Carpe Diem

Consumer Spending Surges in November

WASHINGTON (AP)Consumers put aside worries about slumping home sales and soaring gasoline prices and headed to the malls in November, pushing spending up by the largest amount in 3 1/2 years.

The Commerce Department reported Friday that consumer spending shot up 1.1% last month, nearly triple the October gain. It was the biggest one-month jump since a 1.2% rise in May 2004 and was significantly higher than the 0.7% gain analysts had expected.

Bottom Line: Consumer spending increased for the 14th consecutive month (see chart above, shaded area on right), for the first time since 1999 (shaded area on left), providing further evidence that the economy is strong and stable, and not in any imminent danger of falling into a recession.

Carpe Diem

Real Disposable Income Shows Economic Strength

The BEA reported today that Real Disposable Income grew by 2.1% in November from a year ago, the 23rd consecutive month of positive growth (see chart above).

Bottom Line: This is one of the 5 economic recession-indicating variables watched by the NBER (the others are real GDP, industrial production, trade sales and employment), and suggests that there is still no evidence yet that recessionary conditions are affecting the U.S. economy.
Carpe Diem

Final Estimate of Real GDP: A Healthy 4.9%

The BEA released it final estimate of third quarter (July-September) real GDP growth today, and it remained unchanged from its previous estimate of 4.9%. Third quarter growth in real GDP was more than twice the average growth this decade of 2.2%, and followed second quarter growth of 3.8% (see chart above). Notice also that the strong back-to-back growth in real output during the last two quarters looks nothing like the recessionary period of 2001, or even the pre-recession period of 2000.

Carpe Diem

Milton Friedman Rides Again

The top chart above is from a previous CD post, and the bottom chart above is from Larry Kudlow’s blog, and he featured it last night on Kudlow and Company.

I used a three year lag in my chart, and Larry is using a two-year lag in his graph, which might be a slightly better fit. But the main point is that money supply growth takes between 2-3 years to have its full impact on the price level and inflation.

The significant decline in the growth rate of M1 over the last few years (and the monetary base as well), suggests that inflation could likely decrease in 2008 and 2009 from its current year-end level. M1 growth has actually been negative for the last year, and the M1 money supply today is below its level a year ago, suggesting that inflation won’t continue to be a problem much longer.
Carpe Diem

The World is Not Running Out of Oil: Fill ‘er Up

From todays’ Investor Business Daily:

“The world produces about 85 million barrels of oil a day. Global energy demand is expected to rise 55% from 2005-2030. Peak oil theories abound that new discoveries are not keeping up with oil usage. But it’s significant that the new demand also is fostering big new discoveries, largely from the very countries where demand is growing most.”

The IBD editorial documents recent discoveries of new oil in Brazil, China, Mexico, India and Russia, and discusses how new oil technologies have also significantly increased the supply of oil.

“The world is not running out of oil,” said Daniel Yergin, head of Cambridge Energy Research Associates and one of the world’s leading oil experts, in a recent interview with Les Echos in Paris.


Go ahead and fill up your SUV, and engage in some guilt-free driving.
Carpe Diem

Inconvenient Weather: A Year of Global Cooling

“Al Gore says global warming is a planetary emergency. It is difficult to see how this can be so when record low temperatures are being set all over the world. In 2007, hundreds of people died, not from global warming, but from cold weather hazards,” says David Deming, geophysicist and associate professor of Arts and Sciences at the University of Oklahoma, in today’s Washington Times. Consider these inconvenient weather facts:

Unexpected bitter cold swept the entire Southern Hemisphere in 2007.

  • Johannesburg, South Africa, had the first significant snowfall in 26 years.
  • Australia experienced the coldest June ever; in northeastern Australia, the city of Townsville underwent the longest period of continuously cold weather since 1941.
  • In New Zealand, the weather turned so cold that vineyards were endangered.
In the United States:
  • In April, a killing freeze destroyed 95% of South Carolina’s peach crop, and 90% of North Carolina’s apple harvest.
  • At Charlotte, N.C., a record low temperature of 21 degrees Fahrenheit on April 8 was the coldest ever recorded for April, breaking a record set in 1923.
  • On June 8, Denver recorded a new low of 31 degrees Fahrenheit; Denver’s temperature records extend back to 1872.
  • On Dec. 7, St. Cloud, Minn., set a new record low of minus 15 degrees Fahrenheit.
Further:
  • On Dec. 4, in Seoul, Korea, the temperature was a record minus 5 degrees Celsius.
  • The Canadian government warns that this winter is likely to be the coldest in 15 years.
(HT: NCPA)

Carpe Diem

Academic Slums: Schools of Education?

American education will never be improved until we address one of the problems seen as too delicate to discuss. That problem is the overall quality of people teaching our children. Students who have chosen education as their major have the lowest SAT scores of any other major. Students who have graduated with an education degree earn lower scores than any other major on graduate school admissions tests such as the GRE, MCAT or LSAT. Schools of education, either graduate or undergraduate, represent the academic slums of most any university. As such, they are home to the least able students and professors with the lowest academic respect. Were we serious about efforts to improve public education, one of the first things we would do is eliminate schools of education.

~George Mason economist Walter Williams writing in his most recent nationally syndicated column