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US Economy Dashboard

Trillion US$

GDP Data of USA


20
18
16
14
12
10
8
6
4
2
0
-2

Q1FY Q2FY Q3FY Q4FY Q1FY Q2FY Q3FY Q4FY Q1FY Q2FY Q3FY
12
12
12
12
13
13
13
13
14
14
14

GDP 15.96 16.09 16.27 16.33 16.50 16.62 16.87 17.08 17.04 17.33 17.56
PCE 10.96 11.03 11.12 11.22 11.35 11.41 11.52 11.65 11.73 11.87 11.97
GDI 2.45 2.49 2.50 2.48 2.54 2.59 2.71 2.75 2.71 2.84 2.89
NE

-0.61 -0.59 -0.54 -0.53 -0.53 -0.53 -0.51 -0.46 -0.54 -0.55 -0.52

GEI

3.17 3.16 3.19 3.16 3.14 3.14 3.15 3.14 3.14 3.16 3.21

Note: GDP: Gross Domestic Product, PCE: Personal Consumption Expenditure, GDI: Gross Private Domestic
Investment, NE: Net Exports of Goods and Services, GEI: Government Expenditure and gross investment

After the Financial Crisis in 2008, USA has shown strong growth and stability in the past two
financial cycles. In order to prop up the economy of US, the US Federal Reserve had adopted a
quantitative easing program, which increased the money supply in the economy resulting in
higher inflation and improved GDP. In absolute terms, the economy US grew from $16 trillion to
$17.5 trillion. This growth can be attributed to growth in the consumption and domestic
investments. US has been in a trade deficit for the past 11 quarters.

Inflation (Based on CPI)


3.5
3

3.3
2.8

2.5
2
1.5
1
0.5
0

1.9

1.7

1.9

2.1
1.7
1.4

1.6
1.2

1.4

Inflation (Based on
CPI) in %

With the tapering of the quantitative easing by the US Federal Reserve in the fiscal year 2013
caused the inflation in the US economy to fall drastically. The target inflation for the current
financial year is 1.7% which was achieved after the Quarter 3 results. The increased wholesale
price index is also an indicator of the monetary policies of the US Fed Reserve.

Wholesale Price Index


120

110

109

109

103

100

100

89
94

94

80

85

79

75
71

60

WPI

40
20
0
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

The real interest rates in US were rising until the financial crisis which began in 2007. US
Federal Reserve started reducing the rates around this time to stabilize the US economy, finance
new spending and help support the prices of many other assets, such as stocks and houses.

Real Interest Rates


6.00%
5.00%
4.00%
3.00%

Real Interest Rates

2.00%
1.00%
0.00%
2005

2006

2007

2008

2009

2010

2011

2012

2013

The current account deficit of US has improved from 2006 to 2009 due to both cyclical and
structural factors. It can be explained due to weak domestic demand and lower energy imports
due to development of shale gas.

Current account balance (BoP, current US$ in


billion)
0.00
-100.00

2005

2006

2007

2008

2009

2010

2011

2012

-200.00
-300.00
-400.00
-500.00

Current account balance (BoP,


current US$ in billion)

-600.00
-700.00
-800.00
-900.00

INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION


The Industrial Production and Capacity Utilization statistical release, which is published around
the middle of the month, reports measures of output, capacity, and capacity utilization in
manufacturing, mining, and the electric and gas utilities industries.
For the period since 1997, the total IP index has been constructed from 312 individual series
based on the 2007 NAICS codes. These individual series are classified in two ways: (1) market
groups, and (2) industry groups. Market groups consist of products and materials. Total
products are the aggregate of final products, such as consumer goods and equipment, and
nonindustrial supplies (which are inputs to nonindustrial sectors). Materials are inputs in the
manufacture of products. Major industry groups include three-digit NAICS industries and

aggregates of these industriesfor example, durable and nondurable manufacturing, mining,


and utilities

Industrial production has been fluctuating +/- 1% in the period Aug 2011-14 (YoY).The
absolute values of IP both Manufacturing and Total industries ar showing an upward but
stabilizing trend which is commonly observed in developed Economies like US.

US MARKETS Price and Volume Variation


NYSE

NASDAQ
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0

NASDAQ Price
variation

4.5E+09
4E+09
3.5E+09
3E+09
2.5E+09
2E+09
1.5E+09
1E+09
500000000
0

NASDAQ Volume
variation

Both the leading stock markets NYSE and NASDAQ have shown a rising trend, while Nyse has
shown a 505 rise over the given period NASDAQ has almost doubled in terms of its price
variation.
References
http://www.federalreserve.gov/econresdata/statisticsdata.htm
https://www.nyse.com/data
http://www.nasdaq.com/

Parameter: Unemployment Rate

Source: Bureau of Labour Statistics

It is defined as a percentage of the labour force (the employed plus the unemployed workforce).
Unemployment is an excellent indicator of the state of the economic cycle. High unemployment
(compared with the average over the past few years) suggests a recessionary gap. Low unemployment at
the top of the cycle is broadly indicative of inflationary pressures.

Unemployment
Rate

Unemployment Rate
10.0
8.0
6.0
4.0
2.0
0.0
Aug/11

Feb/12

Sep/12

Mar/13

Oct/13

Apr/14

Month

Economists argue that there is a natural rate of unemployment (NRU) or non-accelerating rate inflation
rate of unemployment (NAIRU), at which the demand and supply of labour are in balance. The basic
premise is that the increase in demand can be translated into the employment only up to the NAIRU, at
which point the employment stops growing and the increase in demand spills over into higher inflation.

Parameter: Money Supply

Source: Federal Reserve

Money supply is defined as follows:


M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository
institutions; (2) travelers checks of nonbank issuers; (3) demand deposits at commercial banks (excluding
those amounts held by depository institutions, the U.S. government, and foreign banks and official
institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable
deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS)
accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift
institutions. Seasonally adjusted M1 is constructed by summing currency, travelers checks, demand
deposits, and OCDs, each seasonally adjusted separately.
M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) smalldenomination time deposits (time deposits in amounts of less than $100,000), less individual retirement
account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market
mutual funds, less IRA and Keogh balances at money market mutual funds.
Significance: Indicator of the level of transactions, inflation and output
Interpretation:
M= total amount of money in circulation
V= Velocity of circulation (Total number of times the money changes hands every year)
So M x V gives the amount of money spent each year. This product should be equal to the product of the
real output (Y) and the price index (P).Assuming that the velocity is fixed and predictable, controlling the
money supply controls the money GDP (Y x P); and if the trend in real output can be predicted then
inflation can be controlled.

14000

2500

12000
10000

2000

8000

1500

6000

1000

4000

500

M 2 in $ Billion

3000

2000

Month

Aug/14

May/14

Feb/14

Nov/13

Aug/13

May/13

Feb/13

Nov/12

Aug/12

May/12

Feb/12

0
Nov/11

0
Aug/11

M 1 in $ Billion

Money Supply

M1
M2

US Dollar Currency Fluctuations


The United States Dollar Index or DXY measures the performance of the dollar against a basket of other
currencies including EUR, JPY, GBP, CAD, CHF and SEK. The US $ has been ranging from 78-84 mark
throughout the 3 year period.

US Dollar Index(DXZ)
86
84
82
80
78
76
74
72
70
68

US Dollar Index(DXZ)

The attractiveness of U.S. financial markets relative to the euro area and Japan has increased investor
interest in the U.S. as a place to invest and boosted the value of the U.S. dollar. The rise in dollar in last 2
months is due to its rise against Yen due to Asian nations still-sluggish economy and easy monetary policy.
Meanwhile, the euro EURUSD, -0.01% has depreciated against the dollar as the European Central Bank
unveiled easing measures in June and hinted at more on the horizon to combat low inflation.

Foreign Direct Investment Position


The U.S. direct investment position abroad valued at historical costthe book value of U.S. direct
investors equity in, and net outstanding loans to, their foreign affiliateswas $4,660.9 billion at the end
of 2013. It grew $276.2 billion, or 6.3 percent after growing 8.3 percent in 2012, which is below the
average annual growth rate of 10.5 percent from 2002 to 2012. The slower growth in 2013 reflected a shift
in valuation adjustments from positive to negative, a shift to debt instruments inflows, and smaller equity
outflows other than reinvestment of earnings. In contrast, reinvestment of earnings grew 17.8 percent
and contributed the most to the growth in the outward position.
The foreign direct investment position in the United States valued at historical costthe book value of
foreign direct investors equity in, and net outstanding loans to, their U.S. affiliateswas $2,764.0 billion
at the end of 2013. The position grew 6.1 percent, or $158.2 billion, reflecting $230.8 of direct investment
financial transactions inflows that were partly offset by a negative valuation adjustment of $72.6 billion.

Net inflows occurred for all three components of direct investment flowsequity investment, debt
instruments investment, and valuation adjustments

Direct Investment Positions in US(bn $)


5,000.00
4,500.00
4,000.00
3,500.00
Outward
position

3,000.00
2,500.00

Inward
position

2,000.00
1,500.00
1,000.00
500.00
0.00
2010

Industry wise classification

2011

2012

2013

As we can see from the above diagram, manufacturing forms the bulk of the Inbound FDI followed by
other industries.
Country wise FDI
Outbound FDI

Inbound FDI

Five host countriesthe Netherlands, the United Kingdom, Luxembourg, Canada, and Bermuda
accounted for more than half of the total position at the end of 2013. For the fifth consecutive year, the
position in the Netherlands was the largestat $722.8 billion, or 15.5 percent of the total position.
The top five investing countries accounted for more than half of the overall foreign direct investment
position in the United States. The United Kingdom was the largest investing country with a position of
$518.6 billion, or 18.8 percent of the total . Japan was the second largest with a position of $342.3 billion,
or 12.4 percent of the total. The Netherlands was the third largest with a position of $273.9 billion, or 9.9
percent of the total. Canada was the fourth largest with a position of $237.9 billion, or 8.6 percent of the
total. France was the fifth largest with a position of $226.1 billion, or 8.2 percent of the total.
References:
1. www.tradingeconomics.com
2. US Bureau of Economic Analysis