« Starting the blog again... First, Update original Effective Demand | Main | Is Effective Demand showing the limit of the Business Cycle... again? »

09/03/2015

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Edward,

After Qtr2 2014, Effective Demand initially jumped up and out. But the Qtr2 2015 jumped out but down very slightly.

How do you explain ED jumping out? Is this reducing production and selling off inventory? Something we discussed here:
http://effectivedemand.typepad.com/ed/2015/02/new-ed-data-in-ased-model.html

Hey Jim,
I go back and take a look at this post...
http://effectivedemand.typepad.com/ed/2013/09/will-there-be-inflation-in-the-next-recession.html

Back in the 70s, when GDP hit the ED limit, the economy would start to rise along the AS curve leading to a rise in inflation. The dynamics are different now.
After 2Q15, inflation was weak with oil prices dropping. Labor share started to rise a bit. And capacity utilization fell quite a bit. So the ED curves rose and expanded outward allowing inflation to stay low as production increased. If the ED had not expanded to the right, GDP would have risen up the AS curve with inflation as it did in the 70s.

So production is not reducing. We see GDP rising in 2Q. But there is an effort to control inventories as capacity utilization drops. But at the same time, what is happening with China now? How much inventory are they dumping on the US market?

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)

Data as of 4thQ-2016
Effective Demand = $17.587 trillion
Real GDP = $16.805 trillion
Productive Capacity is rising to next business cycle =
UT index is rising = +3.9%
Effective demand limit = 75.9%
TFUR = 72.0%
ED Fed rate rule (down from a peak of 3.8% in 2014) = 1.6%
Estimated Natural Real Interest rate = 2.2%
Short-term real interest rate (fallen from 2.8% peak in 2014) = -0.5%

There is no recession for 4thQ-2016. I am expecting a recession by the middle of 2017.

(UT index is rising which implies a recession is on the way.



Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):

The UT Index

Recession Alert (developed at recessionalert.com):

recession alert

z-vertical:

z-vertical

z derivatives in terms of labor & capital:

z derivatives in terms of labor & capital

Effective Demand, real GDP & Potential GDP:

ED, real GDP & pot rGDP

ED Output Gap:

ED Output gap

Corporate profit rate over real cost of money:

Corp profit rate over real cost of money

Exponential decay of Inflation:

Corporate profits impact Inflation

Measures of Inflation:

Measures of Inflation

YoY Employment change:

YoY employment change

Speed of consuming slack: yoy monthly:

Speed of consuming slack

Speed of consuming slack: quarterly:

Speed of consuming slack quarterly

Real consumption per Employee:

real consumption per employee 2

Will real wages ever rise faster than productivity?:

Productivity & Real Wages

Real Wage Index:

real wage index

Productivity:

Productivity

Productivity against Effective Demand limit:

Prod & ED limit

Bottom of Initial Claims?:

Initial claims

Tracking inflation expectations:

Fisher effect?

M2 velocity still falling:

Measures of Inflation

All in one:

All in one

Double checking labor share with unit labor costs & inflation:

ULC LS CPI
My Photo
Edward Lambert: Independent Researcher on Effective Demand.
Some links for economic analysis
Fed Views - San Francisco Fed, around 10th of each month.
Well's Fargo monthly - around 10th of each month
Well's Fargo weekly
Well's Fargo Interest rate report
Well's Fargo Economic indicators
T. Rowe Price weekly market wrap-up
Blog powered by Typepad
Member since 03/2013