shows the Fed has slowed purchases of U.S. Treasury debt since May, but still held nearly $1.6 trillion as of mid-June.

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Flows into the United States for all types of investments were overwhelmed by outflows in May, as evidenced by the sharp drop-off in three-month-average net inflows shown by the Treasury International Capital (TIC) accounting system. Net flows were -$67.5 billion in May.
 

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Short-term U.S. securities (e.g., T-bills) continued to decline in May. With the exception of October, foreign investors have been net sellers of short-term U.S. debt during every month since September 2010.
 

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Net inflows into long-term public debt were essentially stable (at $29.690 billion) in May. Purchases of private securities also jumped by less than $1 billion in May, to $14.888 billion.

June 2011 Consumer and Producer Price Indices

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The seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in June. Over the last 12 months, the all items index increased 3.6 percent before seasonal adjustment.

The gasoline index declined sharply in June, falling 6.8 percent. While this decrease was the major factor in the seasonally adjusted decline in the all items index, the index for household energy declined as well. In contrast, the index for all items less food and energy increased 0.3 percent for the second consecutive month. The indexes for shelter, apparel, new vehicles, used cars and trucks, and medical care all continued to rise in June.

The seasonally adjusted Producer Price Index for Finished Goods (PPI) decreased 0.4 percent in June. This decline followed increases of 0.2 percent in May and 0.8 percent in April. At the earlier stages of processing, prices received by manufacturers of intermediate goods were unchanged in June, and the crude goods index moved down 0.6 percent. On an unadjusted basis, prices for finished goods climbed 7.0 percent for the 12 months ended June 2011.
 

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Details at different stages of processing include:

Finished goods -- The decline in finished goods prices can be attributed to the index for finished energy goods, which decreased 2.8 percent. By contrast, prices for finished goods less foods and energy and for finished consumer foods moved up 0.3 percent and 0.6 percent, respectively.

Intermediate goods -- This index was unchanged in June following ten straight monthly increases. Price advances of 0.3 percent for intermediate goods less foods and energy and 0.4 percent for intermediate foods and feeds offset a 0.8- percent decline in the index for intermediate energy goods. On a 12-month basis, prices for intermediate goods climbed 11.0 percent, the largest increase since a 15.3-percent rise in September 2008.

Crude goods -- The index for crude goods fell 0.6 percent in June. For the 3 months ended in June, prices for crude materials declined 0.9 percent after rising 5.6 percent for the 3 months ended in March. In June, the monthly decrease in the crude goods index is attributable to prices for crude energy materials, which moved down 4.1 percent. By contrast, the indexes for crude foodstuffs and feedstuffs and for crude nonfood materials less energy increased 2.1 percent and 1.1 percent, respectively.
 

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Price index changes for the forest products that we track either rose more quickly or fell more slowly on a year-over-year basis.
 

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June 2011 Industrial Production, Capacity Utilization and Capacity

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Industrial production increased 0.2 percent in June after having edged down 0.1 percent in May. For 2Q2011 as a whole, total industrial production increased at an annual rate of 0.8 percent. Manufacturing output was unchanged in June. In the second quarter, supply chain disruptions following the earthquake in Japan curtailed the production of motor vehicles and parts and restrained output in related industries; the production index for overall manufacturing was little changed for the quarter. At 93.1 percent of its 2007 average, total industrial production in June was 3.4 percent above its year-earlier level. The output of Wood Products factories fell 1.2 percent, while Paper output fell by 0.3 percent.
 

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The capacity utilization rate for total industry remained essentially unchanged at 76.7 percent in June, a rate 2.2 percentage points above the rate from a year earlier but 3.7 percentage points below its average from 1972 to 2010. Manufacturing capacity utilization was also unchanged. Wood Products downshifted by 1.0 percent, while Paper also declined by 0.3 percent.
 

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Capacity at the all-industries and manufacturing levels crept higher (0.1 percent); Wood Products dropped by 0.2 percent while Paper declined by 0.1 percent.