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By the numbers
PUBLIUS
ECONOMIC UPDATE : FALL 2021 Economic Trends, Fall 2021 In the fourth quarter of 2021, The U.S. economy moved into a moderate recovery stage with GDP reaching its pre-pandemic level. However, the slow labor market recovery, supply-chain disruptions, energy price increases, product and material shortages, and transportation bottlenecks, combined with the unprecedented expansionary fiscal and monetary policy stimulants, contributed to a high inflation rate of 7%. The Federal Reserve’s October 2021 Beige Report found that a majority of the Fed Districts saw positive growth in consumer spending, but saw declines in auto sales and low inventory levels and rising prices. Other reported economic notables from the October Beige Report:
possible new policy initiatives and executive orders of the Biden Administration will have on the overall economy. Policies to monitor include: energy, environment, taxes, immigration, government debt, and trade policies.
- Manufacturing grew moderately as did trucking and freight.
[The monetary base is the total amount of a currency that is either in general circulation in the hands of the public or in the commercial bank deposits held in the central bank's reserves.]
- Growth in nonmanufacturing activity ranged from slight to moderate. - Residential real estate activity slowed slightly but the market remained healthy, overall. - Agriculture conditions were mixed. - Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months. As of November 2021, the leading economic indicators point to a continuous modest economic growth in 2022. The projected modest recovery can be attributed to the stimulus package and an accommodating Federal Reserve monetary policy of keeping rates low. The fiscal policy stimulants, though, are projected to increase the Federal Government’s deficit from its $779 billion level in 2019 to over $3.668 trillion in 2021. The projected deficit, in turn, is expected to augment the Federal debt from its $23 trillion level in 2019 to $29 trillion in 2021. The Federal Reserve’s purchases of that debt from 2019 to 2021 has led to an increase in the U.S. monetary base from $4.945 trillion in May of 2020 to 6.331 trillion in November 2021. In the long run, the fear is that the current expansionary monetary actions, unless reversed, will lead to even higher inflation as the economy moves back to full capacity. Furthermore, the unprecedented deficits and federal government debt levels will result in higher interest rates in the future. In the absence of a strong supply-side economic growth, the long-run cost of the monetary and fiscal policy stimulants will be a slower economic growth accompanied by inflation and relatively high levels of unemployment. Finally, there is considerable uncertainty over the impacts that
TRENDS PRODUCTION AND ENERGY PRICE The moderate growth in GDP in the second and third quarters of 2021was characterized by similar patterns in production. Total industrial production in October was 5.1% above its year-earlier level and at its highest level since December 2019. In October, capacity utilization for the industrial sector increased 1.2% to 76.4%. Energy production in November 2021 was up from 8.9% from its year-earlier level, but 5.6% lower than its November 2019 level. The lower energy production combined with moderate economic growth contributed to higher energy prices. Crude oil prices, in turn, increased 101% from $39.40 per barrel in November 2020 to $81.48, and 54% from $53.96 in November 2019 (pre-pandemic period) to $81.48 in November 2021. Similar trends characterized electricity and natural gas prices. Of particular note to the production trend was the decline in U.S vehicle sales, which after increasing 62% from April 2020 to April 2021, decreased 30% from April 2021 to November 2021. Lastly, after peaking at 1.73 in April 2020, the manufacture and trade inventory-to-sales index declined 27% to 1.26 in November 2021. - Industrial production measures the output of industrial establishments in the following industries: mining and quarrying, manufacturing and public utilities (electricity, gas and water supply). - Capacity utilization tracks the extent to which the installed productive capacity of a country is being used in the production of goods and services. It is reported as the percent of capacity being used for production (as opposed to sitting idle).
