Selected Comparative Economic Indicators

October 12, 2011

The table below compares the latest U.S., euro zone, Japanese and British estimated unemployment rates and on-year percentage changes of industrial production, retail sales, real GDP, and CPI inflation.  Projected 2012 current account to GDP ratios according to the October Economist monthly survey are shown, too.

  U.S. Ezone Japan Britain
Joblessness 9.1% 10.0% 4.3% 8.1%
Indus output 3.4% 6.3% 0.6% -1.0%
Retail sales 7.2% -1.0% -2.6% 0.0%
GDP 1.5% 1.6% -1.1% 0.6%
CPI 3.8% 3.0% 0.2% 2.7%
Cacct/GDP -3.2% -0.3% 2.5% -1.5%

One can derive a summary statistic of these fundamentals by adding GDP, retail sales, industrial production and the current account ratio and subtracting unemployment and the deviation in absolute percentage points of the actual CPI from an ideal inflation rate of 1.8%.  More is better than less in the case of GDP, retail sales, and industrial production.  Higher unemployment is worse than having less unemployment.  A 1.8% rate of inflation is generally associated with price stability, so deviations above or below that level are equally bad.  The current account ratio comes with a sign depending upon whether a country is in surplus, which is good, or deficit.  Adding the ratio with its sign properly adjusts our summary fundamentals quotient (SFQ).  Higher SFQ figures are preferable.  All four economies had a negative SFQ, but the U.S. wins the contest, since its score of minus 2.2 (3.4 +7.2 + 1.5 – 9.1 – (3.8 – 1.8) +(-3.2)) is above the euro, Japanese, and British quotients.  Those other readings are minus 4.6, minus 6.5, and minus 11.2. 

America’s fundamental leadership is reflected in stocks but not so much the dollar.  The Dow Jones Industrials is some 4.0% stronger than a year ago, whereas the German Dax, Japanese Nikkei and British Footsie show 12-month declines of 5.5%, 6.9%, and 4.2%.  The yen has strengthened 6.0% on net against the dollar from a year ago.  The U.S. currency’s net on-year changes against the euro, a drop of 0.4%, and sterling, a rise of 0.6%, have been trivial.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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