IA Mediocre Cyclical United States Economic Growth
IA1
Stagnating Real Private Fixed Investment
IID
United States International Terms of Trade
I United States
Employment Situation
I
Real Disposable Income
I United States Industrial
Production
I United States Inflation
II Long-term United States
Inflation
III Current United States
Inflation
IV Global Inflation
V World Economic Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk Financial
Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great
Inflation
IIIB Appendix on Safe Haven
Currencies
IIIC Appendix on Fiscal
Compact
IIID Appendix on European
Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit
Financing of Growth and the Debt Crisis
IV Global Inflation
V World Economic Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk Financial
Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great
Inflation
IIIB Appendix on Safe Haven
Currencies
IIIC Appendix on Fiscal
Compact
IIID Appendix on European
Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit
Financing of Growth and the Debt Crisis
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022,
2023, 2024, 2025, 2026.
Note: This Blog will
post only the Preamble of the US economy while we concentrate efforts in
completing a book-length manuscript in the critically important subject of
INFLATION.
Preamble. United States total public debt outstanding is $39.0
trillion and debt held by the public $31.4 trillion (https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny) [Date last updated Mar 24, 2026.] The Federal Reserve
Bank of Saint Louis estimates Federal Total Public Debt as percent of GDP at 122.5
in IVQ2025 and Federal Total Public Debt Held by the Public at 95.0 Percent of
GDP (https://fred.stlouisfed.org/series/GFDEGDQ188S). [Shutdown affects data: https://news.research.stlouisfed.org/2025/09/a-u-s-government-shutdown-could-delay-some-fred-data-2/] The Net International Investment Position of the United
States, or foreign debt, is $27.54 trillion at the end of IVQ2025 (https://www.bea.gov/sites/default/files/2026-03/ita-iip425.pdf) [Shutdown affects data]. The United States current
account deficit is 2.4 percent of nominal GDP in IVQ2025, “down from 3.1
percent in the third quarter” (https://www.bea.gov/sites/default/files/2026-03/ita-iip425.pdf)
(Next release Jan 14, 2026) [Shutdown affects data].
The Treasury deficit of the United States reached $1.8 trillion in fiscal year
2025 (https://fiscal.treasury.gov/reports-statements/mts/). Total assets of Federal Reserve Banks reached $6.6
trillion on Mar 25, 2026 and securities held outright reached $6.4 trillion (https://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1). US GDP nominal NSA reached $31.5 trillion in IVQ2025 (https://apps.bea.gov/iTable/index_nipa.cfm). US GDP contracted at the real seasonally adjusted annual
rate (SAAR) of 1.0 percent in IQ2022 and grew at the SAAR of 0.6 percent in
IIQ2022, growing at 2.9 percent in IIIQ2022, growing at 2.8 percent in IVQ2022,
growing at 2.9 percent in IQ2023, growing at 2.5 percent in IIQ2023 growing at
4.7 percent in IIIQ2023, growing at 3.4 percent in IVQ2023, growing at 0.8
percent in IQ2024, growing at 3.6 percent in IIQ2024, growing at 3.3 percent in
IIIQ2024, growing at 1.9 percent in IVQ2024, contracting at 0.6 percent in
IQ2025, growing at 3.8 percent in IIQ2025 ,growing at 4.4 percent in IIIQ2025
and growing at 0.7 percent in IVQ2025 (https://apps.bea.gov/iTable/index_nipa.cfm). [Shutdown affects data] Total
Treasury interest-bearing, marketable debt held by private investors increased
from $3635 billion in 2007 to $16,439 billion in Sep 2021 (Fiscal Year 2021) or
increase by 352.2 percent (https://fiscal.treasury.gov/reports-statements/treasury-bulletin/). John Hilsenrath, writing
on “Economists Seek Recession Cues in the Yield Curve,” published in the Wall
Street Journal on Apr 2, 2022, analyzes the inversion of the Treasury yield
curve with the two-year yield at 2.430 on Apr 1, 2022, above the ten-year yield
at 2.374. Hilsenrath argues that inversion appears to signal recession in
market analysis but not in alternative Fed approach.
The Consumer
Price index of the United States in Chart CPI-H increased 2.4 percent in Feb
2026 Relative to a Year Earlier, The Tenth Highest Since 8.9 percent in Dec
1981 was Followed by the Highest of 9.1 percent in Jun 2022, the Second Highest
of 8.6 percent in May 2022, 8.5 percent in both Jul 2022 and Mar 2022, 8.3
percent in both Apr and Aug 2022, 8.2 percent in Sep 2022, 7.9 percent in
February 2022, 7.5 percent in Jan 2022, 7.7 percent in Oct 2022, 7.1 percent in
Nov 2022, 6.5 percent in Dec 2022, 6.4 percent in Jan 2023, 6.0 percent in Feb
2023, 5.0 percent in Mar 2023, 4.9 percent in Apr 2023, 4.0 percent in May
2023, 3.0 percent in Jun 2023, 3.2 percent in Jul 2023, 3.7 percent in Aug
2023, 3.7 percent in Sep 2023, 3.2 percent in Oct 2023, 3.1 percent in Nov
2023, 3.4 percent in Dec 2023, 3.1 percent in Jan 2024, 3.2 percent in Feb
2024, 3.5 percent in Mar 2024, 3.4 percent in Apr 2024, 3.3 percent in May
2024, 3.0 in Jun 2024, 2.9 percent in Jul 2024, 2.5 percent in Aug 2024, 2.4
percent in Sep 2024, 2.6 percent in Oct 2024, 2.7 percent in Nov 2024, 2.9
percent in Dec 2024, 3.0 percent in Jan 2025, 2.8 percent in Feb 2025, 2.4
percent in Mar 2025, 2.3 percent in Apr 2025, 2.4 percent in May 2025, 2.7
percent in Jun 2025, 2.7 percent in Jul 2025, 2.9 percent in Aug 2025, 3.0
percent in Sep 2025, no observations available (NA) for Oct 2025 during the
shutdown, 2.7 percent in Nov 2025, 2.7 percent in Dec 2025, 2.4 percent in Jan
2026 and 2.4 percent in Feb 2026.
Chart CPI-H, US, Consumer Price Index, 12-Month
Percentage Change, NSA, 1981-2026
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/data.htm
Table
CPI-H, US, Consumer Price Index, 12-Month Percentage Change, NSA,
1981-1983, 2019-2026
|
Year |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
|
1981 |
11.8 |
11.4 |
10.5 |
10.0 |
9.8 |
9.6 |
|
1982 |
8.4 |
7.6 |
6.8 |
6.5 |
6.7 |
7.1 |
|
1983 |
3.7 |
3.5 |
3.6 |
3.9 |
3.5 |
2.6 |
|
1984 |
4.2 |
4.6 |
4.8 |
4.6 |
4.2 |
4.2 |
|
2019 |
1.6 |
1.5 |
1.9 |
2.0 |
1.8 |
1.6 |
|
2020 |
2.5 |
2.3 |
1.5 |
0.3 |
0.1 |
0.6 |
|
2021 |
1.4 |
1.7 |
2.6 |
4.2 |
5.0 |
5.4 |
|
2022 |
7.5 |
7.9 |
8.5 |
8.3 |
8.6 |
9.1 |
|
2023 |
6.4 |
6.0 |
5.0 |
4.9 |
4.0 |
3.0 |
|
2024 |
3.1 |
3.2 |
3.5 |
3.4 |
3.3 |
3.0 |
|
2025 |
3.0 |
2.8 |
2.4 |
2.3 |
2.4 |
2.7 |
|
2026 |
2.4 |
2.4 |
||||
|
Year |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
|
1981 |
10.8 |
10.8 |
11.0 |
10.1 |
9.6 |
8.9 |
|
1982 |
6.4 |
5.9 |
5.0 |
5.1 |
4.6 |
3.8 |
|
1983 |
2.5 |
2.6 |
2.9 |
2.9 |
3.3 |
3.8 |
|
1984 |
4.2 |
4.3 |
4.3 |
4.3 |
4.1 |
3.9 |
|
2019 |
1.8 |
1.7 |
1.7 |
1.8 |
2.1 |
2.3 |
|
2020 |
1.0 |
1.3 |
1.4 |
1.2 |
1.2 |
1.4 |
|
2021 |
5.4 |
5.3 |
5.4 |
6.2 |
6.8 |
7.0 |
|
2022 |
8.5 |
8.3 |
8.2 |
7.7 |
7.1 |
6.5 |
|
2023 |
3.2 |
3.7 |
3.7 |
3.2 |
3.1 |
3.4 |
|
2024 |
2.9 |
2.5 |
2.4 |
2.6 |
2.7 |
2.9 |
|
2025 |
2.7 |
2.9 |
3.0 |
NA |
2.7 |
2.7 |
|
2026 |
Note: NA because of
interruption of appropriations.
Source: US Bureau of
Labor Statistics https://www.bls.gov/cpi/data.htm
Chart VII-3 of the Energy Information Administration
provides the US retail price of regular gasoline. The price moved to $3.502 per
gallon on Mar 9, 2026, from $3.069 a year earlier or 14.1 percent.
https://www.eia.gov/petroleum/weekly/ [Chart discontinued See Weekly
Petroleum Status Report.]
Chart
VII-3A provides the US retail price of regular gasoline, dollars per gallon,
from $1.191 on Aug 20,1990 to $3.961 on Mar 23, 2026 or 232.6 percent. The
price of retail regular gasoline increased from $2.249/gallon on Jan 4,2021 to
$3.961 on Mar 23, 2026, or 76.1 percent. The price of retail regular gasoline increased
from $3.530/gallon on Feb 21, 2022, two days before the invasion of Ukraine, to
$3.961/gallon on Mar 23, 2026 or 12.2 percent and had increased 57.0 percent
from $2.249/gallon on Jan 4,2021 to $3.530/gallon on Feb 28, 2022.
Chart VII-3A, US Retail Price of Regular Gasoline,
Dollars Per Gallon
Source: US Energy Information Administration
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPMR_PTE_NUS_DPG&f=W
Chart
VII-4 of the Energy Information Administration provides the price of the
Natural Gas Futures Contract increasing from $2.581 per million Btu on Jan 4,
2021 to $5.326 per million Btu on Dec 20, 2022 or 106.4 percent and closing at
$1.785 on Apr 5, 2024 or change of minus 66.5 percent.
Chart VII-4, US, Natural Gas Futures Contract 1
Source: US Energy Information Administration
https://www.eia.gov/dnav/ng/hist/rngc1d.htm
Chart VII-5 of the US Energy Administration provides US
field production of oil moving from a high of 12.983 thousand barrels per day
in Dec 2019 to 11.760 thousand barrels per day in Dec 2021 and the final point
of 13.655 thousand barrels per day in Dec 2025.
Chart
VII-5 United States Field Production of Crude Oil, Thousand Barrels Per Day
Sources: US Energy Information Administration https://www.eia.gov/dnav/pet/hist/leafhandler.ashx?n=pet&s=mcrfpus2&f=m
Chart
VII-6 of the US Energy Information Administration provides net imports of crude
oil and petroleum products. Net imports changed from 1967 thousand barrels per
day in the first week of Dec 2020 to minus -3216 thousand barrels in the fourth
week of Oct 25, 2024, minus 3310 thousand barrels in the second week of Dec 13,
2024 and minus 2.953 thousand barrels in the third week of Mar 20, 2026.
Chart VII-6, US, Net Imports of Crude Oil and Petroleum
Products, Thousand Barrels Per Day
Source: US Energy Information Administration
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTNTUS2&f=W
Chart VI-7 of the EIA provides US Petroleum
Consumption, Production, Imports, Exports and Net Imports 1950-2022. There was
sharp increase in production in the final segment that reached consumption by
2020. There is reversal in 2021 with consumption exceeding production.
Chart VI-7, US Petroleum Consumption, Production,
Imports, Exports and Net Imports 1950-2022, Million Barrels Per Day
https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php
Chart
VI-8 provides the US average retail price of electricity at 12.78 cents per
kilowatthour in Dec 2020 increasing to 17.45 cents per kilowatthour in Jan 2026
or 36.5 per cent.
Chart VI-8, US Average Retail Price of Electricity,
Monthly, Cents per Kilowatthour
United States
manufacturing output from 1919 to 2026 monthly is in Chart I-4 of the Board of
Governors of the Federal Reserve System. The second industrial revolution of
Jensen (1993) is quite evident in the acceleration of the rate of growth of
output given by the sharper slope in the 1980s and 1990s. Growth was robust
after the shallow recession of 2001 but dropped sharply during the global
recession after IVQ2007. Manufacturing output recovered sharply but has not
reached earlier levels and is losing momentum at the margin. There is cyclical
uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar
behavior in manufacturing. There is classic research on analyzing deviations of
output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975,
Sargent and Sims 1977). The long-term trend is growth of manufacturing at average
2.9 percent per year from Jan 1919 to Jan 2026. Growth at 2.9 percent per year
would raise the NSA index of manufacturing output (SIC, Standard Industrial
Classification) from 106.8904 in Dec 2007 to 179.24607 in Jan 2026. The actual
index NSA in Jan 2026 is 97.4547 which is 45.6 percent below trend. The
underperformance of manufacturing in Mar-Nov 2020 originates partly in the
earlier global recession augmented by the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions), in the lockdown of economic activity in the COVID-19
event and the trough in Apr 2020 (https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021). Manufacturing
output grew at average 1.5 percent between Dec 1999 and Dec 2006. Using trend
growth of 1.5 percent per year, the index would increase to 139.9156 in Jan
2026. The output of manufacturing at 97.4547 in Jan 2026 is 30.3 percent below
trend under this alternative calculation. Using the NAICS (North American Industry Classification
System), manufacturing output fell from the high of 108.5201 in Jun 2007 to the
low of 84.8006 in Apr 2009 or 21.9 percent. The NAICS manufacturing index
increased from 84.8006 in Apr 2009 to 98.2351 in Jan 2026 or 15.8 percent. The
NAICS manufacturing index increased at the annual equivalent rate of 3.5
percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the
NAICS manufacturing output index from 104.8218 in Dec 2007 to 195.2641 in Jan
2026. The NAICS index at 98.2351 in Jan 2026 is 49.7 percent below trend. The
NAICS manufacturing output index grew at 1.7 percent annual equivalent from Dec
1999 to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing
output index from 104.8218 in Dec 2007 to 142.1800 in Jan 2026. The NAICS index
at 98.2351in Jan 2026 is 30.9 percent below trend under this alternative
calculation.
Chart I-4, US, Manufacturing Output, 1919-2026
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
Chart I-4B provides
the data for the period 2007-2026 SIC US Manufacturing. There has not been
recovery from the higher levels before the recession from Dec 2007 to Jan 2009
(https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions).
Chart I-4B, US, Manufacturing Output, 2007-2026
htps://www.federalreserve.gov/releases/g17/Current/default.htm
Chart
I-7 of the Board of Governors of the Federal Reserve System shows that output
of durable manufacturing accelerated in the 1980s and 1990s with slower growth
in the 2000s perhaps because processes matured. Growth was robust after the
major drop during the global recession but appears to vacillate in the final
segment. There is sharp contraction in Mar-Apr 2020 in the global recession,
with output in the US reaching a high in Feb 2020 (https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions), in the lockdown of economic activity in the COVID-19
event and the trough in Apr 2020 (https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021). There is initial recovery in May 2020-Oct 2022 with
deterioration/weakness and renewed oscillating growth in Nov 2022-Jan 2026.
Chart I-7, US, Output of Durable Manufacturing, 2007-2026
Source: Board of Governors of the Federal Reserve System
htps://www.federalreserve.gov/releases/g17/Current/default.htm
Chart I-7B provides NAICS Durable Manufacturing from 2007 to 2026. There has not been recovery from the higher levels before
the recession from Dec 2007 to Aug 2009 (https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions).
Chart I-7B, US, Output of Durable Manufacturing, 2007-2026
Source: Board of Governors of the Federal Reserve System
htps://www.federalreserve.gov/releases/g17/Current/default.htm
Chart
V-3D provides the index of US manufacturing (NAICS) from Jan 1972 to Jan 2026.
The index continued increasing during the decline of manufacturing jobs after
the early 1980s. There are likely effects of changes in the composition of
manufacturing with also changes in productivity and trade. There is sharp
decline in the global recession,
with output in the US reaching a high in Feb 2020 (https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions), in the lockdown of economic activity in the COVID-19
event and the trough in Apr 2020 (https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021).
Chart V-3D, United States Manufacturing (NAICS) NSA, Jan
1972 to Jan 2026
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htmh
Chart V-3DB provides NAICS Manufacturing from 2007 to 2026. There has not been recovery from the higher levels before
the recession from Dec 2007 to Apr 2009 (https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions).
Chart V-3DB, United States Manufacturing (NAICS) NSA, Jan
2007 to Jan 2026
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
Chart VII-9 provides the fed funds rate and Three
Months, Two-Year and Ten-Year Treasury Constant Maturity Yields. Unconventional
monetary policy of near zero interest rates is typically followed by financial
and economic stress with sharp increases in interest rates.
Chart VII-9, US Fed Funds Rate and Three-Month, Two-Year
and Ten-Year Treasury Constant Maturity Yields, Jan 2, 1994 to 2022-2023
Source: Federal Reserve Board of the Federal Reserve System
https://www.federalreserve.gov/releases/h15/
Note: program does not download the
entire right-side of the chart.
Chart VII-9A, US Fed Funds Rate and Three-Month, Two-Year
and Ten-Year Treasury Constant Maturity Yields, Jan 2, 2022 to May 30,
2023
Source: Federal Reserve Board of the Federal Reserve System
https://www.federalreserve.gov/releases/h15/
Note: Chart is shortened of current dates in download.
Chart VI-14 provides the overnight fed funds rate, the
yield of the 10-year Treasury constant maturity bond, the yield of the 30-year
constant maturity bond and the conventional mortgage rate from Jan 1991 to Dec
1996. In Jan 1991, the fed funds rate was 6.91 percent, the 10-year Treasury
yield 8.09 percent, the 30-year Treasury yield 8.27 percent and the
conventional mortgage rate 9.64 percent. Before monetary policy tightening in
Oct 1993, the rates and yields were 2.99 percent for the fed funds, 5.33 percent
for the 10-year Treasury, 5.94 for the 30-year Treasury and 6.83 percent for
the conventional mortgage rate. After tightening in Nov 1994, the rates and
yields were 5.29 percent for the fed funds rate, 7.96 percent for the 10-year
Treasury, 8.08 percent for the 30-year Treasury and 9.17 percent for the
conventional mortgage rate.
Chart VI-14, US, Overnight Fed Funds Rate, 10-Year
Treasury Constant Maturity, 30-Year Treasury Constant Maturity and Conventional
Mortgage Rate, Monthly, Jan 1991 to Dec 1996
Source: Board of Governors of the Federal Reserve
System
http://www.federalreserve.gov/releases/h15/update/
Chart VI-15 of the Bureau of Labor Statistics provides
the all items consumer price index from Jan 1991 to Dec 1996. There does not
appear acceleration of consumer prices requiring aggressive tightening.
Chart VI-15, US, Consumer Price Index All Items, Jan
1991 to Dec 1996
Source: Bureau of Labor Statistics
https://www.bls.gov/cpi/data.htm
Chart IV-16 of the Bureau of Labor Statistics provides
12-month percentage changes of the all items consumer price index from Jan 1991
to Dec 1996. Inflation collapsed during the recession from Jul 1990 (III) and
Mar 1991 (I) and the end of the Kuwait War on Feb 25, 1991 that stabilized
world oil markets. CPI inflation remained almost the same and there is no valid
counterfactual that inflation would have been higher without monetary policy
tightening because of the long lag in effect of monetary policy on inflation
(see Culbertson 1960, 1961, Friedman 1961, Batini and Nelson 2002, Romer and
Romer 2004). Policy tightening had adverse collateral effects in the form of
emerging market crises in Mexico and Argentina and fixed income markets
worldwide.
Chart VI-16, US, Consumer Price Index All Items,
Twelve-Month Percentage Change, Jan 1991 to Dec 1996
Source: Bureau of Labor Statistics
https://www.bls.gov/cpi/data.htm
Chart USFX provides the exchange rate of US Dollars
per EURO from 2007 to 2023. Barry Eichengreen and Jeffrey Sachs, Exchange Rates
and Economic Recovery in the 1930s, The Journal of Economic History, Vol. 45, No. 4 (Dec 1985),
argue that foreign exchange “depreciation was clearly beneficial for initiating
countries” during the Great Depression of the 1930s and that it was no
equivalent to “beggar my neighbor” policies such as tariffs.
Chart USFX, Exchange Rate USD/EURO 2007-2023
Source: https://www.federalreserve.gov/releases/h10/current/
Chart USFX, Exchange Rate USD/EURO 2000-2023
Source: https://www.federalreserve.gov/releases/h10/current/
Federal Reserve Bank of St. Louis https://fred.stlouisfed.org/
Chart USFX, Exchange Rate USD/EURO 2018-2023
Source: https://www.federalreserve.gov/releases/h10/current/
Federal Reserve Bank of St. Louis https://fred.stlouisfed.org/
Table
USFX provides the rate of USD/EURO in selected months. The dollar appreciated
sharply from USD 1.2254 on Jan 4, 2021 to 1.0787 on Aug 25, 2023 and 1.1543 on Mar
20, 2026.
Table USFX, USD/EURO Selected Months
|
Date |
USD/EUR |
|
1/4/2021 |
1.2254 |
|
1/5/2021 |
1.2295 |
|
1/6/2021 |
1.229 |
|
1/7/2021 |
1.2265 |
|
1/8/2021 |
1.2252 |
|
1/11/2021 |
1.2169 |
|
1/12/2021 |
1.2168 |
|
1/13/2021 |
1.2159 |
|
1/14/2021 |
1.2156 |
|
1/15/2021 |
1.2099 |
|
1/31/2023 |
1.0858 |
|
2/1/2023 |
1.0917 |
|
2/2/2023 |
1.0918 |
|
2/3/2023 |
1.0825 |
|
2/6/2023 |
1.0722 |
|
2/7/2023 |
1.0705 |
|
2/8/2023 |
1.0734 |
|
2/9/2023 |
1.0761 |
|
2/10/2023 |
1.0670 |
|
2/13/2023 |
1.0718 |
|
2/14/2023 |
1.0722 |
|
2/15/2023 |
1.0683 |
|
2/16/2023 |
1.0684 |
|
2/17/2023 |
1.0678 |
|
2/24/2023 |
1.0545 |
|
3/03/2023 |
1.0616 |
|
3/10/2023 |
1.0659 |
|
3/17/2023 |
1.0647 |
|
3/24/2023 |
1.0762 |
|
3/31/2023 |
1.0872 |
|
4/7/2023 |
1.0913 |
|
4/14/2023 |
1.0980 |
|
4/21/2023 |
1.0973 |
|
4/28/2023 |
1.1040 |
|
5/5/2023 |
1.1026 |
|
5/26/2023 |
1.0713 |
|
6/2/2023 |
1.0724 |
|
6/9/2023 |
1.0749 |
|
6/16/2023 |
1.0925 |
|
6/23/2023 |
1.0887 |
|
6/30/2023 |
1.0920 |
|
7/7/2023 |
1.0964 |
|
7/14/2023 |
1.1237 |
|
7/21/2023 |
1.1120 |
|
7/28/2023 |
1.1039 |
|
8/4/2023 |
1.1036 |
|
8/11/2023 |
1.0957 |
|
8/18/2023 |
1.0875 |
|
8/25/2023 |
1.0787 |
|
9/1/223 |
1.0787 |
|
9/8/2023 |
1.0709 |
|
9/15/2023 |
1.0673 |
|
9/22/2023 |
1.0660 |
|
9/29/2023 |
1.0584 |
|
10/6/2023 |
1.0596 |
|
10/13/2023 |
1.0502 |
|
10/20/2023 |
1.0592 |
|
10/27/2023 |
1.0592 |
|
11/3/2023 |
1.0733 |
|
11/10/2023 |
1.0710 |
|
11/17/2023 |
1.0879 |
|
11/24/2023 |
1.0934 |
|
12/1/2023 |
1.0878 |
|
12/8/2023 |
1.0746 |
|
12/15/2023 |
1.0906 |
|
6/21/2024 |
1.0694 |
|
2/7/2025 |
1.0329 |
|
3/20/2026 |
1.1543 |
Source: https://www.federalreserve.gov/releases/h10/current/
U.S.
International Trade in Goods and Services, January 2026
The
U.S. monthly international trade deficit decreased in January 2026 according
to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The
deficit decreased from $72.9 billion in December (revised) to $54.5 billion
in January, as exports increased and imports decreased. The goods deficit
decreased $17.5 billion in January to $81.8 billion. The services surplus
increased $1.0 billion in January to $27.3 billion. |
|
Next
release: April 2, 2026
The U.S. monthly international trade deficit increased in
December 2025 according to the U.S. Bureau of Economic Analysis and the U.S.
Census Bureau. The deficit increased from $53.0 billion in November (revised)
to $70.3 billion in December, as imports increased and exports decreased. The
goods deficit increased $15.7 billion in December to $99.3 billion. The
services surplus decreased $1.6 billion in December to $29.0 billion.
Source: https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services [Data
are not being updated during shutdown.]
A comprehensive analysis of the Mill-Bickerdike theorem and the Lerner
theorem on tariffs and international terms of trade with application to the
Brazilian coffee support program, the recovery of Brazil from the Great
Depression and Brazil’s industrialization is in Carlos Manuel Pelaez, História
da Industrialização Brasileira. Rio de Janeiro, APEC Editora, 1972.
Chart IID-1B provides the US terms of trade index, index of
terms of trade of nonpetroleum goods and index of terms of trade of goods with
the new base of 2017. The terms of trade of nonpetroleum goods dropped sharply
from the mid-1980s to 1995, recovering significantly until 2014, dropping and
then recovering again into 2021. There is relative stability in the terms of
trade of nonpetroleum goods from 1967 to 2025 but sharp deterioration in the
overall index and the index of goods.
Chart IID-1B, United States Terms of Trade Indexes
1967-2025, Quarterly
Source: Bureau of Economic Analysis
https://apps.bea.gov/iTable/index_nipa.cfm
[Data are not being updated during
shutdown.]
Percentage
shares of net trade (exports less imports), exports and imports in US Gross
Domestic Product are in Chart IA1-14 from 1979 to 2025. There is sharp trend of
decline of exports and imports after the global recession beginning in IVQ2007.
Net trade has been subtracting from growth since the stagflation of the 1970s.
Chart IA1-14, US, Percentage Shares of Net Trade, Exports
and Imports in Gross Domestic Product, Quarterly, 1979-2025
Source: US Bureau of Economic Analysis
https://apps.bea.gov/iTable/index_nipa.cfm
[Data are not being updated during
shutdown.]
Table
B provides the exchange rate of Brazil and the trade balance from 1927 to 1939.
“Currency depreciation in the 1930s…benefitted the initiating countries…There
can be no presumption that depreciation was beggar-thy-neighbor…competitive
devaluation taken by a group of countries had they been even more widely
adopted and coordinated internationally would have hasted recovery from the
Great Depression,” Barry Eichengreen and Jeffrey Sachs, “Exchange Rates and
Economic Recovery in the1930s,” Journal of Economic History, Vol. 45,
No. 4 (Dec., 1985), pp.925-946.
Table B, Brazil, Exchange Rate and Trade Balance,
1927-1939
|
Year |
Exchange Rate Mil-Réis per £ |
Trade Balance 1000 Contos |
||
|
1927 |
40.6 |
370.9 |
||
|
1928 |
40.3 |
275.3 |
||
|
1929 |
40.6 |
332.7 |
||
|
1930 |
49.4 |
563.6 |
||
|
1931 |
62.4 |
1517.2 |
||
|
1932 |
48.1 |
1018.1 |
||
|
1933 |
52.6 |
655 |
||
|
1934 |
59.7 |
956.2 |
||
|
1935 |
57.9 |
248.1 |
||
|
1936 |
58.4 |
626.8 |
||
|
1937 |
56.9 |
-222.5 |
||
|
1938 |
57.6 |
-98.7 |
||
|
1939 |
71.1 |
631.9 |
Source: Carlos
Manuel Peláez, Análise Econômica do Programa Brasileiro de Sustentação do Café
1906-1945: Teoria, Política e Medição, Revista Brasileira de Economia,
Vol. 25, N 4, Out/Dez 1971, 5-213.
Christina D. Romer argues that growth of the money
stock was critical in the recovery of the United States from the Great
Depression (Christina D. Romer, What ended the Great Depression? The Journal of Economic
History,
Volume 52, Number 4, Dec 1992, pp 757-784).
Table C, Brazil, Yearly Percentage Changes of the Money
Stock, M1 and M2, Exchange Rate, Terms of Trade, Industrial Production, Real
Gross National Product and Real Gross Income Per Capita, 1930-1939
|
Period |
M1 |
M2 |
Exchange Rate |
Terms of Trade |
Industrial Production |
Real GNP |
Real Gross Income Per Capita |
|
1929/30 |
-9 |
-4 |
22 |
-34 |
-5 |
-1 |
-10 |
|
1930/31 |
4 |
1 |
26 |
-5 |
8 |
-3 |
-6 |
|
1931/32 |
15 |
7 |
-23 |
8 |
0 |
6 |
2 |
|
1932/33 |
10 |
4 |
10 |
-15 |
16 |
10 |
7 |
|
1933/34 |
5 |
6 |
13 |
5 |
13 |
7 |
5 |
|
1934/35 |
7 |
8 |
-3 |
-28 |
14 |
1 |
-4 |
|
1935/36 |
10 |
11 |
1 |
2 |
14 |
12 |
9 |
|
1936/37 |
10 |
9 |
-3 |
2 |
7 |
3 |
0 |
|
1937/38 |
19 |
13 |
1 |
-11 |
6 |
4 |
-1 |
|
1938/39 |
0 |
8 |
23 |
-12 |
14 |
4 |
2 |
Source: Carlos
Manuel Peláez and Wilson Suzigan, História Monetária do Brasil. Segunda
Edição Revisada e Ampliada. Coleção
Temas Brasileiros, Universidade de
Brasília, 1981.
“In
the period of the free coffee market 1857-1906, international coffee prices
fluctuated in cycles of increasing amplitude. British export prices decreased
at a low average rate, and physical exports of coffee by Brazil increased at
the average rate of 2.9 percent per year. The income terms of trade of the
coffee economy of Brazil improved at the average compound rate of 4.0 percent
per year. But the actual rate must have been much higher because of drastic
improvements in the quality of manufactures while the quality of coffee
remained relatively constant,” Carlos Manuel Peláez, “The Theory and Reality of
Imperialism in the Coffee Economy of Nineteenth-Century Brazil,” The
Economic History Review, Second Series, Volume XXIX, No. 2, May 1976.
276-290. See Carlos Manuel Peláez, “A Comparison of Long-Term Monetary Behavior
and Institutions in Brazil, Europe and the United States,” The Journal of
European Economic History, Volume 5, Number 2, Fall 1976, 439-450,
Presented at the Sixth International Congress of Economic History, Section
on Monetary Inflation in Historical Perspective, Copenhagen, 22 Aug
1974.
In his classic restatement of the Keynesian demand
function in terms of “liquidity preference as behavior toward risk,” James
Tobin (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1981/tobin-bio.html) identifies the risks of low interest rates in terms
of portfolio allocation (Tobin 1958, 86):
“The assumption that investors expect on balance no
change in the rate of interest has been adopted for the theoretical reasons
explained in section 2.6 rather than for reasons of realism. Clearly investors
do form expectations of changes in interest rates and differ from each other in
their expectations. For the purposes of dynamic theory and of analysis of
specific market situations, the theories of sections 2 and 3 are complementary
rather than competitive. The formal apparatus of section 3 will serve just as
well for a non-zero expected capital gain or loss as for a zero expected value
of g. Stickiness of interest rate expectations would mean that the expected
value of g is a function of the rate of interest r, going down when r goes down
and rising when r goes up. In addition to the rotation of the opportunity locus
due to a change in r itself, there would be a further rotation in the same
direction due to the accompanying change in the expected capital gain or loss. At
low interest rates expectation of capital loss may push the opportunity locus
into the negative quadrant, so that the optimal position is clearly no consols,
all cash. At the other extreme, expectation of capital gain at high
interest rates would increase sharply the slope of the opportunity locus and
the frequency of no cash, all consols positions, like that of Figure 3.3. The
stickier the investor's expectations, the more sensitive his demand for cash
will be to changes in the rate of interest (emphasis added).”
Tobin (1969) provides more elegant, complete analysis
of portfolio allocation in a general equilibrium model. The major point is
equally clear in a portfolio consisting of only cash balances and a perpetuity
or consol. Let g be the capital gain, r the rate of interest on
the consol and re the expected rate of interest. The rates
are expressed as proportions. The price of the consol is the inverse of the
interest rate, (1+re). Thus, g = [(r/re)
– 1]. The critical analysis of Tobin is that at extremely low interest rates
there is only expectation of interest rate increases, that is, dre>0,
such that there is expectation of capital losses on the consol, dg<0.
Investors move into positions combining only cash and no consols.
Valuations of risk financial assets would collapse in reversal of long
positions in carry trades with short exposures in a flight to cash. There is no
exit from a central bank created liquidity trap without risks of financial crash
and another global recession. The net worth of the economy depends on interest
rates. In theory, “income is generally defined as the amount a consumer unit
could consume (or believe that it could) while maintaining its wealth intact”
(Friedman 1957, 10). Income, Y, is a flow that is obtained by applying a
rate of return, r, to a stock of wealth, W, or Y = rW
(Friedman 1957). According to a subsequent statement: “The basic idea is simply
that individuals live for many years and that therefore the appropriate
constraint for consumption is the long-run expected yield from wealth r*W.
This yield was named permanent income: Y* = r*W” (Darby
1974, 229), where * denotes permanent. The simplified relation of income and
wealth can be restated as:
W = Y/r (1)
Equation (1) shows that as r goes to zero, r→0,
W grows without bound, W→∞. Unconventional monetary policy lowers
interest rates to increase the present value of cash flows derived from
projects of firms, creating the impression of long-term increase in net worth.
An attempt to reverse unconventional monetary policy necessarily causes
increases in interest rates, creating the opposite perception of declining net
worth. As r→∞, W = Y/r →0. There is no exit from
unconventional monetary policy without increasing interest rates with resulting
pain of financial crisis and adverse effects on production, investment and
employment.
Inflation and unemployment in the period 1966 to 1985
is analyzed by Cochrane (2011Jan, 23) by means of a Phillips circuit joining
points of inflation and unemployment. Chart VI-1B for Brazil in Pelaez (1986,
94-5) was reprinted in The Economist in the issue of Jan 17-23, 1987 as
updated by the author. Cochrane (2011Jan, 23) argues that the Phillips circuit
shows the weakness in Phillips curve correlation. The explanation is by a shift
in aggregate supply, rise in inflation expectations or loss of anchoring. The
case of Brazil in Chart VI-1B cannot be explained without taking into account
the increase in the fed funds rate that reached 22.36 percent on Jul 22, 1981 (http://www.federalreserve.gov/releases/h15/data.htm) in the Volcker Fed that precipitated the stress on a
foreign debt bloated by financing balance of payments deficits with bank loans
in the 1970s. The loans were used in projects, many of state-owned enterprises
with low present value in long gestation. The combination of the insolvency of
the country because of debt higher than its ability of repayment and the huge
government deficit with declining revenue as the economy contracted caused
adverse expectations on inflation and the economy. This interpretation is
consistent with the case of the 24 emerging market economies analyzed by
Reinhart and Rogoff (2010GTD, 4), concluding that “higher debt levels are
associated with significantly higher levels of inflation in emerging markets.
Median inflation more than doubles (from less than seven percent to 16 percent)
as debt rises frm the low (0 to 30 percent) range to above 90 percent. Fiscal
dominance is a plausible interpretation of this pattern.”
The reading of the Phillips circuits of the 1970s by
Cochrane (2011Jan, 25) is doubtful about the output gap and inflation
expectations:
“So, inflation is caused by ‘tightness’ and deflation
by ‘slack’ in the economy. This is not just a cause and forecasting
variable, it is the cause, because given ‘slack’ we apparently do not
have to worry about inflation from other sources, notwithstanding the weak
correlation of [Phillips circuits]. These statements [by the Fed] do mention
‘stable inflation expectations. How does the Fed know expectations are ‘stable’
and would not come unglued once people look at deficit numbers? As I read Fed
statements, almost all confidence in ‘stable’ or ‘anchored’ expectations comes
from the fact that we have experienced a long period of low inflation (adaptive
expectations). All these analyses ignore the stagflation experience in the
1970s, in which inflation was high even with ‘slack’ markets and little
‘demand, and ‘expectations’ moved quickly. They ignore the experience of
hyperinflations and currency collapses, which happen in economies well below
potential.”
Yellen (2014Aug22) states that “Historically, slack has
accounted for only a small portion of the fluctuations in inflation. Indeed,
unusual aspects of the current recovery may have shifted the lead-lag
relationship between a tightening labor market and rising inflation pressures
in either direction.”
Chart VI-1B provides the tortuous Phillips Circuit of
Brazil from 1963 to 1987. There were no reliable consumer price index and
unemployment data in Brazil for that period. Chart VI-1B used the more reliable
indicator of inflation, the wholesale price index, and idle capacity of
manufacturing as a proxy of unemployment in large urban centers.
Chart VI1-B,
Brazil, Phillips Circuit, 1963-1987
Source: ©Carlos Manuel Pelaez, O Cruzado e o
Austral: Análise das Reformas Monetárias do Brasil e da Argentina.
São Paulo: Editora Atlas, 1986, pages
94-5. Reprinted in: Brazil. Tomorrow’s Italy, The Economist, 17-23
January 1987, page 25.
