Sunday, March 04, 2012

Matt Ridley on the "Wind Farm Scam"

From Matt Ridley's new cover story in The Spectator, "The Winds of Change":

"To the nearest whole number, the percentage of the world’s energy that comes from wind turbines today is: zero

Despite the regressive subsidy (pushing pensioners into fuel poverty while improving the wine cellars of grand estates), despite tearing rural communities apart, killing jobs, despoiling views, erecting pylons, felling forests, killing bats and eagles, causing industrial accidents, clogging motorways, polluting lakes in Inner Mongolia with the toxic and radioactive tailings from refining neodymium, a ton of which is in the average turbine — despite all this, the total energy generated each day by wind has yet to reach half a per cent worldwide.  

If wind power was going to work, it would have done so by now. The people of Britain see this quite clearly, though politicians are often willfully deaf." 

HT: Warren Smith

Residential Natural Gas Prices: Lowest in a Decade

In a recent speech, Obama mocked the "drill, drill, drill" strategy, and called it a "bumper sticker," not a real solution to high prices at the pump.  Well, the drill, drill, drill strategy seems to be having quite an effect on residential natural gas prices, which just fell to an inflation-adjusted ten-year low in December, according to new data from the EIA (see chart above, adjusted for inflation using the CPI).  At $9.69 per thousand cubic feet in December, residential customers were paying the lowest inflation-adjusted price since March 2002, almost ten years ago, when the price was $9.09.  As recently as the summer of 2008, prices peaked above $20, at more than twice the current level.

Why are residential gas prices the lowest in a decade?  As I pointed out yesterday, natural gas production peaked in December at the highest monthly production level in U.S. history, see chart and post here, and it's the abundance of shale gas being produced at record high levels that is bringing prices down to record low levels.  In other words, it's just simple, basic economics of supply and demand. Drill, drill, drill = increased supply, supply, supply = low, low, low prices.

Chart of the Day: Private GDP Grew 4.7% in Q4

Last week's BEA report showed real GDP growing by 3% at an annual rate in Q4 2011.  But as First Trust Portfolios pointed out, the non-government, private components of GDP (consumption, investment and net exports) grew at 4.7% (see chart above) in Q4.  In contrast, there was a 4.4% decline in government purchases in Q4, which created a drag on overall economic growth and brought real GDP growth down to 3%.  The decrease in government spending was "driven by a wind-down of operations in Iraq and continued state and local spending cuts."

Sunday Energy Links

1. Interactive Keystone XL pipeline map.

2.  The Nuclear Regulatory Commission approved licenses for two new AP1000 nuclear reactors at Georgia's Vogtle nuclear plant Thursday afternoon -- the first time since 1978 a new nuclear plant has been licensed in the U.S.

3.  Researchers at the Harvard School of Engineering and Applied Sciences have shown that the primary explanation for the reduction in CO2 emissions from power generation in 2009 was that a decrease in the price of natural gas reduced the industry's reliance on coal.

4.  North Dakota exports increased 36%  in 2011 led by strong global sales of agricultural and construction machinery and a record volume of crude that was shipped to Canada before returning to the U.S. by pipeline. 

5. Direct flights soon to be available from Minneapolis, MN to Williston, ND at the epicenter of the Bakken oil region.

6.  Ohio Gov. John Kasich proposes a new tax on horizontal fracking to finance a cut in personal income taxes. 

Saturday, March 03, 2012

December Natural Gas Production Sets New Record

Last year ended with another record-setting month for the world's largest natural gas producer, as the U.S. produced all-time record amounts of both gross withdrawals and dry production (consumer-grade gas) in the month of December, according to new data released this week by the Energy Information Administration (see chart above).  The record-setting gross volume in December (2.56 trillion cubic feet) was above its year-earlier level by 7.1%; and the all-time high for monthly dry gas production was 8.2% above last December, and surpassed two trillion cubic feet for only the second month ever.

Over the last five years as unconventional shale gas has become increasingly more available due to advanced extraction techniques (fracking and horizontal drilling), domestic production of natural gas has increased by more than 30%.  Welcome to America's new age of energy abundance with enough natural gas to last into the 22nd century, according to some estimates. 

According to a study by PricewaterhouseCoopers, "Shale Gas: A Renaissance in U.S. Manufacturing?" the global consulting firm predicts that abundant, cheap shale gas will spark a U.S. manufacturing renaissance over the next several years, with the potential to create a million new jobs by 2025 and reduce annual energy costs for American manufacturers by almost $12 billion over the next decade.   

Update 1: Here's another benefit from the shale revolution: In the last two years, 106 coal plants (319 units) in the U.S. have either closed or are scheduled for pending closing, partly due to abundant shale gas and low natural gas prices.  

Update 2: Does the U.S. really have a 100-year supply of natural gas? Yes, according to this recent Reason article "100 Years of Natural Gas." 

Friday, March 02, 2012

Markets in Everything: Oil Field Laundromats

Bismarck Tribune -- "Oil field clothes can tear up a washing machine. Several Bismarck laundry businesses have had to close their doors to workers but others are building their businesses around the boom.

A sign on the door of King Koin Laundrette Car and Dog Wash at 2125 E. Thayer Ave. reads “Because of odor & residue problems, we no longer allow oil field clothes in this establishment.” Owner Mike Walsh hung it there about two years ago when damage to his washing machines and dryers became too much. A similar sign hangs at Interstate Laundry and Carwash at 1438 Interstate Loop.

Soap and Suds Laundry Mat at 122 W. Bowen Ave. has opened its doors to the rig workers though. Owner Louis Baltrusch thinks he is the only self-service laundromat to allow oil field clothes in Bismarck. “Why shouldn't I work with them?” Baltrusch said.

It just takes a lot of soap to make it work. “Before guys would come in and use the top loaders and leave a mess behind,” he said. Baltrusch now has three washing machines at the front of the laundromat that he asks rig workers to use. He sees at least 30 to 40 workers each week."

Charts of the Day: % Democrats Falls to 8-Year Low

Since November 2002, Rasmussen has tracked partisan trends based on monthly surveys of 15,000 adults, and this is from the latest report on March 1:

"The number of Republicans in the country was virtually unchanged in February, while the number of Democrats fell to 32.4%, a new low for the third month in a row (see top chart above). During February, 36.0% of Americans considered themselves Republicans. That’s up from 35.9% in January and the highest number of Republicans measured since December 2010."

As the percentage of Democrats has fallen to an eight-year low since 2004, the Republican-Democrat split has been shifting towards a Republican advantage and reached a record high in February of +3.6% (36% - 32.4%).   

Meanwhile, Obama's Intrade odds of re-election remain steady at 60%.

HT: Junkyard Hawg

Mancession Has Ended, At Least for Jobless Rates

For 61 consecutive months starting in December 2006 and ending in December 2011, the monthly jobless rate for men exceeded the jobless rate for women, by as much as 2.7%.  That 2.7% gap was a post-WWII record and took place in October 2009 when the male unemployment rate peaked at a post-WWI high of 11.4% and the female rate was 8.7%.  In the aftermath of the 2007-2009 recession the female jobless rate peaked at 8.9% in November 2010, but remained a full percentage point and-a-half below the 10.4% post-WWI high in 1982.  The recession's disproportionate adverse effect on male employment and unemployment rates compared to female workers gave rise to the expression "mancession" to describe that disproportionate effect.

Now, as of January, the "mancession" has officially come to end, at least for that one month, as the male and female jobless rates converged in January at 8.3%.  The last month the two rates were equal was in November 2006 when male and female unemployment rates were both 4.5%.

Update: In terms of employment levels though, the mancession continues: male employment is still 3.2 million jobs below the pre-recession peak, while female employment is only 1.7 million jobs below the November 2007 level.   Therefore, in terms of job losses, there's still a disproportionate effect on men by a ratio of almost 2-to-1.

Per-Capita, the U.S. is a Century Ahead of China

There's been a discussion in the last two issues of The Gartman Letter (subscription required) about the relative size of China's economy on a per-capita basis, and then adjusted for Purchasing Power Parity.  Here are some contributions to that discussion:

1. According to the IMF, China's per-capita GDP in 2011 was $5,200, putting it on par with the per-capita GDP of Angola ($5,061), Macedonia ($5,012) and Algeria ($5,001).

2. Adjusting for Purchasing Power Parity, China's per-capita GDP in 2011 increases to $8,400, putting it on par with Ecuador ($8,335) and Belize ($8,275).

3. Comparing the U.S. to China: Per-capita GDP (in 2011 dollars) in the U.S. first reached a level of $5,200 back in 1850, more than 160 years ago (see chart), and reached $8,400 back in 1905, more than a century ago.

Bottom Line: Yes, it's true that China has made phenomenal economic gains over the last several decades and has become the second largest economy in the  world, and it's true that China will probably surpass the U.S. to become the world's largest economy within the next decade.  But on a per-capita basis, the U.S. is still a full century ahead of China, and it could take many generations of economic growth in China before it even comes close to approaching the per-capita GDP in the U.S.

Let's keep it in perspective.

Thursday, March 01, 2012

Car Sales Shift Into High Gear, 4-Year High in Feb.

For the second month in a row, U.S. auto sales came in much higher than the consensus expected in February and reached a four-year high of 15.1 million units at a seasonally-adjusted annual rate (see chart above).  Despite higher gas prices, total February light vehicle sales came in an impressive 15.7% above a year earlier, led by a 40.4% increase for Chrysler and 34% increase for Volkswagen.  Sales of the Ford Focus doubled over the last year, and the company overall had a 14.4% increase. GM highlights included a 28% year-over-year sales increase for the Chevrolet Silverado truck and a 20% annual gain for the GMC Sierra truck.

The last time U.S. monthly sales surpassed 15 million vehicles was in February 2008, as the recession was just beginning.  A Reuters report cites rising consumer confidence,  upbeat U.S. economic data, pent-up demand and greater availability of credit for the higher-than-expected jump in February car sales.  

Congressional Barbershops: Private "House Cuts" is Profitable, "Senate Hair Care" Got $300k Bailout

From The Daily:

"While the Senate barbershop is federally subsidized, the House barbershop is a private business. Its three employees, one of whom is part time, are independent contractors. The House barbershop was privatized in 1994, a decision that House Republicans made after they took control of the lower chamber for the first time in decades.

The dueling business models of the congressional barbershops have produced different financial results. While the Senate barbershop required a $300,000 federal bailout last year, the House barbershop turned a profit. And while Senate Hair Care Services, the formal name for the Senate barbershop, is not charged a dime for its work space, House Cuts pays the government $2,000 to $3,000 in rent each year."

MP: No surprise here....

Jobless Claims Fall Again to March 2008 Level and Could Reach Pre-Recession Levels Within 6 Weeks

Weekly jobless claims fell last week to 354,000 (four-week average), dropping to the lowest level since mid-March 2008 almost four years ago, in another sign of improvement in the U.S. labor market.  This marks the seventh consecutive weekly decline in the four-week moving average, and the 12th decline in the last 13 weeks.  At the average rate of weekly declines over the last three months (-3,350), jobless claims will be back to the pre-recession late-November 2007 level of 336,250 within the next 6 weeks.   

Despite Food, Fuel and Financial Crises, World Bank Reports that Poverty Fell From 2005-2010

The Economist -- "The past four years have seen an economic crisis coincide with a food-price spike. That must surely have boosted the number of the world’s poor (especially since food inflation hits the poor hardest)—right? Wrong. New estimates of the numbers of the world’s poor by the World Bank’s Development Research Group show that for the first time ever, poverty—defined as the number and share of people living below $1.25 a day (at 2005 prices)—fell in every region of the world in 2005-08."  See below.

World Bank -- "The number of people in extreme poverty and the poverty rate declined in every region of the developing world during 2005-2008, the first time it ever happened over a three-year monitoring cycle since the World Bank started tracking extreme poverty.

The data released by the World Bank’s Development Research Group show that 22% of the developing world’s population – or 1.29 billion people – lived on $1.25 or less a day in 2008, down from 43% in 1990 and 52% in 1981 (see top chart above). The update draws on 850 household surveys conducted by nearly 130 countries, representing 90% of the developing world’s population. It covers 1981 to 2008, mainly because newer data from low-income countries are either scarce or not comparable with previous estimates, though more recent statistics are available for middle-income countries and a handful of poorer countries to allow preliminary estimates for 2010.

Those preliminary estimates indicate that by 2010 the $1.25-a-day poverty rate fell to less than half of the 1990 rate. That means the developing world has achieved, ahead of time, the United Nation’s first Millennium Development Goal of cutting the 1990 extreme-poverty rate in half by 2015. It also means most countries recovered quickly from the recent food, fuel and financial crises."

Wednesday, February 29, 2012

Excessive Bureaucracy: Choking Greece's Economy

Greece has more economic problems than just excessive government debt and a 21% unemployment rate, it's got an excessive government bureaucracy that is choking off private enterprise and small businesses.  Or maybe it's more accurate to say that it's because of the excessive government bureaucracy that Greece has excessive debt and 21% unemployment.

Here are two anecdotes of excessive bureaucracy in Greece that "get at the very heart of how Greece landed up in its current condition and why rapid change is unlikely":

Anecdote 1: "It took 10 months, a fat bundle of paperwork, countless certificates, long hours of haggling with bureaucrats and overcoming myriad other inconceivable obstacles for one group of young entrepreneurs to open an online store. 

Fotis Antonopoulos, one of the co-founders of, and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.

Once they climbed the crazy mountain of Greek bureaucracy and reached the summit, they faced the quagmire of the bank, where the issue of how to confirm the credit card details of customers ended in the bank demanding that the entire website be in Greek only, including the names of the products.

“They completely ignored us, however much we explained that our products are aimed at foreign markets and everything has to be written in English as well,” said Antonopoulos.

Eventually, Antonopoulos and his associates decided to use foreign banking systems like PayPal, and cut the Greek bank, with which they had been negotiating for three months, from the middle. “It’s their loss, not ours. We eventually solved the problem in just one day,” explained Antonopoulos."

Anecdote 2 (via Tyler Cowen): "A number of contacts in Greece described their experiences trying to open a business or buy property, which involved high fees, several trips to different tax offices and months of navigating bureaucracy. This gets at the very heart of how Greece landed up in its current condition and why rapid change is unlikely.

This is best encapsulated in an anecdote from my visit to Athens. A friend and I met up at a new bookstore and café in the centre of town, which has only been open for a month. The establishment is in the center of an area filled with bars, and the owner decided the neighborhood could use a place for people to convene and talk without having to drink alcohol and listen to loud music. After we sat down, we asked the waitress for a coffee. She thanked us for our order and immediately turned and walked out the front door. My friend explained that the owner of the bookstore/café couldn’t get a license to provide coffee. She had tried to just buy a coffee machine and give the coffee away for free, thinking that lingering patrons would boost book sales.

However, giving away coffee was illegal as well. Instead, the owner had to strike a deal with a bar across the street, whereby they make the coffee and the waitress spends all day shuttling between the bar and the bookstore/café. My friend also explained to me that books could not be purchased at the bookstore, as it was after 6 p.m. and it is illegal to sell books in Greece beyond that hour. I was in a bookstore/café that could neither sell books nor make coffee."

TED Talk: The Case for Optimism and Abundance

Onstage at TED2012, Peter Diamandis makes a case for optimism -- that we'll invent, innovate and create ways to solve the challenges that loom over us. "I'm not saying we don't have our set of problems; we surely do. But ultimately, we knock them down."

Restaurant Performance Index Suggests Ongoing Improvements As Does Fed's Beige Book Report

From today's report from the National Restaurant Association:

"The outlook for the restaurant industry is positive for the coming months, as the National Restaurant Association’s Restaurant Performance Index (RPI) remained well above 100 in January. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.3 in January, down from December’s strong level of 102.2 (see red line in chart). Despite the decline, January represented the third consecutive month that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“Although the Restaurant Performance Index dipped somewhat from December’s nearly six-year high, it remained solidly in positive territory,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Restaurant operators reported positive same-store sales for the eighth consecutive month, and a majority of them expect business to continue to improve in the months ahead.”

Other highlights include:

1. Restaurant operators reported positive customer traffic results in January. Forty-six percent of restaurant operators reported higher customer traffic levels between January 2011 and January 2012, while 30 percent reported a traffic decline.

2. The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 102.1 in January – essentially unchanged from December’s level of 102.3 (see blue line in chart). In addition, January marked the fifth consecutive month that the Expectations Index stood above 100, which represents an optimistic outlook among restaurant operators for business conditions in the months ahead.

3. Restaurant operators also remain generally optimistic about the direction of the overall economy. Thirty-seven percent of restaurant operators said they expect economic conditions to improve in six months, down slightly from 39 percent last month. In comparison, only 11 percent of operators said they expect economic conditions to worsen in the next six months, matching the proportion who reported similarly last month."

MP: The Restaurant Performance Index has remained above 101 for two consecutive months (in December and January) for the first time since late 2006.  In other positive news today, the AP reported today that:

"The U.S. economy started the year off well with busier factories, higher retail sales, more jobs and growth in home sales. The Federal Reserve said Wednesday that all 12 of its banking districts reported some level of growth in January and the first half of February. Manufacturing output rose in all districts, and auto manufacturing, steel makers and other metal producers all reported especially solid growth.

Home sales increased in at least half of the districts, a notable improvement from the Fed's last report in January. Sales are expected to climb further in four districts. And six districts reported rising construction of apartments."

Matt Ridley on How Expensive Green Energy Destroys Jobs, While Cheap Shale Gas Creates Jobs

Matt Ridley masterfully applies Bastiat's "broken-window fallacy" to green energy jobs, writing last December in City AM, a UK financial newspaper:

"When is a job not a job? Answer: when it is a green job. Jobs in an industry that raises the price of energy effectively destroy jobs elsewhere; jobs in an industry that cuts the cost of energy create extra jobs elsewhere.

The entire argument for green jobs is a version of Frederic Bastiat’s broken-window fallacy. The great nineteenth century French economist pointed out that breaking a window may provide work for the glazier, but takes work from the tailor, because the window owner has to postpone ordering a new suit because he has to pay for the window.

You will hear claims from Chris Huhne, the U.K.'s anti-energy secretary [he was recently forced to resign and faces criminal charges], and the green-greed brigade that trousers his subsidies for their wind and solar farms, about how many jobs they are creating in renewable energy. But since every one of these jobs is subsidized by higher electricity bills and extra taxes, the creation of those jobs is a cost to the rest of us. The anti-carbon and renewable agenda is not only killing jobs by closing steel mills, aluminium smelters and power stations, but preventing the creation of new jobs at hairdressers, restaurants and electricians by putting up their costs and taking money from their customers’ pockets.

Contrast that with news from the United States that, according to a report from IHS Global Insight, the cheap shale gas revolution now in full flow has created 148,000 jobs directly within the gas industry and – by making energy cheaper – has created at least another 450,000 jobs elsewhere in the economy. By 2015, the total impact of shale gas will be 870,000 new jobs, says the report.

Back in 1800, Britain was becoming the richest country in the world with the fastest economic growth and the fastest job creation – the China of its day. That was not because we had suddenly become cleverer than everybody else at inventing things. It was because we had stumbled upon limitless, dense and above all cheap energy in the form of coal, and harnessed it to mechanize industry, cheaply amplifying the labor productivity of each person so much that he could be paid high wages.

That lesson – that cheap energy is an employment multiplier, while costly energy is an employment divider – has been forgotten. Please let us recall it before the green jobs myth causes more unemployment."

HT: Warren Smith

Huge Gender Gap Persists in College Degrees, Do We Need White House Council on Boys and Men?

From a BLS report released earlier this month, "America's Young Adults at Age 24":

"At age 24, a clear gender gap in educational attainment persists. While nearly 28 percent of women had received a bachelor’s degree by the October when they were age 24, only 19 percent of men had done so (see chart). Additionally, nearly the same percentage of men and women (12 and 13 percent, respectively) were enrolled in college at age 24, so it is unlikely the gap in educational attainment will close."
In other words, for young adults at age 24 there are 148 women who have earned a bachelor's degree (or more) for every 100 men.  At age 23, there are 164 women holding a college degree for every 100 men, and at age 22 the F:M ratio for college degrees is 187:100.

Despite the incredible success of women in higher education compared to men, which could have major implications for subsequent success in the job market, President Obama signed an executive order in March 2009 to create the White House Council on Women and Girls, and stated that the purpose of the Council is "to ensure that each of the agencies in which they're charged takes into account the needs of women and girls in the policies they draft, the programs they create, the legislation they support." 

In 2010, a multi-partisan group of thirty-four scholars made a proposal that President Obama create a White House Council on Boys and Men, as a parallel program to the White House Council on Women and Girls.  Warren Farrell, the leader of the effort, identified five different areas in which boys are in crisis—education; jobs; emotional health; physical health; and fatherlessness.  In an interview with Forbes, Farrell said that "The White House Council would signal to the world that boys and men are facing problems, alert schools and parents as to the nature of these problems, and alert all the nation’s institutions to explore how attending to these problems might help our sons, daughters, families and nation."  One educational issue to be addressed by the Council would be the huge gender gaps in educational attainment for young adults illustrated by the BLS report.
As you might expect, Obama has not responded to the request to create a Council on Boys and Men.  Reason? In a 2009 article in the National Journal, Stuart Taylor summarized well the standard, politically-correct "selective concern on sex imbalances" that typically ignores any cases of male under-representation, like college degrees, which helps us understand why there will be no White House Council for Boys and Men:

"It is an article of faith in the Obama administration, Congress, and much of the academic establishment that there are no innate differences between females and males in interests or cognitive capacities. From this dubious premise, they conclude that only pervasive, ongoing sexism and stereotypes can explain the huge gender disparities in academic fields -- hard sciences, engineering, and mathematics -- that are still male-dominated.

But advocates of this disparity-proves-discrimination dogma apply it quite selectively. They have shown virtually no concern about the small and shrinking percentages of males in colleges generally and in most academic fields."

Tuesday, February 28, 2012

South Carolina is No. 1 State for Auto Exports

Following up on this recent CD post about BMW exporting 70% of its U.S.-made vehicles at its South Carolina plant, comes this report:
"South Carolina reclaimed its lead as the No. 1 exporter of vehicles in 2011, outranking Michigan, and became the top exporter in the nation of tires, officials said Tuesday. Exports from the state jumped 21.4 percent in 2011 compared to the previous year. 

Automobile exports from South Carolina jumped 52 percent in 2011, surpassing Michigan for the No. 1 spot among automobile exporters. South Carolina previously ranked first in auto exports in 2009, based on the export of BMW automobiles from the German automaker’s Upstate manufacturing plant."

Read more here:

Read more here:

Markets in Everything: 41 Megapixel Camera

In a smartphone.....

"At this week's Mobile World Congress in Barcelona, Nokia announced the 808 PureView, a smartphone with an astounding 41-megapixel image sensor. The Nokia 808 will be the first smartphone by Nokia to include its new PureView imaging technology, which combines a high-resolution sensor with Carl Zeiss optics and Nokia-developed algorithms."

Housing Bubble? Not in Oil-Rich North Dakota

According to quarterly house price indexes from the FHFA, national home prices in the last quarter of 2011 increased slightly from the previous quarter, but ended the year at the same index level as the fourth quarter of 2004, seven years ago.  Compared to the 2007 peak, home prices in 2011 Q4 were 16% lower.

In contrast, home prices in oil-rich North Dakota never peaked, and never crashed, and have been increasing at at annual average rate of 4.55% over the last ten years.  Just one more benefit of domestic energy production in North Dakota  - the state has been completely insulated from the housing bubble and crash, and subsequent wave of foreclosures and depressed prices that have affected most of the rest of the country.    

Bank Profits and Average ROA Highest Since 2006

From today's Quarterly Banking Profile from the FDIC:

"For all of 2011, bank net income totaled $119.5 billion, an increase of $34 billion (39.8%) from 2010 earnings. This is the highest annual net income total since the industry earned $145.2 billion in 2006. More than two out of every three banks (66.9%) reported improved earnings in 2011, and only 15.5 percent reported a net loss for the year. In 2010, 22.1 percent of all banks reported full-year net losses. The average ROA in 2011 was 0.88%, up from 0.65% in 2010. The improvement in full-year net income was made possible by an $81.1 billion reduction in loan loss provisions."

MP: Bank profits last year were almost 20% above the pre-recession 2007 level, the average ROA was the highest since 2006, and the number of bank failures in 2011 was 92, down from 157 in 2010 and 140 in 2009.  Today's FDIC report provides evidence that U.S. banks are gradually recovering from the financial crisis of 2008-2009, and in 2011 had their best year since 2006.

Update 1: Over the last three months, the KBW Bank Index has gained more than 25% compared to a 15% increase in the S&P500 over that period.  

Update 2: See related LA Times story "Bank earnings hit five-year high in 2011."

Richmond, Dallas Fed Report Manufacturing Gains

RICHMOND FED -- "Manufacturing activity in the central Atlantic region advanced for the third straight month, according to the Richmond Fed’s latest survey. Our broadest indicators of overall activity—shipments, new orders and employment—remained in positive territory, and the rate of increase strengthened considerably from our last report. Other indicators were also positive, including backlogs and capacity utilization. Likewise, delivery times and finished goods inventories grew at a moderately quicker rate.

Looking ahead, assessments of business prospects for the next six months were generally on par with last month’s readings. Contacts at more firms anticipated that shipments, new orders, backlogs, capacity utilization, and capital expenditures would continue to grow at a solid pace in the months ahead.

In February, the seasonally adjusted composite index of manufacturing activity—our broadest measure of manufacturing—increased eight points to 20 from January’s reading of 12 (see chart above). Among the index’s components, shipments gained eight points to 25, new orders picked up seven points to finish at 21, and the jobs index moved up nine points to end at 13."

From the Dallas Fed's report yesterday:

"Texas factory activity continued to increase in February, according to business executives responding to the Texas Manufacturing Outlook Survey.  Highlights include:

1. The production index, a key measure of state manufacturing conditions, rose from 5.8 to 11.2, suggesting a pickup in the pace of growth.

2. The new orders index was positive for a second month in a row but fell from 9.5 to 5.8. Similarly, the shipments index moved down from 6.1 to 4.2. 

3. Capacity utilization increased further in February; the index edged up from 8.5 to 10.

4. The general business activity index rose to 17.8, its highest reading since November 2010.

5. The company outlook index also reached a level not seen since 2010; it advanced from 13.5 to 15.8.

6. The employment index jumped to 25.2, its highest level since the beginning of 2006.  

Intrade Odds

Michigan: Romney (66%) vs. Santorum (40%) at 10 a.m.

Arizona: Romney (98%) vs. Santorum (2.7%) at 10 a.m.

Monday, February 27, 2012

Responding to High Oil Prices and Low Gas Prices, U.S. Drilling Companies Switch from Gas to Oil

With crude oil prices above $100 and rising, and a glut of natural gas pushing prices down to record lows, U.S. oil and gas companies have been shifting from drilling for gas to drilling for oil, as the chart above illustrates.  According to weekly data from oilfield service company Baker Hughes, the percentage of rigs drilling for natural gas dropped below 36% in the last week, the lowest level since 1987, as the share of rigs drilling for oil increased to 64%.  As the chart shows, the trend started accelerating in about October of last year.

It's an example of how the "invisible hand," profit motive, market forces and market prices work their magic, and bring about natural and automatic self-correcting adjustments to demand and supply.  As the Law of Supply would predict, higher prices for crude oil increase incentives for producers to supply more (the "smell of profits"), and lower prices for natural gas reduce incentives for production, and producers supply less.  And the best part is that it all happens automatically through the miracle of the market, without any oversight or central planning, just by "spontaneous order" and "producer greed."       

What if Cash Sales for Houses Were Banned?

Here’s a thought experiment:

Suppose that millions of households are supplied with standardized, government-issued 2-bedroom, 2-bath condominium apartments.  Households have clear title to the property, and therefore have full property rights to their housing units, but there is a government law that forbids selling those apartments for cash. The apartments can only be transferred through a barter transaction, where one household exchanges their apartment for the apartment of another household, possibly in a different part of the same city or same state, or in a different part of the country. 

For reasons that might be related to employment, family, health, retirement, or education, individuals or households could relocate only if they can arrange an “apartment swap,” and there is an inefficient, but active market for those swaps. The apartment swap would basically require a barter arrangement that relies most frequently on the “double coincidence of wants” - which is the central requirement for all barter transactions. For example, if I have an apartment in City X and want to move to City Y, and Person A in City Y has an apartment and wants to move to City X, and we can be brought together through a website like Craig’s List, then we can execute an apartment swap and trade apartments.

(For simplification, ignore complicating factors like differences in quality, size, amenities, neighborhoods, etc. and assume that apartments are like tradeable, homogenous commodities.)

But what if I want to move to City Y and I like Person A’s apartment, which is available for a swap, but Person A doesn’t want to move to City X, but wants to move to City Z.  Maybe there’s an apartment available in City Z for Person A, but that owner, Person B, doesn’t want to move to City Y, he wants to move to my City X.  Well,  now we’ve got all of the necessary parties to arrange a 3-way apartment swap.  We don’t have a matched “double coincidence of wants,” but we do have a matched “triple coincidence of wants.” I take possession of Person A’s apartment in City Y, Person A takes possession of Person B’s apartment in City Z, and Person B moves to my apartment in City X.

Sound a little complicated? Well it is, and the convoluted swap arrangement wouldn’t have been necessary at all except that cash sales of apartments are illegal in the example. In the absence of a ban on cash sales, each of the parties involved would simply put their apartments up for sale like currently happens every day in our current real estate market.  Obviously that type of normal market operation would be much more efficient than a barter, swap market because it eliminates the key feature of barter trades that makes them so inefficient: “double coincidence of wants.” And the example above illustrates an additional inefficiency of barter markets - the “double of coincidence of wants” frequently doesn’t exist, in which case a complicated series of swaps involving 3 or more people may be required for apartment exchanges to take place.  Maybe there would have to be dozens of parties involved as part a 20-apartment or 30-apartment exchange. 

Sound like a far-fetched example with no basis in reality? Well, the example above was meant to describe the current situation in the U.S. for kidney transplants. Because kidneys are not allowed to be sold for cash, and because blood type incompatibility often prevents a family member from providing a kidney to a loved one, complicated kidney swaps have become increasingly common, and they’re getting larger in size. A record was recently set with a 60-person, 30-kidney swap, I posted about it here, and here’s a recent story in today’s San Francisco Chronicle.

Bottom Line: In the same way that the housing market would operate extremely inefficiently under a no-cash, swap-only, barter system of exchange, the market for kidney transplants will always suffer from extreme levels of inefficiency, compared to a cash-based system of exchange. In other words, there will always be a chronic, and growing shortage of kidneys under a no-cash, swap only system. At least in the apartment example above, the worst that can happen is that you get stuck in your apartment for an extended period of time, but it probably won't be fatal.  In the case of kidneys, a "no-cash swap-only" system of exchange translates into thousands of death sentences annually for those on the waiting list who die waiting (about 13 per day).

HT: Morganovich for the SF Chronicle article, and posing the question "Can you imagine trying to buy stocks this way?"  I changed it from stocks to apartments.  

Five Leading Economic Indexes Increase

In the last week, the Conference Board is reporting increases in leading economic indexes for the Euro Area (+1.0% in January), Mexico (+0.2% in December), China (+1.6% in January), France (+0.3% in December), and Australia (+0.2% in December). 

Intrade Predicted 16 Of 18 Oscars in 2009-2011

For the last three years, I've reported the Intrade odds for the leading contracts to win the top six Academy Awards, as of the day of the awards, and here is a summary of those odds and results:

Best Picture:
2009: Hurt Locker (53%) YES

2010: The Kings Speech (79.7%) YES
2011: The Artist (94%) YES 

Best Actor:
2009: Jeff Bridges (92%) YES

2010: Colin Firth (94.1%) YES
2011: Jean Dujardin (63%) YES

Best Actress:
2009: Sandra Bullock (68%) YES
2010: Natalie Portman (89.9%) YES
2011: Viola Davis (70%) NO

Best Supporting Actor:
2009: Christoph Waltz (93.5%) YES
2010: Christian Bale (88.9%) YES
2011: Christopher Plummer (94.5%) YES 

Best Supporting Actress:
2009: Mo'Nique (86%) YES

2010: Mellisa Leo (64.9%) YES
2011: Octavia Spencer (94%) YES
Best Director:
2009: Kathryn Bigelow, The Hurt Locker (85%) YES
2010: David Fincher, The Social Network (63.5%) NO
2011: Michel Hazanavicius, The Artist (80%) YES

Bottom Line:  In 16 out of 18 cases over the last three years for the major awards, the leading Intrade contracts correctly predicted the Oscar winners. 

Sunday, February 26, 2012

Newspaper Ad Revenues Fall to 60-Yr. Low in 2011

The chart above displays total annual print newspaper advertising revenue (for the categories national, retail and classified) based on actual annual data from 1950 to 2010, and estimated annual revenue for 2011 using quarterly data through the third quarter, from the Newspaper Association of America.  The advertising revenues have been adjusted for inflation, and appear in the chart as millions of constant 2011 dollars.  Estimated revenues of $20.7 billion in 2011 will be the lowest annual  amount spent on newspaper advertising since $19.5 billion in 1951, exactly 60 years ago.

The decline in newspaper ad revenues to a 60-year low is amazing by itself, but the sharp decline in recent years is pretty stunning.  Last year's ad revenues of about $21 billion were less than half of the $46 billion spent just four years ago in 2007, and less than one-third of the $64 billion spent in 2000.

And even when online advertising is added to the print ads, the combined total spending for print and online advertising in 2011 will still only be about $22.6 billion, just slightly more than  the $22.5 billion spent on print advertising in 1954.

Economic Lesson: It's another one of those huge Schumpeterian gales of creative destruction.  

Update: Here's another perspective: It took 50 years to go from about $20 billion in annual newspaper ad revenue in 1950 (adjusted for inflation) to $63.5 billion in 2000, and then only 11 years to go from $63.5 billion back to about $20 billion in 2011.

HT: Sprewell

Chart of the Day: America's High Tax Burden

Delinquency, Charge-Off Rates Falling for Bus Loans

Scott Grannis had a post on Friday about the recent acceleration in commercial bank lending to businesses, which grew at 15.2% annualized rate over the last quarter.  In another sign of improvement in credit conditions for small and medium-sized companies, the chart above shows the significant decreases over the last two years in the delinquency rates and charge-off rates for business loans at all U.S. commercial banks.  

The delinquency rate for business loans fell for the eighth straight quarter in 2011 Q4 to 1.59%, the lowest rate since the first quarter of 2008, and the charge-off rate fell to 0.66%, the lowest rate since the first quarter of 2007.  

The credit market for bank lending to America's small and medium-sized businesses is gradually recovering and slowly returning to the pre-recession conditions.   

Spending on Energy in 2011 Was Lowest Since '98

The charts above show annual personal consumption expenditures from 1995-2011 on "Energy Goods and Services," which "consists of gasoline and other energy goods and of electricity and gas," based on BEA data available here.  Some interesting observations:

1. The top chart shows that American consumers spent $460 billion (in real 2005 dollars) on "energy goods and services" in 2011, which was the lowest level of spending on energy since $454 billion in 1998, more than a decade ago.

2. On a per-capita basis (using population data here), annual real energy spending per person was lower in 2011 than in any year going back to 1995, and about 11% below 2005 when real energy spending peaked at  $494 billion.  Compared to the first year in the series, 1995, real spending on energy per person in 2011 was 7.5% lower.

3. The bottom chart displays energy spending as a share of total real personal consumption expenditures (in real dollars), which has fallen from slightly more than 7% in 1995 to slightly less than 5% in 2011.

MP: The reduction in real spending on energy over the last six years, and the ongoing reduction in spending on energy as a share of total consumption since 1995, could reflect increasing energy efficiency (appliances, cars, new homes, etc.), reduced driving, and lower natural gas costs.  The downward trend in both series would also suggest that higher gasoline prices in 2012 would have less of an impact on consumers than in past years.

Comments welcome.

Thanks to Marmico for the link to the BEA data, and for the suggestion for the chart below using nominal dollars:

Update: The bottom chart above shows the share of spending on energy using real dollars, and the new chart below shows the share of spending on energy using nominal dollars.  Adjusting for inflation, the share of energy spending goes down from 7% to 5% from 1995 to 2011, whereas the unadjusted share spent on energy goes up from 5% to 6% over the same period.  I agree with Morganovich and Marmico that the unadjusted, nominal measure of energy's share of total personal consumption spending is better than the inflation-adjusted measure, and I stand corrected (and updated!).

Saturday, February 25, 2012

Why This Time Could Be Different: Rising Oil Prices Are Being Offset By Falling Natural Gas Prices

WSJ Blog -- "Soaring oil prices in the spring of 2008 sent gasoline prices surging and accelerated the recession. Now, rising gas prices are threatening the recovery. But lower natural gas and utility costs this time around might limit some of the damage, says Deutsche Bank chief U.S. economist Joseph LaVorgna.

In a note to clients last Tuesday, titled “Why this time could be different,” LaVorgna reminds us of his rule of thumb for measuring the effect of run-ups at the pump: a one-cent increase in gasoline prices increases household energy consumption by about $1.4 billion. With the 29-cent jump in gas prices over the past two months, that would translate into about $40.6 billion in higher household energy costs.

Today, he says the economy can handle the higher oil prices “provided that they do not increase substantially further and remain at elevated levels on a longer-term basis.”

One key reason: Lower natural gas prices, and lower utility consumption (including electricity) due to a warm winter, are offsetting much of the higher oil costs. LaVorgna puts the benefit from both at about $16 billion, or almost half of the recent run-up in gasoline prices (assuming gasoline prices hold near their current levels)."

MP: The chart above shows the historical relationship between monthly natural gas prices (data here) and crude oil prices (data here) with both price series converted to index equal to 100 in January 2002.  Both oil and natural gas prices spiked in 2008, and both series rose together and more than doubled between mid-2006 and mid-2008, and then both fell together through early 2009.  Since then oil prices have increased by 2.5 times, from about $40 in February 2009 to more than $100 today.  In contrast, natural gas prices have fallen by about 50% since early 2009, from about $5 to $2.50 per million BTUs.  The huge departure over the last few years from the typical historical, positive correlation between oil and natural gas prices explains why this time really could be different, as Joe LaVorgna suggests.

Update: PPL Electric Utilities in Pennsylvania just announced that it will lower electricity prices for 586,000 residential customers by almost 11% on March 1.  A company spokesman said that the lower rates were partly because of the abundance of natural gas, which has been driving down the cost of electricity generation.  (HT: John Hanger)

Hunger Strike at UVa, Will Michael Moore Join?

On Michael Moore's website, he features a post written by University of Virginia student and football player Joseph Williams, who is about 8 days into a hunger strike at UVa to protest the oppressive, slave and plantation-like wages of $7.25 per hour for some university employees, while his coach makes about $300,000 (he didn't say that, I'm not sure if he's thought of that).  Williams and his fellow hunger strikers are part of the Living Wage Campaign and they are calling on the UVa administration to pay "living wages" to all employees.  Here are the first two paragraphs:

"I am a third year studying Political and Social Thought, and a student-athlete at the University of Virginia.  Last Friday, 12 University students began a hunger strike to protest the economic and social injustices perpetrated by the UVa administration against the vast majority of the University’s service-sector employees. I joined two days later; since then, 5 more students have joined the hunger strike, which is now closing in on in its 7th day. Although the University of Virginia - Thomas Jefferson’s brainchild and the only US university designated as a UNESCO World Heritage Site - has the prestige and high moral traditions of other top institutions, levels of inequality exist here today that are reminiscent of Jefferson’s days as a slave-master and plantation owner - with one anonymous employee even referring to the University’s Grounds as “the plantation.” 

Our University seeks to distinguish itself as a caring community and prides itself on traditions of honor and student self-governance. However, in our “caring community,” hundreds of contract employees may make as little as $7.25/hour while six out of the top ten highest paid state employees in Virginia hold administrative positions at the University. Many employees, mostly women and African Americans, do not receive enough pay for their basic necessities to exist in Charlottesville, where the cost of living is nearly 10% higher than the national average. This extreme inequality has disturbed and disillusioned students for decades, many of whom have tried to grapple with issues of race, class, and poverty in and out of the classroom. We have taken every conventional route towards this goal, garnered wide student, faculty and community support - yet our pleas have been consistently ignored and workers are still paid unjust wages."

 Question: Couldn't they get the portly Michael Moore to join the  hunger strike?

Don Boudreaux Responds to O'Reilly's Nitwitery

Don Boudreaux writes a classic and brilliant response to some nonsensical whining by Bill O'Reilly and Lou Dobbs who complain on Fox News (see video above) that "working Americans are getting hosed at the pump" by high gas prices because U.S. oil companies are sending their products overseas to make more money:

"I was amused, by the way, that in your Feb. 17th discussion with Lou Dobbs, Mr. Dobbs shared your anger at rising U.S. oil exports.  This is the same Mr. Dobbs who repeatedly complains that the problem with America’s involvement in the global economy is that foreigners stubbornly refuse to buy sufficient amounts of American exports.  Go figure.

Now about your ethics.  You’re paid so handsomely because there’s a large nation-wide demand for your commentary and bombast.  In your career you’ve worked for broadcasters in Boston, Dallas, Denver, Hartford, and elsewhere.  And before moving to Fox you were a correspondent for ABC News.  You apparently never hesitated to sell your product to the highest bidder; you never hesitated to export yourself from one market to another in search of higher pay; you never resisted the bidding for your services by buyers (i.e., employers) far and wide which put upward pressure on the amounts of money that you are paid, both to appear on television and to deliver lunch and dinnertime speeches.  

So I ask: are you guilty of an offense against those many Americans who – as a result of your responding to market signals regarding the value of your services – must now pay higher prices for the privilege of hearing your commentary?  Should you return to your long-ago job at a local Scranton television station, at your long-ago lower salary, and apologize to the good people of Lackawanna County for your greedy and evil habit of exporting yourself to wherever and whoever offers to pay you more money?"

Why $100+ Per Barrel Oil is a Godsend

From Holman Jenkins in today's WSJ "What's Right With Gas Prices":

"Ironically, the best therapy [for higher oil prices] is a higher oil price. It makes it profitable to bring into production more costly resources around the world. The rise in recent years to $100-plus a barrel is a godsend. Peak oil theorists are being refuted; so are greenies who imagined a towering oil price would usher in a carbon-free future. The opposite is seen to be true. Oil sands, shale hydrocarbons and even biofuels have been made profitable with existing technology, and of course technology can be counted on to advance.

A higher price not only elicits the new supplies to satisfy Indian and Chinese motorists; it helps to distribute production more broadly around the globe and lets the world be less dependent on cheap Mideast oil. 

Gasoline is the most visible price in the economy, and its gyrations cause the juju men in Washington and elsewhere to do crazy things, if not so crazy when understood that their real goal is to receive praise and ward off blame for the behavior of energy prices. But the price mechanism itself is still America's real energy policy, thank God.

One last thing: In the past 100 years, the real price of gasoline, in current 2011 dollars, has spent almost all its time between $2 and $4 (see chart above, data here). So today's price is hardly the end of the world."

Fact of the Day: Asia is Largest Consumer of Oil

The EIA has a great interactive chart showing annual global oil consumption from 1980 to 2010.  In 1980, North America was the world's No. 1 consumer of oil at 20 million barrels per day, and twice as much oil as Asia (10 million), see top graphic in chart above.  By 2010, Asia had become the world's largest oil consumer at 25 million barrels per day vs. 23 million for North America.  

Credit Card Delinquency Rate Falls to 17-Year Low As the National Debt Approaches 100% of GDP

The Federal Reserve released new data this week on delinquency and charge-off rates at U.S. commercial banks for the fourth quarter of 2011. For consumer credit cards, the delinquency rate fell for the 10th consecutive quarter to 3.27% during the October-December period last year, dropping to the lowest level since a 3.24% reading in the third quarter of 1994, more than 17 years ago (see blue line in chart). Compared to the 4.50% quarterly average since 1991, the delinquency rate on credit cards is now about a full percentage point below the long-run average.

For all consumer loans, the fourth quarter delinquency dropped to 3.08%, the lowest rate since the 3.0% rate in the second quarter of 2007 before the recession started (see red line in chart). The second quarter delinquency rate is also below the 3.50% historical quarterly average since 1991.

Delinquency rates for consumer loans and credit card debt are both back to pre-recession levels, and credit card delinquencies are the lowest in 17 years.  Likewise, the charge-off rates for all consumers loans and credit card loans are both back to pre-recession levels (data here). The drop in delinquency and charge-off rates for consumer debt is consistent with the drop in the household debt ratio in Q3 last year to 11.1% (red line in chart below), the lowest since 1994. 

When it comes to managing debt, American households seem to be acting more and more responsibly, maybe because of some hard lessons learned during the recession about fiscal responsibility.  Meanwhile, the politicians in Congress seem to be acting less and less responsibly, as the national debt (about $15.1 trillion) now approaches 100% of GDP ($15.3 trillion), see chart below.

Markets in Everything: Parking Smartphone App

Futuristic smartphone app from German-based Valeo, Park4U, that actually parks your car for you.

HT: W.E. Heasley

The New Reallocation of Global Manufacturing and The Renaissance of American Manufacturing

In the Knowledge@Wharton video above, Hal Sirkin of the Boston Consulting Group discusses the rebirth of manufacturing that is underway in the U.S., partly because of the erosion of China’s manufacturing cost advantages, especially for wages, which has started bringing manufacturing production and jobs back to the U.S., reversing a decade-long trend of outsourcing production overseas. Ten years ago when China entered the WTO and wages there were $0.58 per hour (vs. $15 in the U.S.), it made economic sense for American manufacturers to outsource production to China. But now with ongoing double-digit wage increases in China, high oil costs, long delivery times, and quality and intellectual property issues, American manufacturing can now increasingly compete on cost, productivity, quality and delivery.  Manufacturing in the U.S. makes more sense today than in a generation, especially for those products that are destined for the U.S. market.

The Boston Consulting Group predicts that within a few years, China's manufacturing cost advantage will disappear for 70% of the products currently produced there for the U.S. market, and increasing amounts of production will be "reshored" or "insourced" to the U.S., with the potential to create 2-3 million new factory jobs in America.  Dozens of U.S. companies have already brought manufacturing production and jobs home, and that contributed to the manufacturing sector's strong economic performance in the last two years, with all-time record profits in 2011, almost 400,000 new jobs since the beginning of 2010, and output growth last year more than twice the rate of the overall economy.

Welcome to America's manufacturing renaissance, and it's just getting started.

HT: Dan Greller

Friday, February 24, 2012

Cartoon of the Day

From Michael Ramirez at IBD.

HT: Warren Smith

Friday Energy Links

1. CBS News: Boom times are back in Oklahoma for oil production

2. CBS MoneyWatch -- "There is one reason the U.S. economy is recovering: Low gas prices. Natural gas, that is. The price is at a 10-year low and expected to stay that way for awhile. This glut of inexpensive energy is why so many companies have been moving manufacturing back to the U.S.

The cheap price has been a boon to many industries, like plastics, fertilizers, chemicals and other things derived from natural gas. It has also helped manufacturers of everything from steel to beer, which use large amounts of energy. This, more than anything else, is responsible for the return of so much manufacturing to the U.S. Manufacturing employment rose by 225,000 jobs last year, sustaining gains for the first time since 1997."

3.  Houston Chronicle -- "The University of Texas Energy Institute recently released a report confirming that the process of hydraulic fracturing, or fracking, used to release oil and gas from shale rock, has a minimal impact on ground water."

Thursday, February 23, 2012

The U.K. Learns a Lesson About the Laffer Curve

From a  WSJ editorial on how higher marginal tax rates in the U.K. lowered tax revenues from Britain's top earners, confirming that the Laffer curve is real and that "if you tax something, you actually do get less of it":

"Speaking of higher taxes (and President Obama always does), there's news from once fair Britannia. Preliminary figures out this week show that Britain's 50% top marginal income-tax rate may have reduced tax revenue from top earners by as much as 5%, compared to the old 40% top rate. Tax revenue from those filing self-assessments due January 31 was down some £500 million versus last year. 

What this week's numbers teach, however, is that Britain's richest taxpayers are simply shifting their incomes, or themselves, offshore, or deferring income, or otherwise arranging their affairs to avoid the confiscatory new top tax rate. Maybe that's unfair, too—the rich are usually better at protecting their assets—but it's the predictable consequence of a tax rate whose animating purposes are envy and spite."

Dec. 2011 Sets Record for the Highest-Ever Volume of Global Trade and Global Output in History

The CPB Netherlands Bureau for Economic Policy Analysis released its monthly report this week on world trade and world industrial production for the month of December 2011.  Here are some of the highlights:

1. World trade volume increased in December by 1.5% on a monthly basis and by 2.5% on an annual basis, bringing the global trade index to a new all-time record high of 166.6 (see blue line in chart).  World trade is now 4.0% above the previous April 2008 peak of 160.2 in the early part of the U.S. and global recessions.  

2. By region, annual export growth was led by the United States at 8%, followed by 6.2% export growth for Central and Eastern Europe and 5.2% for Latin America. 

3. World industrial output increased by 1% in December from the previous month and by 3.8% on an annual basis, reaching a new all-time high of 145.2 (see red line in chart), with especially strong annual output growth in Asia (8.85%) and emerging economies (7.1%).   Output declined in both Europe (-1.25%) and Japan (-2.75%) on an annual basis.

4. World output is now 7.6% above its pre-recession level and 23% above the recessionary low in March 2009. 

Bottom Line:  Both world trade volume and world industrial output ended last year at record high levels in December, providing more evidence of a global recovery last year from the 2008-2009 recession.  The economic weaknesses in Europe and Japan were more than offset by especially strong trade and output growth in the U.S., Latin America, Asia, and Central and Eastern Europe.  In an important economic milestone for the global economy, the year 2011 ended with the highest-ever volume of global trade in a single month and the highest-ever monthly amount of world industrial output in history.    

Update: Based on this explanatory note, I think the world trade volume series is adjusted for inflation, see the formula and discussion on page 6.