Wednesday, January 18, 2012
I Smell Something Dead Somewhere
What I was waiting for in this report was utilities. Think Christmas lights, etc. Maybe some of this is in municipal lighting, but there's a dead rat in the basement of the economic good news edifice, because utilities began to fall in August, and haven't stopped.
Weather has less of an effect on utilities than people think. We are now down 6.6% over the year. I'd buy 3%, maybe 4%, but not that much.
Over the long term, the correlation between utilities and GDP is - here, evaluate it yourself:
Blue line is utilities, red is real GDP, and green is real PCE.
The yellowish/orangish thing is real PCE divided by real GDP, with the result multiplied by a hundred to scale well on a 100-point scale.
That last basically measures the contribution of personal consumption to GDP. I do think production is beginning to contribute slightly more to the economy, but increased production should show up in utilities. A five month negative run worries me.
The one year change is pretty steep, and it started in the summer.
At the very least, I suspect that there might be some downward revisions to GDP at a later date.
Some of this is due to conservation at municipalities and homes. That degree of conservation would have something to say about the strength of the economy, though.
Is this the wood stove/kerosene lamp economy now for the lower third?
The first part of the movement definitely wasn't due to that factor, and capacity factors seem to indicate that it isn't. From the release:
The operating rate for utilities was 76.8 percent, a level 9.8 percentage points below its long-run average.
My WV is shiesse, which sounds very Germanically appropriate.
WV: "balesser"-- decreased utilization is balesser of too weevils, given the coal plant shutdowns coming up soon...
Yes, let me repeat that. Below the 2009 low of 79.2.
2nd quarter was at 79.2, but that wasn't surprising given the supply chain issues. I have to assume that this is a significant drop in household usage, and the level seems clearly significant.
WV: "nocares", Washington nocares about economic growth anymore.
I'm sure a few good blackouts next summer will larn those ornery Texans their lesson and send 'em out to vote Democratic en masse.
Links to this post: