(What’s Left of) Our Economy: Another U.S. Trade Deficit Surge on the Way?

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Biden administration, Canada, CCP Virus, China, coronavirus, COVID 19, Delta variant, exports, goods trade, imports, lockdowns, manufacturing, manufacturing trade deficit, merchandise trade, semiconductors, services trade, South Korea, Taiwan, tariffs, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

A day after the Biden administration began laying out its “strategic vision” for trade policy toward China (which looks an awful lot like the tariff-heavy Trump administration policies decried by candidate Biden), this morning’s latest official U.S. monthly trade figures reminded that the predatory People’s Republic is hardly the only obstacle to an improved national trade performance.

Some of the distorting effects of the stop-start nature of the CCP Virus-era U.S. and global economies can be seen in the statistics. Principally, the last three data months have seen a month-on-month increase in the overall U.S. deficit in June, a decrease in July, and the rebound reported in today’s August release.

At the same time, through May, the growth of this total goods and services deficit was pretty sluggish. Since June, though, it’s remained above $70 billion for three straight months. (as will be detailed below).

At least as troubling – the rates of change in trade deficit increases and decreases, and in the economy’s rates of growth and shrinkage never match up exactly in the short run, because of lag times between orders and the receipt of supplies of traded goods in particular. But it’s not good news that whereas the U.S. economy grew at after-inflation annual rates topping six percent in each of the first and second quarters (ending in June) while the trade gap’s growth was pretty sluggish, third quarter growth could well be much slower (see, e.g., here), and the trade deficit seems to be settling in at higher levels.

To return to the China data – not that they were good. The S$31.74 billion U.S. merchandise deficit with the People’s Republic was the biggest monthly total since July, 2019’s $32.68 billion, and was up sequentially by 10.79 percent. Goods imports rose 6.51 percent on month to just under $43 billion for their highest level since last November. But merchandise exports sank month-to-month by 3.94 percent, to $11.26 billion – their lowest level since February.

Even so, the August trade report showed again that, longer term, the Trump tariffs are bringing and keeping America’s huge and longstanding China goods trade gap under control. Specifically, this deficit is up 13.65 percent year-to-date – much more slowly than the closest global proxy, America’s non-oil goods deficit (19.11 percent).

As for the headline U.S. combined goods and services trade deficit, it rose in August by 4.19 percent, from a slightly upwardly revised $70.30 billion to a new record $73.25 billion.

The merchandise trade shortfall increased, too – but by just 1.82 percent sequentially. And the $89.41 billion total, while high by historic standards, still trailed the $93 billion-plus top-two levels hit in March and June (the latter’s $93.26 billion remaining the record).

The August services trade surplus of $16.16 billion, however, was the lowest since December, 2011, and fell by 7.74 percent from July.

Several other records were set by the August results in the broadest U.S. trade flow categories. On the negative side, total U.S. imports hit an all-time high of $286.99 billion during the month, as did goods imports ($239.11 billion). But at $149.69 billion, August goods exports hit their second consecutive historical best.

And speaking of records, manufacturing’s $116.88 billion trade shortfall represented another. The August total was 5.76 percent greater than July’s $110.05 billion and exceeded the previous all-time worst (June’s $114.06 billion by 2.47 percent).

Delving more deeply into the manufacturing numbers, industry’s exports did improve by 1.95 percent sequentially, from $95.22 billion to $97.13 billion. But the much greater amount of imports jumped more than twice as fast – by 4.03 percent, from $205.72 billion to $214.01 billion.

On a January-August basis, the manufacturing deficit has ballooned by 23.77 percent, from $686.36 billion to $849.50 billion – making a fourth straight trillion-dollar trade gap for industry all but certain.

Year-to-date, manufacturing exports have grown by 19.28 percent, but imports remain more than twice as great, and they’ve swelled by 21.64 percent.

Some more records and notable results:

>At $3.73 billion, the August goods trade deficit with global semiconductor manufacturing superpower Taiwan set a fifth straight monthy record.

>The merchandise gap with South Korea, another leading semiconductor manufacturer, soared by 51.18 percent to $3.15 billion – its third highest total all-time.

>And the goods shortfall with Canada, America’s third largest goods trade partner (after the European Union and China, respectively) surged 24.48 percent, to a $5.33 billion level that was the loftiest monthly amount since October, 2008 ($5.65 billion).

The bear case for the trade deficit is easy to identify: For example, if it’s been rising even as the CCP Virus’ highly contagious Delta variant and related economic and behavior curbs are depressing growth, it’s sure to rise higher and faster as the Delta wave keeps showing signs of weakening, and growth picks up again. Further, whenever unsnarling begins of the kinds of logistical snags that have disrupted supplies of semiconductors and created long backups at ports on America’s West Coast and elsewhere, U.S. imports in particular will rise even more rapidly.

The bull case seems to depend mainly on the winding down domestically and internationally of the virus – which will help America’s trade partners finally to start catching up with the United States recovery-wise, and therefore to step up net buys of U.S. imports. (See, e.g., here.) There are also the arguments that supply chain normalization will help restore domestic U.S. business’ export potential; and that the Biden administration has just made clear that the vast bulk of the steep and sweeping Trump China tariffs will remain in place for the foreseeable future – which will keep pricing enormous amounts of imports from China out of the U.S. market.

At this point, the fence looks like the safest place to be analytically, as has often been the case for the pandemic economy. So that’s where I’ll sit regarding future prospects for the trade deficit – but leaning a little toward the bearish side for now.

Im-Politic: Anti-Pandemic Economy Clamps Could Be Strengthening Just as the Virus Threat is Weakening

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Andrew Jackson, Battle of New Orleans, Biden, CCP Virus, CDC, Centers for Disease Control and Prevention, coronavirus, COVID 19, data, hospitalizations, Im-Politic, Jobs, lockdowns, mortality, OurWorldinData.org, stay-at-home, vaccination, vaccine mandates, vaccine passports, vaccines, War of 1812, Washington Post, Wuhan virus

What a stunning and thoroughly depressing point the U.S. fight against the CCP Virus may be at. Governments at all levels, private businesses, and non-profit institutions of all kinds are imposing all sorts of vaccination mandates on employees that could result in significant layoffs for the recalcitrant (including those with natural virus immunity) and equally important damage to the economy. And at the same time, the most reliable data now show that the virus’ destructive impact – recently renewed by the highly infectious Delta variant – is easing once again, and for reasons that look completely unrelated to vaccination rates.

Not that the most reliable CCP Virus data are incredibly reliable. As I’ve previously written, there are some awfully dubious definitions of “Covid-related deaths” being used across the country, and major holes in the coverage achieved by the official record keepers. In addition, serious problems have been revealed even in the hospitalization numbers – which I’d considered the most accurate gauge of the virus’ effects on human health.

All the same, the proverbial statistical curve for both indicators is now bending down for the first time since Delta began dominating the American virus scene in mid-summer.

As often the case, my source for the death and hospitalization figures are the Washington Post‘s very user-friendly CCP Virus databases. For this post, I’m also using some hospitalization figures for the U.S. Centers for Disease Control and Prevention’s (CDC) website. Unless otherwise mentioned, the specific numbers here are changes in seven-day averages (7DA), which smooth out random fluctuations that tend to occur on a day-to-day basis.

Regarding mortality, the 7DA for daily reported covid-related deaths bottomed out on July 6 at 209 and it had plummeted by nearly 30 percent during the previous week. And through July 27, the 7DA stayed below 300. But by August 16, it hit 651 and thereafter began soaring rapidly.

By the 18^th, the 7DA average had jumped by nearly 32 percent week-on-week, and the rate of increase continued surging until it peaked on the 24^th at an appalling 77.90 percent. But thereafter, these increases dropped dramaticaly. A week later, they were down to just over 21 percent. That is, consistent with the “bend the curve” criteria, the problem kept worsening, but it was worsening much more slowly, which counts as welcome progress.

This encouraging development continued through September 9, by which time the 7DA was rising on a weekly basis by just 3.17 percent. In other words, it nearly stopped rising altogether. But this fall-off proved to be a head fake. Almost immediately, the weekly increases in the 7DA for covid-related mortality bounced back, and reached a discouraging 27.49 percent in less than a week (by the 15^th).

Yet another decline has followed, and this one has been considerably deeper. By September 21, the weekly 7DA increase was back below ten percent, and just four days later, hit zero for the first time since the second half of July.

Since then, and through yesterday, the 7DA has not only been decreasing on a weekly basis. It’s been decreasing faster and faster. Yesterday, the decline stood at 6.74 percent.

The hospitalization story has been somewhat different, and brighter, especially since early September. The 7DA for daily new hospital admissions for CCP Virus-related reasons bottomed out on June 25 at 1,824 and at that point, it was down on week by just under 5.20 percent.

By August 9, the situation had turned around completely – and then some. The 7DA had soared by 34 percent. Afterwards, however, came a consistent decline. By the 20^th, the weekly rate of increase in the 7DA had fallen to ten percent, and by September 1, the increases had stopped. The weekly 7DA registered its first weekly decline on September 6 (down two percent), and its first double-digit decrease on the 21^st (ten percent).

Since then through the 30^th, it’s fallen by ten percent or more twice, and the weekly decrease in the 7DA hasn’t dipped below seven percent.

Given the mushrooming of vaccine mandates and widespread claims – including by President Biden – that the nation is now facing a “pandemic of the unvaccinated,” you’d think that the above improvements stemmed overwhelmingly from increased vaccination rates. But the data – in this case, from the OurWorldinData.org website, provide no support for this conclusion.

Specifically, on August 24, when the 7DA of daily covid-related deaths was skyrocketing at that awful 77.90 percent weekly rate, 51 percent of Americans were fully vaccinated against the CCP Virus, and 9.1 percent were partly vaccinated. By yesterday, these figures were only 55 percent and 8.8 percent, respectively.

On August 9, when the 7DA for covid-related hospitalizations was growing by 34 percent week-on-week, half of Americans were fully vaccinated and 8.5 percent were partly vaccinated. Through yesterday, those numbers hadn’t changed dramatically, either.

Could mask-wearing be responsible? Trouble is, I haven’t seen any figures on how this practice has changed in recent months. (If you have, let me know.) As far as I’m concerned, the real reasons for this good CCP Virus news have to do with rising levels of natural immunity (especially important given Delta’s virulence), the distinct possibility that the CCP Virus is one of those pathogens whose lethality wanes as it mutates (an important Delta consideration, too), and the nation’s better treatment record – due to a combination of more experienced doctors and new therapeutics.

In early 1815, then-General Andrew Jackson led American forces to a great victory over the British in the Battle of New Orleans. But due to that era’s painfully slow communications, the triumph came about two weeks after the United States and Great Britain signed the treaty ending the War of 1812.  It makes me wonder how long the U.S. public and private sectors — which don’t have the communications excuse — will keep threatening the economy’s recovery with redoubled anti-virus measures just as the pandemic tide appears to be turning.   

(What’s Left of) Our Economy: New U.S. GDP Data Still Show Trade Normalization — Pre-Delta

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CCP Virus, China, coronavirus, COVID 19, exports, GDP, goods trade, gross domestic product, growth, imports, inflation-adjusted growth, lockdowns, real growth, real trade deficit, services trade, Trade, trade deficit, vaccine mandates, Wuhan virus, {What's Left of) Our Economy

Today’s third (and final, for now) official read on U.S. economic growth in the second quarter confirms that at least as of June, the nation’s trade flows had made impressive progress toward returning to a pre-CCP Virus form of normality. The trouble still is, though, that these data cover a three-month stretch that came just before the highly infectious Delta variant of the virus arrived state-side in force, kicking off a new round of mandated and voluntary curbs on business and consumer behavior that will clearly impact the third quarter’s exports, imports, and trade balances – among other measures of economic performance.

The key sign of such trade normalization – the dramatically slowing rate at which the total U.S. deficit is increasing. It’s the same pattern that U.S. public health authorities spoke about early in the pandemic when they focused on “bending the curve.” The idea is that huge, powerful trends rarely reverse themselves overnight, or even quickly. When they’re harmful, the most realistic early aim policy- and other decision-makers can seek is slowing the rate at which they become worse.

And these latest second quarter numbers add to the evidence that trade deficit worsening has nearly stopped. Last month’s previous government estimate of the gross domestic product (GDP), its change, and how its individual components have grown or shrunk in inflation-adjusted terms (the terms most widely watched) revealed that the combined goods and services trade shortfall was only 1.71 percent wider ($1.2471 trillion at annual rates) than in the first quarter ($1.2261 trillion).

This morning, though, the overall trade gap was pegged at a smaller $1.2445 trillion – just 1.50 percent more than in the first quarter. The absolute level of the deficit remains enormous. In fact, as such, it’s still the biggest ever (and still the fourth straight record quarterly total). More important, at 6.43 percent the size of the total economy, it’s still the biggest trade gap ever in relative terms, too.

In addition, the second quarter’s inflation-adjusted overall trade deficit was a full 46.83 percent greater than the $847.6 billion annualized figure recorded in the fourth quarter of 2019 – the last full quarter before the CCP Virus began distorting U.S. trade flows by weakening the economy of enormous trade partner China.

But between the second and third quarters of last year, when the economy was rebounding strongly from its short but dizzying pandemic- and lockdown-induced recession, the real trade deficit skyrocketed by 31.81 percent. So the curve has not only been bent – it’s nearly flattened. And in price-adjusted terms, the government’s U.S. economic growth estimate for that April-through-June period this year came in this morning at 6.56 percent at annual rates – a bit better than last month’s 6.40 percent.

Slightly better trade deficit improvement coupled with slightly stronger economic growth is definitely good news, and it’s confirmed by the figures on the impact on growth of the trade deficit change. Last month, the Commerce Department (which compiles and reports the GDP statistics) announced that the constant dollar trade gap’s modest sequential increase over the first quarter level cut after-inflation U.S. growth by 0.24 percentage points. In other words, had the deficit simply remained the same, second quarter growth would have been 6.64 percent annualized, not 6.40 percent.

The new numbers show that the deficit’s smaller increase reduced second quarter growth by just 0.18 percentage points. So if the trade gap hadn’t worsened at all, real economic growth would have hit 6.74 percent, not 6.56 percent.

The manner in which the second quarter’s constant dollar trade gap improved over the second read was encouraging, too – although the pattern was not quite as positive as that reported last month.

That GDP release judged that total exports improved by 1.60 percent (to $2.298 trillion annualized) over the first quarter’s level, not by the originally reported 1.47 percent. Total imports, by contrast grew more slowly – by l.64 percent, not 1.90 percent (and reached $3.5457 trillion).

According to today’s GDP report, the total sequential export increase was a faster 1.85 percent (to $2.3042 trillion at annual rates), but the total import increase was as well (1.73 percent, to a slightly higher $3.5487 trillion).

Just as important, after-inflation total exports are still 9.76 percent below their immediate pre-virus (fourth quarter, 2019) levels, but total imports are 4.35 percent higher, and the latest second quarter figure is still a second straight quarterly record.

Goods trade accounts for the vast majority of U.S. trade flows and today’s second quarter revisions saw the longstanding constant dollar deficit level rise marginally, from $1.4014 trillion annualized to $1.4020 trillion. This figure remained the fourth straigh all-time high for this indicator, but was a mere 0.44 percent worse than its first quarter counterpart, and thus represented a major slowdown from the 20.40 percent spike seen during last year’s third quarter GDP boom.

For a change, even though the service sector has been the hardest hit by the virus by far, its new real trade surplus figures improved over the previous read – from $151.2 billion at annual rates, to $152.4 billion. Nonetheless, this still represented the weakest quarterly performance since the third quarter of 2010’s $161.7 billion – when the economy’s recovery from the 2007-2008 financial crisis and Great Recession remaine in early stages.

The rapid spread of the Delta variant and consequent business restrictions and renewed consumer caution are widely forecast to depress U.S. growth considerably (see, e.g., here) – which usually heralds a considerable reduction in the trade deficit. But even if economic form follows, the unpredictability of the pandemic and the responses it generates means that it’s anyone’s guess as to how long any particular trend will last.

(What’s Left of) Our Economy: Why the Fed is Still (Really) Dovish on Economic Stimulus

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CCP Virus, coronavirus, COVID 19, Employment, Federal Reserve, global financial crisis, Great Recession, interest rates, Jerome Powell, lockdowns, monetary policy, moral hazard, QE, quantitative easing, recovery, stimulus, taper, transitory, Wuhan virus, {What's Left of) Our Economy

Yesterday, I tweeted that the Federal Reserve’s just-published statement on its policy plans looked pretty dovish – that is, signaling a continued determination to keep pouring massive amounts of stimulus into the U.S. economy. Most every other student of the economy worth heeding read exactly the opposite into the message and some related materials it issued – including Chair Jerome Powell’s statement at his subsequent press conference that the central bank could start easing off the accelerator as early as November. (One notable exception:  CNBC’s Steve Liesman.)  

Here’s why I’m right – at least in the most important senses – and why the dovishness I see isn’t great news for the American economy at all over any serious length of time.

The folks reading hawkishness into the Fed’s stance pointed to three main reasons for their conclusion, and I’d be the last person to ignore them. First, the policy statement did declare that “moderation” in the central banks’ bond-buying program, known as “quantitative easing” (QE) “may soon be warranted” if the economy’s progress “continues broadly as expected.” That’s a big change even from the July statement’s analysis:

“Last December, the [Fed] indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the [Fed] will continue to assess progress in coming meetings.”

Second, at the press conference, Powell not only hinted at a November start for the so-called “taper” of Fed bond buying.  He added that the process could conclude “around the middle of next year.” So although the change is expected to occur gradually, the Fed is indicating it won’t take forever to accomplish. 

Third, in a regularly issued graphic summary of their (anonymous) future expectations (called the “dot plot”), fully half of these policymakers made clear they anticipated that next year would also see the interest rate they control begin rising. As Powell told the press, taking this step would mean that these Fed officials had seen much more economic progress than that required for the taper of bond purchases they appear ready to begin.

I actually agree that this evidence adds up to more Fed “hawkishness.” But “more” clears only a very low bar for an institution that’s been super-dovish for the better part of the last decade and a half (since it decided to fight the Great Recession following the 2007-08 global financial crisis by opening up the stimulus spigots to an unheard of extent).

In other words, a Fed that for many more months will be continuing to spur growth and employment by purchasing tens of billions of dollars of bonds every month (only less than the current $120 billion) still looks pretty devoted to easy money to me.

At least as important, Powell in particular made clear that the Fed’s expectations for ending what are, after all, measures taken to counter the Covid-induced economic emergency are so fragile that he and his colleagues could change their minds as soon as the current recovery – which has been strong by most measures – veers off track.

It’s true that at the press conference, the Chair stated that all it would take for him to decide that employment was still improving enough to support a prompt beginning of tapering would be a “reasonably good” and “decent” official U.S. jobs report come out next month – not a “knockout, great, super strong” result. (Powell already believes that the nation’s inflation record – the Fed’s other main “taper test” has already been good enough to warrant reducing those bond purchases.)

But aside from questions about how Powell defines “reasonably good,” etc., his remarks show that he (along with his policymaking colleagues, over whom he wields considerable influence) still believes that a single poor jobs report, or similar discouraging development, would suffice to keep the economy on its exact same monumental levels of literal life support even though the patient has long exited the emergency room.

And these exacting standards for merely reducing current stimulus gradually (which, as the Chair himself noted, would still leave its asset holdings “elevated” and “accommodative”) tell me at least that, however well the economy performs, the Fed will be remaining on a super easy-money course pretty much indefinitely.

The one development that could change this picture significantly: a big, sustained takeoff of inflation.

But if Powell’s right (which I believe he is), then the current burst of higher prices results from “transitory” developments peculiar to the dramatic stop-start dynamics created by the pandemic and its policy and behavioral fall-out. Prices, therefore, should start normalizing before too long.

So what’s the problem? First, if the Fed is afraid that the U.S. economy can’t prosper adequately without what are essentially massive government subsidies, that’s a pretty damning indictment of that economy’s ability to generate satisfactory levels of growth and employment and living standards improvements more or less on its own.

Even more important, even if this Fed judgment is wrong, clearly it’s going to keep the stimulus flowing at historically unheard of rates, and historically, anyway, super easy-money has undermined financial stability – and disastrously – by creating what economists call “moral hazard.” That’s the condition in which over-abundant, dirt-cheap resources produce any number of reasons for using these resources foolishly (i.e., unproductively). After all, they drive down the economic penalties for making these mistakes to rock bottom levels by all but eliminating interest costs.

And an economy that uses resources so inefficiently is bound to run into big trouble before too long and suffer punishing and lingering after-effects. If you’re skeptical, think back to that devastating financial crisis and Great Recession – which weren’t so long ago – and to the slowest U.S. recovery in decades that followed. If that’s not persuasive enough, ask yourself why even the easy-money pushers at the Fed are talking about tapering in the first place.

(What’s Left of) Our Economy: More Trade Normality Revealed in New GDP Figures – But for How Long?

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CCP Virus, coronavirus, COVID 19, Delta variant, exports, GDP, goods trade, gross domestic product, imports, inflation-adjusted growth, lockdowns, real exports, real GDP, real imports, real trade deficit, recession, recovery, services trade, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

Last month, I reported that the trade highlights of the first official read on U.S. economic growth in the second quarter of this year showed signs that some form of normality was returning to the nation’s international trade flows after months of unprecedented pandemic-era fluctuations. This morning, the second government estimate of the second quarter gross domestic product (GDP) came out (next month we’ll see the final version – for now), and the signs of a new normality look even stronger.

Specifically, the sequential growth of America’s inflation-adjusted trade deficit during this period was even slower than the slowish rate presented in last month’s GDP release – and using the phrase “to a crawl” seems justified in describing the pace.

That initial estiimate revealed that the real trade gap’s quarterly widening had slowed from the sizzling 31.81 percent in the third quarter of last year, when the economy was roaring back from its brief but epic CCP Virus- and lockdown-induced crash dive to just 2.69 percent between this April and June (a strong growth period itself, but nothing compared with the initial recession rebound). Today, however, the after-inflation trade shortfall’s expansion came in at just 1.71 percent for the second quarter – when real growth itself clocked in at 6.40 percent on an annual basis, not the 6.35 percent estimated last month.

The new number for the second quarter’s price-adjusted trade deficit, $1.2471 billion annualized, remains astronomical by any reasonable standard. Not only is it still the biggest such figure in absolute terms. It’s the biggest such figure in relative terms – as a share of real GDP – where it still stands at 6.44 percent. And this revised trade deficit remains the fourth straight all-time high recorded. For some more perspective, the inflation-adjusted gap is also still 47.13 percent wider than where it stood in the fourth quarter of 2019 ($847.6 billion), just before the pandemic and its effect began weakening and distorting the economy.

More encouragingly, though, the new trade deficit result is a significant improvement over the $1.2590 trillion first reported. Also on the plus side, the after-inflation trade deficit’s sequential rise cut only 0.24 percentage points from the quarter’s 6.40 percent growth at an annual rate. That is, had the second quarter deficit stayed at its first quarter level, second quarter growth would have been 6.64 percent annualized – or 3.75 percent faster.

It all adds up to the trade deficit’s best such effect on real GDP change in absolute terms since the second quarter of 2020, when the deficit’s shrinkage prevented the nearly 36 percent pandemic-produced real GDP plunge from becoming slightly worse. By contrast, in the first quarter of this year, the inflation-adjusted trade shortfall’s increase cut the 6.14 percent annualized real growth figure by 1.56 percentage point. So had there been no sequential increase at all, that quarter’s price-adjusted growth would have been 7.70 percent at annual rates – a difference of fully 25.41 percent.

The manner in which the second quarter’s constant dollar trade gap improved over the initial read was good news as well, as after-inflation exports rose faster and their import counterparts climbed more slowly than reported last month.

Rather than growing by 1.47 percent sequentially during the second quarter, total after-inflation exports were judged to have advanced by 1.60 percent. At $2.2980 trillion annualized, though, they’re still 9.98 percent lower than in the fourth quarter of 2019 – the last full quarter before the CCP Virus’ arrival. As a result, the second quarter’s real export performance was an even greater improvement over the first quarter’s 0.73 percent dip than previously thought.

Combined goods and services imports were reported up by 1.64 percent between the first and second quarters, not 1.90 percent, as originally reported. This new figure also beat the first quarter’s 2.25 percent sequential real import increase.

At the same time, the new inflation-adjusted total import figure of $3.5547 trillion annualized still represents their second straight quarterly record, and such purchases from abroad are still 4.26 percent higher than their fourth quarter, 2019 level.

Turning to goods (the vast majority of U.S. trade flows), the second GDP read for the second quarter left standing their dubious record of a fourth straight all-time high trade deficit. But as with the overall trade deficit, the new figure of $1.4014 trillion annualized was a solid improvement from the previously reported $1.4610 trillion. And as a result, the second quarter number was only marginally (0.40 percent) worse than the first quarter figure, making clear a major slowdown in this indicator’s rise as well (from 20.40 percent during last year’s super-growth third quarter).

Unfortunately, the revised second quarter real service trade figures told a story that was especially gloomy even given this sector’s well known and disproportionate virus- and lockdown-induced woes. The long-running service trade surplus is now pegged at $149.5 billion for the April-through-June period. That’s a figure lower than the $151.2 billion previously reported, and the weakest quarterly result since the $161.7 billion recorded in the third quarter of 2010, when the recovery from the 2007-2008 financial crisis and Great Recession was in its earliest stages.

Also unfortunate – and frustrating: Whatever is shown in the final (for now) second quarter GDP report, the results will be pre-Delta variant. So although today’s data shows trade normalization to be even closer than previously thought, that next set could be of limited use at best in figuring out how long it’s going to last.

(What’s Left of) Our Economy: New U.S. Figures Show Inflation is Looking More Transitory

Tags

CCP Virus, coronavirus, COVID 19, deflation, Delta variant, Federal Reserve, inflation, interest rates, lockdowns, monetary policy, QE, quantitative easing, recession, recovery, reopening, Wuhan virus, {What's Left of) Our Economy

Normally, a 5.28 percent annual U.S. inflation rate for July reported today by the Labor Department wouldn’t be seen as good news. Ditto a comparable 4.24 increase in prices excluding food and energy (the so-called core rate, which strips out these categories supposedly because they’re so unusually volatile and don’t necessarily reflect the forces influencing prices overall).

Since these times aren’t normal, due to the CCP Virus pandemic, and since they may well not return to normal for quite a while, due to alarm over the latest, highly infectious Delta strain, times may not become normal any time soon, “We’ll take it for now” strikes me as the only reasonable reaction.

In terms of how U.S. leaders, including the Federal Reserve, should react, tentativeness is justified, too. But the new figures add to the evidence that the recent surge in U.S. inflation is likely to be a “transitory” phenomenon (as Fed-speak calls it) that doesn’t warrant any significant monetary policy moves to cool off the economy (like raising interest rates or moderating or reducing the central banks’ monthly bond purchases – the so-calle Quantitative Easing, or QE, program).

As I’ve argued previously (see, e.g. here), the year-on-year numbers actually prove little – because the virus and the recession and curbs on economic activity it prompted weakened prices to such a remarkable degree, and because the relatively quick reopening starting in late spring, 2020, and the historically explosive growth it ignited, generated such strong catch up. Think of a coiled spring getting released.

Skeptical? From February through July, 2020, overall prices in America dropped on net, and such deflation marked core prices from February through June.

That’s why I look instead at the month-to-month price increases this year. And they definitely point to a significant recent slowing inflation by both measures. Here are the sequential numbers for the overall rate reported today (known as the “Consumer Price Index for All Urban Consumers,” or CPI-U for short);

December-January: 0.26 percent

January-February:   0.35 percent

February-March:     0.62 percent

March-April:           0.77 percent

April-May:              0.64 percent

May-June:               0.90 percent

June-July:                0.47 percent

What’s at least as important as recent signs of inflation slowing is the absence of signs of inflation taking off. They matter because expectations of inflation themselves can become major inflation fuel by causing businesses to boost purchases of inputs above normal rates to avoid greater expenses down the road. The resulting spiral effect can be difficult to halt without the Fed literally slamming the brakes on the entire economy and even producing a recession.

Now here are the monthly increases for core inflation:

December-January: 0.03 percent

January-February:   0.10 percent

February-March:     0.34 percent

March-April:           0.92 percent

April-May:              0.74 percent

May-June:               0.88 percent

June-July:               0.33 percent

The pattern isn’t identical to that for overall inflation, but it’s pretty similar.

The other main body of evidence arguing for abnormally high inflation turning out to be temporary has to do with some of the main engines of the recent price increases. As noted in last month’s post, the surge-y June inflation figures were led by products and services like used cars and trucks (up 10.5 percent month-to-month), vehicle rentals (up 5.2 percent), and hotel and motel rates (up 7.9 percent). These results could be traced either to the stop-start nature of the economy during the pandemic period and consequent bottlenecks and shortages, or to the arrival of the vacation season to a nation long afflicted with cabin fever and hoping that the virus was being beaten.

The July monthly price changes for these items? Used vehicle prices inched up a bare 0.2 percent, vehicle rental prices actually sank by 4.6 percent, and hotel and motel room prices cooled to 6.8 percent. Clearly the latter remain high. But airline fares, whose monthly price increases had already fallen from 10.2 percent in April to seven percent in May to 2.7 percent in June became 0.1 percent cheaper in July.

There’s no guarantee of course that the July numbers will continue the inflation-slowdown trend. But the bad news is that the main reason is anything but good. It has to do with the distinct possibility that the rapid Delta-induced increase in CCP Virus cases will keep prompting a return to business restrictions and behavior curbs that will undermine economic growth. In turn, that would greatly complicate business’ efforts to pass on whatever cost increases they’re dealing with.

If this pattern takes hold, the rising price spiral dynamic could shift into reverse, bringing the economy back to the deflationary days of 2020. And even worse – this kind of spiral can be harder to break than inflationary spirals. For in these circumstances, consumers and businesses hold off on many purchases because they believe prices will drop even further – and production and hiring therefore fall off, too.

In addition, if robust growth continues, along with inflation it views as unacceptably high, the Fed could seek to stabilize prices by slamming on those economic brakes.   

For now, though, the July inflation numbers should be seen as encouraging.  They may amount to favors that are small (and transitory themselves), but they’re still worth being grateful for. 

Im-Politic: Why Delta Looks Like a Wave (in the Best Sense)

Tags

CCP Virus, coronavirus, COVID 19, Delta variant, health, Im-Politic, lockdowns, pandemic, public health, The New York Times, vaccination, vaccine mandates, vaccine passports, vaccines, Washington Post, Wuhan virus

I hate to break up the CCP Virus panic party that’s been held lately due to the surge of the Delta variant in recent weeks.

Actually, as known by RealityChek readers, I don’t hate to break it up, since I’ve been writing that it doesn’t portend the end of days, or anything close – much less a development serious enough to justify a return to economic and behavioral curbs in the United States. But even I was surprised to see how strongly the U.S. data support my confidence that Delta’s a wave in the most encouraging sense: It’s something that’s going to come down about as fast as it went up, both nation-wide and state-wide. Moreover, contrary to the almost universal claims, differences in vaccination rates don’t seem to have much to do with these trends.

These conclusions are based on data showing recent changes in hospitalization rates in states that have seem to have been hardest hit by the overall national increase in recorded virus cases since late June. As I’ve pointed out, case numbers are a deeply flawed measure of the virus’ impact on the nation, largely because so many infections are asymptomatic or very mild. Therefore, such victims typically don’t bother to report them. By the same token, however, their prevalence indicates that the pandemic’s dangers to Americans generally speaking are limited.

Hospitalization rates suffer major flaws, too – mainly because of sloppy definitional practices – but they’re better than case numbers. And what the numbers make clear is that in handful of states widely described as the Delta and overall new wave epicenters (see, e.g., here and here), the hospitalization curve is bending down big time. That is, the weekly numbers of new hospitalizations have slowed dramatically.

Here are the actual figures, with the percentage changes new hospitalizations over the last two weeks shown on the left side (and based on The New York Times‘ interactive CCP Virus tracker) and the percentage changes over the last week shown on the right side (and based on the Washington Post‘s tracker). I needed to use two sources here because I couldn’t find a single source that presented all this information in one place.

U.S.:                      +90 percent            +34 percent

Florida:                +111 percent            +17 percent

Texas:                  +102 percent            +19 percent

Lousiana:             +136 percent            +32 percent

Arkansas:               +45 percent              +4 percent

Missouri:                +27 percent              +5 percent

Mississippi:          +166 percent            +26 percent

In addition, as well known by now, the full vaccination rates in all of these states have lagged the national average of about 50 percent as of today.

Florida:      49.6 percent

Texas:        44.5 percent

Lousiana:   37.6 percent

Arkansas:   37.6 percent

Missouri:    42.1 percent

More evidence of the relatively modest role played by the vaccines in slowing hospitalization rates can be seen in the below table presenting, as above, the changes in weekly hospitalizations over the last two weeks and over the last week for the ten states with the highest full vaccination rates (shown in parentheses).

                                   over the last two weeks            over last week

US (50.1 percent):              +90 percent                       +34 percent

Vermont (67.9 percent):    +577 percent                     +260 percent

Mass. (64.4 percent):          +78 percent                       +25 percent

Maine (64.2 percent):         +29 percent                          -8 percent

Connect. (63.9 percent):     +90 percent                       +14 percent

R.I. (62.1 percent):               -29 percent                      +89 percent

Maryland (59.5 percent):     +77 percent                      +23 percent

N.J. (59.0 percent):              +60 percent                      +14 percent

N.H. (58.6 percent):             +45 percent                     +13 percent

Wash. (58.6 percent):           +60 percent                     +21 percent

N.M. (57.8 percent):            +89 percent                     +23 percent

The first observation to be made is that nation-wide, the increase in hospitalizations has slowed significantly – for which everyone should be thankful. The second point worth noting is that the two week changes for the high- and low-vax states don’t differ to any great extent, though both display significant variation. And the third point I’d emphasize is that the slowdowns mostly have been much faster in the low-vax states. So since we’re examining all these states during the same timeframes, it’s difficult to understand the insistence that vaccination is so vital to stopping the spread. (Incidentally, I’d ignore the Vermont data, since the absolute numbers are so small.)

The only other explanation I can think of is that the high-vax states tend to be states that are densely populated, whereas the low-vax states are much less so. But logically, that would seem to argue most strongly for more energetic vaccine efforts to be made where people are most crowded together, not for villifying the vaccination laggard states (especially when, as in the cases of Florida and Texas, they’re not trailing by that much).

And nothing apparent about the Delta variant so far changes what’s been the most sensible formula for contending with the CCP Virus since the pandemic’s first (understandably) panicky months of 2020:  Don’t treat it like the nation’s only health problem, much less its only problem; don’t ignore its wave-like dynamics or its highly differentiated health effects; therefore keep social and economic life as normal as possible, and focus protective efforts (including vaccines) on the highly vulnerable.      

Im-Politic: The CDC’s Delta Misinformation Spread

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CCP Virus, CDC, Centers for Disease Control and Prevention, coronavirus, COVID 19, Delta variant, Im-Politic, lockdowns, public health, Rochelle Walensky, vaccinations, vaccine passports, vaccines, Wuhan virus

Remember all the way back to…August 3, when I wrote that the available data made clear that the U.S. government’s leading medical authorities, its President, and many of its politicians and Mainstream Media journalists were engaged in fear-mongering over the new-ish Delta variant of the CCP Virus? I documented that although the new strain has indeed spread rapidly, even the (overwhelmingly circumstantial) evidence cited said absolutely nothing about the most critical issue: the new variant’s ability to cause serious illness and death.

Indeed, I noted, the ability of all versions of the virus (1) to spread asymptomatically, or (2) with symptoms too mild to be reported, and the consequent inability to measure its presence in the population accurately, combined (3) with death rates that have remained at rock bottom, strongly indicated that its lethality rate was low. Flawed definitions of virus-caused hospitalizations further complicated even efforts to gauge Delta’s severity.

Today, however, I’m reporting that the misinformation propagated about the Delta threat is even worse than I originally thought. The problem? The U.S. Centers for Disease Control and Prevention (CDC), whose statistics, conclusions, and guidance form the basis of so much of the virus-related information received by the public, and of so much of the mitigation policy adopted by government at all levels along with private business (e.g., most recently, vaccine passports), has been using figures that are hopelessly out of date. 

The misinformation episode came this past Thursday, when CDC director Dr. Rochelle Walensky answered a reporter’s question about the data backing up the Biden administration contention that Delta’s proliferation, plus the rise in virus-related hospitalizations, had produced a pandemic almost exclusively “among the unvaccinated” that’s creating a new public health emergency serious enough to justify sweeping vaccine mandates and other new public health as well as economic curbs.

Here’s what Walensky said: “So those data were data that were from analyses in several states from January through June and didn’t reflect the data that we have now from the Delta variant. We are actively working to update those in the context of the Delta variant.”

She did add that “I do want to reiterate, though, that based on the data we’re seeing — and we don’t have fully updated numbers — universally, as we look at our hospitalizations and as we look at our deaths, they are overwhelmingly unvaccinated people.”

But her initial response revealed that the information the agency has been principally relying on have nothing to even with vaccinations, much less Delta. And that’s not because the CDC has been slipshod in this respect. It’s because it wasn’t until May that even half the total U.S. population was partially –not fully – vaccinated. In fact, as of early April, the share was only about 25 percent. (See here for the figures.)

So since the vast majority of Americans hadn’t been fully vaccinated for most of the six-month period from which the CDC come – as the agency obviously knew – of course the vast majority of hospitalizations would be of the unvaccinated. And please keep in mind those aforementioned flaws in the definition of CCP Virus-related hospitalization and the lack of data on what age groups dominated the hospitalized population whether properly counted or not – since the pathogen’s severity and lethality are so highly concentrated among the relatively old, and  with underlying health problems.

The focus on January-June also weakens the linkage between virus hospitalization rates – even given all the definitional flaws – and the Delta variant. For the new mutation was at least as scarce during that period as vaccination. The first U.S Delta case wasn’t even recorded until March. In early April, it had produced just 0.1 percent of all American cases, according to the CDC. As recently as early June, the figure was just 9.5 percent. (See here for these numbers). By June 19, the figure was still just 30.4 percent, and it was only in the last 10 days of June into the first three days of July that Delta was responsible for half of infections. (See here for these numbers.)

Throughout the pandemic, their obsessive focus on the CCP Virus – as well as apparent obliviousness to its highly differentiated effects – has blinded the  CDC and other public health authorities to the grievous harm done by its mitigation advice to workers, small business owners, students, opioid addicts, not to mention to those suffering from a myriad of other health problems forced to stand at the back of various medical service lines. 

Walensky’s latest comments show that intellectual dishonesty now belong on the list of their blunders – and on the list of reasons for thoroughly overhauling their leadership and institutional cultures, and role in health policymaking as soon as possible. 

Im-Politic: Delta Fear is Leading The Science, Not Following It

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Anthony S. Fauci, Biden, CCP Virus, Centers for Disease Control and Prevention, coronavirus, COVID 19, Delta variant, hospitalizations, Im-Politic, infections, lockdowns, masks, public health, vaccine passports, Wuhan virus

Sorry, but I’m not that comforted by the fact that Anthony S. Fauci is now saying  that “I don’t think we’re going to see lockdowns” because of the rapid spread of the Delta variant of the CCP Virus.

That’s because (1) President Biden’s top medical advisor has been such a single-minded backer of broad curbs on economic activity despite their devastating costs to both workers and businesses, not to mention the educational and non-virus public health crises they’ve worsened (like deaths from opioid overdoses); and (2) because he and the rest of the lockdown crowd keep harping on fatally flawed measures of virus dangers that have triggered previous lockdowns, and that are especially prominent and misleading because of Delta’s unusual transmissability. The two most important are case numbers and hospitalization increases.

Normally, the number of victims of a given disease and how that number’s been changing would be crucial gauges of the threat it poses to a population at large and of the effectiveness of mitigation steps already taken.

As has been known since the early phases of the pandemic, however, the CCP Virus can be present asymptomatically. That is, many individuals might not know they’re hosting it, either because they’re still feeling perfectly healthy, or because the effects are so mild that they’re judged not worth dealing with – or reporting to the health providers on which governments at all levels in the United States rely heavily for the virus data, and that form the basis for their policy responses.

As a result, literally no one knows how many Americans have been affected by the CCP Virus and, even more important, how that number has been changing. The same goes for the Delta variant. And therefore, literally no one knows the actual national health consequences of its virulence, and especially what percentage of those who have caught Delta are now or will become seriously ill, or have died or will succumb. Those are the Delta statistic — not simple numbers recorded instances of serious illness or mortality, however distressing they are on humanitarian grounds — that matter in assessing the peril posed by this strain, and in formulating responses whose net effects economically, socially, and health-wise aren’t worse than the disease/

To understand this distinction further, think about what’s known about Delta-related hospitalizations. The most accurate answer is “Very little so far in the way of hard data.” Indeed, as pointed out last week by the American Society for Microbiology, “Research is ongoing to determine if Delta infection is associated with increased hospitalization and death.” But that hasn’t prevented a pandemic of claims that it’s been a  primary driver of admissions lately. (See, e.g., here and here — among a gazillion other articles.)

Let’s assume, however, that the narrative is true. If so, since June 27 through the end of last week, when according to the Washington Post‘s very convenient virus tracker, the number of virus-hospitalized Americans hit its lowest level since the spring of 2020, the number of such patients has increased from 16,403 to 49,498 (through July 31), or 33,095. That sounds like a lot of hospitalizations, and the percentage gain (the numbers have nearly tripled), seems even worse. So Delta looks pretty dangerous, right? But again, what’s the context – that is, what’s the share of Americans infected with Delta who get seriously ill enough to get hospitalized?

As of two weeks ago, according to the U.S. Centers for Disease Control and Prevention (CDC), the new strain was responsible for just over 83 percent of all new American CCP Virus cases. That was up from just over 30 percent on June 19 – just about the time virus-related hospitalizations hit their latest bottom. From that time through the end of July, just under 1.352 million total new virus cases have been recorded. So assuming that over the entirety of this period, Delta variant cases made up about 75 percent of these, their total at comes to 1.014 million.

Let’s further assume, in sync with the evidence-free narrative, that all of the new hospitalizations can be blamed on Delta. This would mean that 3.26 percent of the total new Delta cases (that 33,095 figure) were serious enough to require hospital care. Does that number justify even thinking about new lockdowns, much less calling them (only sort of) unlikely?

But don’t forget the asymptomatic cases! According to a new CDC estimate, as of mid-2020, 83 percent of total virus cases in America were asymptomatic – i.e., not recorded. Since so much has changed then – mainly, mass vaccination – that 83 percent figure probably doesn’t hold any more. A reasonable guess might be that 33 percent is now more like it (since about half of the total population is now fully vaccinated and many more Americans have either natural or acquired immunity).

If that’s right, the number of new Delta strain infections is more like 1.5 million, not one million. And the hospitalization rate is more like 2.21 percent. So the notion that “the war [against the virus] has changed” because of this recent mutation, as contended by an internal federal health document obtained by the Washington Post, looks recklessly alarmist.

Further, such views look even wilder and crazier given the likelihood that Washington’s methods for defining cases and virus-related hospitalizations have produced seriously exaggerated counts.

After all, detecting the virus’ presence in an individual is only one of several sets of criteria that the CDC uses to conclude there’s a CCP Virus case to be counted. For example, for individuals that have been in contact with even a probable case of the virus, or who are members of designated vulnerable groups, a positive virus diagnosis can be justified if they display a headache and a sore throat at the same time. Or a sore throat and a runny nose. Or fatigue and a fever. Or if he or she is simply has a cough.

Even the CDC lab test standards for declaring a virus case via testing are dodgy, primarily because the main determinant seems to be the simple presence of the SARS-COV-2 pathogen that causes the disease. Unfortunately, these standards don’t seem to take into account how microorganisms like viruses can enter hosts and form “colonies” that result in no tissue infection and indeed don’t interact with the host at all. And as no less than the World Health Organization has pointed out, “Detection of viral RNA does not necessarily mean that a person is infectious and able to transmit the virus to another person.” Indeed, for all intents and purposes, it means that someone can be hosting the virus but shouldn’t be considered a case at all. One recent study suggests that this pattern is found in more than a tenth of positive cases.

Finally, the hospitalization numbers may be the least reliable of all. In the first place, the reporting system used by the CDC covers only about ten percent of the American population. Moreover, all you need to qualify for the CDC’s definition of a CCP Virus-related hospitalization is to be admitted into such a facility for any reason within 14 days of a positive test. As a result, if you need to be hospitalized for, say, cancer, and you’ve tested positive for the virus during the previous two weeks, you’re considered hospitalized for the CCP Virus.

It’s the same issue that the country has been dealing concerning whether various deaths are “from” or “with” Covid. And genuinely complicated judgment calls are involved. But for that very reason, public health officials should be awfully careful when they talk about devastating consequences of infections in and of themselves.

So the bottom lines are that the sharp recent increase in CCP Virus cases – including of course Delta variant cases – look overwhelmingly to be asymptomatic or mild; that even these numbers define positivity way too broadly, thus representing a major exaggeration and therefore affecting the nation’s health only marginally at best; and that, similarly, there’s probably even less even to true hospitalization rates that are already meager enough than meets the eye.

If Fauci, or anyone else in the Biden administration or in the ranks of restrictions fans had been pointing out any of these absolutely vital nuances since the virus’ Delta phase began, I’d have more faith in assurances about avoiding new lockdowns or any significant new business or behavior curbs. That they haven’t tells me that if such deeply mistaken and needlessly damaging (as known since the virus’ early period) measures aren’t yet on the lockdowners’ table, they’re not too far off — and so far, that would represent leading the science, not following it.  

(What’s Left of) Our Economy: Dangerous New Bubbles or a Virus Mirage?

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bubbles, business investment, CCP Virus, consumer spending, coronavirus, COVID 19, Financial Crisis, GDP, Great Recession, gross domestic product, housing, lockdowns, logistics, nonresidential fixed investment, real GDP, recession, recovery, reopening, Richard F. Moody, semiconductor shortage, toxic combination, transportation, West Coast ports, {What's Left of) Our Economy

Here’s a great example of how badly the U.S. economy might be getting distorted by last year’s steep, sharp, largely government-mandated recession, and by the V-shaped recovery experienced since then.as CCPVirus-related restrictions have been lifted. Therefore, it’s also a great example of how the many of the resulting statistics may still be of limited usefulness at best in figuring out the economy’s underlying health.

The possible example?  New official figures showing that, as of the second quarter of this year, the U.S. economy is even more dangerously bubble-ized than it was just before the financial crisis of 2007-08.

As RealityChek regulars might recall, for several years I wrote regularly on what I called the quality of America’s growth. (Here‘s my most recent post.) I viewed the subject as important because there’s broad agreement that a big reason the financial crisis erupted was the over-reliance earlier in that decade n the wrong kind of growth. Specifically, personal spending and housing had become predominant engines of expansion – and therefore prosperity. Their bloated roles inflated intertwined bubbles whose bursting nearly collapsed the U.S. and entire global economies, and produced the worst American economic downturn since the Great Depression of the 1930s.

As a result, there was equally broad agreement that the nation needed to transform what you might call its business model from one depending largely on borrowing, spending, and paying for them by counting on home prices to rise forever, to one based on saving, investing, and producing. As former President Obama cogently put it, America needed “an economy built to last.”

Therefore, I decided to track how well the nation was succeeding at this version of “build back better” by monitoring the official quarterly reports on economic growth to examine the importance of housing and consumption (which I called the “toxic combination”) in the nation’s economic profile and whether and how they were changing.

For some perspective, in the third quarter of 2005, as the spending and housing bubbles were at their worst, these two segments of the economy accounted for 73.90 percent of the gross domestic product (GDP – the standard measure of the economy’s size) adjusted for inflation (the most widely followed of the GDP data. By the end of the Great Recession caused by the bursting of these bubbles, in the second quarter of 2009, this figure was down to 71.55 percent – mainly because housing had crashed.

At the end of the Obama administration (the fourth quarter of 2016), the toxic combination has rebounded to represent 72.31 percent of after-inflation GDP. So in quality-of-growth terms, the economy was heading in the wrong direction. And under President Trump, this discouraging trend continued. As of the fourth quarter of 2019 (the last quarter before the pandemic began significantly affecting the economy), this figure rose further, to 73.19 percent.

Yesterday, the government reported on GDP for the second quarter of this year, and it revealed that the toxic combination share of the economy in constant dollar terms to 74.24 percent. In other words, the toxic combination had become a bigger part of the economy than during the most heated housing and spending bubble days.

But does that mean that the economy really is even more, and more worrisomely lopsided than it was back then? That’s far from clear. Pessimists could argue that recent growth has relied heavily on the unprecedented fiscal and monetary stimulus provided by Washington since spring, 2020. Optimists could point out that far from overspending, consumers have been saving massively. Something else of note: Business investment’s share of real GDP in the second quarter of this year came to 14.80 percent – awfully lofty by recent standards.  During the 2005 peak of the last bubble, that spending (officially called “nonresidential fixed investment”) was 11.62 percent. 

My own take is that this situation mainly reflects the unexpected strength of the reopening-driven recovery and the transportation and logistics bottlenecks it’s created. An succinct summary of the situation was provided by Richard F. Moody, chief economist of Regions Bank. He wrote yesterday that the new GDP data “embody the predicament facing the U.S. economy, which is that the supply side of the economy has simply been unable to keep pace with demand.” The result is not only the strong recent inflation figures, but a ballooning of personal spending’s share of the economy.

Moody expects that both problems will end “later rather than sooner,” and for all I know, he (and other inflation pessimists) are right. But unless you believe that West Coast ports will remain clogged forever, that semiconductors will remain in short supply forever, that truck drivers will remain scarce forever, that businesses will never adjust adequately to any of this, and/or that new CCP Virus variants will keep the whole economy on lockdown-related pins and needles forever, the important point is that these problems will end. Once they do, or when the end is in sight, we’ll be able to figure out just how bubbly the economy has or hasn’t grown – but not, I’m afraid, one moment sooner.