Saturday, July 30, 2011

Statistical Notes Saturday July 30

-British second quarter GDP growth was 0.2% compared to the previous quarter and 0.7% compared to Q2 2010 according to preliminary estimates, confirming the picture of stagnant growth suggested by other data.

-The U.S. housing market continues to be weak as new home sales and house prices fell.

Meanwhile, durable goods orders fell, indicating that housing weakness is spreading to the manufacturing sector.

-Euro area consumer price inflation fell from 2.7% to 2.5% in July, while money supply growth was unchanged at 1.2%.

-Swedish GDP growth fell according to preliminary estimates on an annual basis from 6.3% to 5.3%, but that is still very high and reflected entirely a base effect as the strong growth in Q2 2010 was removed from the comparison.

-Retail sales rose in Latvia in real terms by 3.3% compared to the previous month and 5.4% compared to the previous year. In Estonia the increase was 4% compared to both the previous month and the previous year. Estonia's industrial production rose 1.5% compared to the previous month and 23.8% compared to the previous year.

In Lithuania, GDP increased 6.1% compared to the previous year.

-South Korea's GDP rose by 0.8% in the second quarter compared to the previous quarter and 3.4% compared to the previous year, indicating a steady expansion.

-Israel's unemployment rate fell to a new 20-year low of 5.7%. It is down from a cyclical peak of 7.7% two years ago.

Friday, July 29, 2011

Recession Confirmed To Have Been Even Deeper Than Many Thought

Theoretically, GDP should always be equal to GDI (Gross Domestic Income), just as Net National Product should be equal to National Income. Because the production and income numbers come from different sources they are however in practice often different. Since there is only one reality, at least one of these numbers must be wrong. So the question is which one of them is true, or at least closest to the truth.

I recently pointed to one article that made the case that income numbers are more reliable, as revisions tend to adjust the production numbers to the income numbers.

This was confirmed in today's annual revision of production and income numbers. in the years of 2007 to 2010 (and Q1 2011). National income was for the period as a whole almost unrevised (the nominal amount was marginally revised up, the real amount was marginally revised down as inflation was revised up), but there was a significant downward revision of GDP particularly in real terms but also in nominal terms. Because of this, the statistical discrepancy between production and income numbers was eliminated almost completely.

As a result, the current GDP and GDI numbers shows that the 2007-09 recession was much deeper than the initial GDP numbers suggested and was instead basically as deep (actually slightly deeper) than the initial GDI numbers suggested. It also means that the recovery since has been even weaker than initially estimated.

The numbers for the first half of this years also shows that this weak recovery has become even weaker, indeed stalling completely after adjusting for terms of trade.

Thursday, July 28, 2011

New European Population Figures

Eurostat today released 2010 population figures for the EU-- Some of the more interesting facts include:

-Luxembourg had the fastest population growth rate, 1.9% (mostly net immigration), followed by Sweden, Malta, Belgium and Britain. Lithuania's population decreased the most, by 2.6% (mostly net emigration). Several other eastern European countries, including Latvia, also had a falling population, as did Germany and Portugal.

Outside the EU, Norway, Switzerland and Turkey had high population growth, driven mainly by immigration in the cases of Norway and Switzerland and a high birth rate in Turkey. Iceland had a falling population despite a high birth rate due to a high level of net emigration

-Germany may have a stronger economy than Ireland, but Ireland's birth rate was nearly twice as high. That however partly reflects the fact that a higher proportion of Ireland's population is women of childbearing age, so the difference in fertility rate isn't quite as big. The high birth rate in Ireland meant that its population grew despite a high level of net emigration.

-Of the large countries, Britain had the highest population growth, while Germany as stated above had a slight decrease in its population. France, Italy and Spain had somewhat lower and Poland significantly lower population growth than Britain.

Given that more babies are born in Britain and France than in Germany, they will likely overtake Germany in population within the coming decades. Turkey will likely do that before 2020.

Wednesday, July 27, 2011

U.S. Dollar Falls To New Lows On Money Supply Growth, Debt Limit Crisis

The U.S. dollar is falling to new lows against an increasing number of currencies, with for example the Australian dollar rising above US$1.10, the Swiss franc touching US$1.25 and the Singapore dollar rising above 83 U.S. cents and as it now costs less than 78 yens to buy a U.S. dollar. The U.S. dollar is even falling against currencies that for other reasons are weak, like the euro and the British pound.

There are two reasons for this. The most important factor is that QE2 has caused money supply growth to reach double digit levels at annualized rates in recent months, regardless of whether you prefer the M1, M2 or MZM definitions.

The drop in recent days however is however more related to a decrease in demand in dollar assets as the likelihood of a U.S. default increases due to the inability of Republicans and Democrats to agree on the terms of an increase in the federal debt ceiling.

Monday, July 25, 2011

QE2 Boosts Profits Of Large U.S. Companies

Despite a stagnant economy, profits of companies in the S&P 500 are soaring.

The main reason for this disconnect is QE2. Inflationary policies usually boosts prices more than wages, meaning that real wages are lowered while profit margins are boosted.

Perhaps even more important for most companies in the S&P 500 is that the weak dollar caused by QE2 raises the dollar value of profits in foreign subsidiaries and enables export companies to boost their margins.

Friday, July 22, 2011

Statistical Notes Friday July 22

-Real retail sales rose slightly in Britain compared to both the previous month and a year earlier, while the budget deficit fell slightly.

-News from the U.S. housing market was mixed as housing starts and new building permits rose, while existing home sales fell slightly.

Meanwhile, general economic news suggested a slight strengthening of the economy. While initial jobless claims rose somewhat, they were still slightly below the 4 week average and the Philly Fed manufacturing index recovered from last month's low.

-Preliminary euro area PMI for July showed a continued slowdown, as the index fell from 53.3 to 50.8. Also confirming weakness was a drop in Construction spending in May, while an increase in May factory orders contradicted other data by suggesting strength.

-Singapore's GDP growth fell sharply, from 9.3% in the first quarter to just 0.5% in the second quarter. In part, this is a base effect as the extraordinarily strong Q2 2010 is used as reference, but there is no question that growth in Singapore has slowed dramatically.

-Inflation rose in India to 9.4%, increasing pressure on the Reserve bank of India to raise interest rates.

-Hong Kong saw employment increase 3.4% (full time employment was up 3.6%) during the latest year, pushing down the unemployment rate to 3.5% despite a big increase in the labor force participation rate.

Meanwhile, consumer price inflation accelerated to 5.6%.

-Taiwan saw a slight increase in its unemployment rate, from 4.27% to 4.35%, but that was more than entirely due to an increase in the participation rate as the employment rate also rose.

Thursday, July 21, 2011

Singapore Central Bank Also Losing Big From Currency Intervention

Much like the Swiss National Bank, Singapore's central bank made large losses from its currency intervention, S$10.9 billion or about 3.5% of GDP.

Ironically, the losses were formally revealed only now because it has started to allow the currency to rise more in value than before, but the real cause of the losses was when they in the past bought large amounts of foreign currency assets at overvalued exchange rates relative to the Singapore dollar. Because most other currencies are arguably still overvalued relative to the Singapore dollar, this means that there are more hidden losses that sooner or later are going to have to be revealed.

Tuesday, July 19, 2011

Why Low Japanese Bond Yields?

Paul Krugman asks why Japan has so much lower bond yields than Italy, even though both its deficit and its debt level is in fact a lot higher.

First of all, it should be noted that interest rates really aren't as low in Japan as they might appear at first glance. Japan has, and has had for many years, an inflation rate two to three percentage points lower than in the euro area, so its bond yields of slightly above 1% is actually the equivalent of slightly more than 3 to 4%.

However, even after that adjustment, Japan still has lower interest rates. Some people argues that it is the fact that Japan has a current account surplus, while Italy has a deficit, combined with the existence of a "home bias" among investors, that explains it.

That is probably one partial explanation, as many Japanese savers have indeed a strong "home bias", in part due to aversion to exchange rate risks, in part due to xenophobia.

Another explanation is that there is currently a self-fulfilling prophecy (aggravated by the recent ill-advised ECB interest rate increase) in markets about the risks of certain European governments. Until recently, when differences in deficits and debts were more or less the same, the difference in inflation adjusted yields were very low.

Monday, July 18, 2011

The Massive Losses From Swiss Currency Intervention

In June last year, I wrote about how the Swiss National Bank had invested invested tens of billions of Swiss francs to halt the appreciation of that currency. The total amount invested according to the Swiss National Bank itself was about CHF 200 billion.

Yet since June 2010, the CHF has nevertheless appreciated by 40% against the USD, from 85 U.S. cents, to $1.20, while it has appreciated by 25% against the euro, from about 70 euro cents to 87 euro cents. In inverted terms, this means that the dollar has lost 30% against the CHF and the euro 20%.

A rough estimate given the holdings of CHF 240 billion in June 2010 implies that the Swiss National Bank has lost CHF 50 to 70 billion, capital losses equivalent to more than 10% of Switzerland's GDP. And despite these massive losses, it has been powerless to stop the massive appreciation that creates big disruptions for Swiss companies.

This illustrates the irrati of exchange rate intervention through asset purchases. If one is to intervene, taxes on foreign capital inflows like Brazil has imposed, is smarter since it creates revenues and not losses.

Saturday, July 16, 2011

The Deep Economic Woes Of Non-Oil Exporting Arab Countries

Caroline Glick offers some interesting insights to the economic woes of large Arab countries with popular uprisings and no significant oil exports, primarily Egypt and Syria (Both Egypt and Syria has some oil production, but far from enough to lift the countries out of poverty). Some excerpts:

The most important, strategically consequential story is that Egypt is rapidly going broke. By the end of the year, the military dictatorship will likely not only default on Egypt’s loans. Field Marshal Tantawi and his deputies will almost certainly be unable to feed the Egyptian people.

Some raw statistics are in order here.

Among Egypt’s population of 80 million, some 32 million are illiterate. They engage in subsistence farming that is too inefficient to support them. Egypt needs to import half of its food.

As David Goldman, (aka Spengler), reported in Asia Times Online, in May the International Monetary Fund warned of the impending economic collapse of non-oil exporting Arab countries saying, “In the current baseline scenario the external financing needs of the region’s oil importers is projected to exceed $160 billion during 2011-13.” Goldman noted, “That’s almost three years’ worth of Egypt’s total annual imports as of 2010.”

Since Mubarak was overthrown in February, Egypt’s foreign currency reserves have plummeted from $36b. to $25b.-28b. Last month, Tantawi rejected an IMF loan offer of $3b., claiming he would not accept any conditions on the loans. Instead he accepted $4b. in loans from Saudi Arabia and another $2.34b. from the Gulf states.

And still, Egypt’s foreign currency reserves are being washed away. As Goldman explained, the problem is capital flight. Due in no small part to the protesters in Tahrir Square calling for the arrest of all those who did business with the former regime, Egypt’s wealthy and foreign investors are taking their money out of the country.

At the Arab Banking Summit in Rome last month, Jordan’s Finance Minister Mohammed Abu Hammour warned, “There is capital flight and $500 million a week is leaving the Arab world.”

According to Goldman, “Although Hammour did not mention countries in his talk... most of the capital flight is coming from Egypt, and at an annual rate roughly equal to Egypt’s remaining reserves.”

Last month, Syrian President Bashar Assad gave a speech warning of “weakness or collapse of the Syrian economy.” As a report last month by Reuters explained, the immediate impact of Assad’s speech was capital flight and the devaluation of the Syrian pound by 8 percent.

For the past decade, Assad has been trying to liberalize the Syrian economy. He enacted some free market reforms, opened a stock exchange and attempted to draw foreign investment to the country. While largely unsuccessful in alleviating Syria’s massive poverty, these reforms did enable the country a modest growth rate of around 2.5% per year.

In response to the mass protests threatening his regime, Assad has effectively ended his experiment with the free market. He fired his government minister in charge of the economic reforms and put all the projects on hold. Instead, according to a report this week in Syria Today, the government has steeply increased public sector wages and offered 100,000 temporary workers full-time contracts. The Syrian government also announced a 25% cut in the price of diesel fuel, at a cost to the government of $527m. per year.

Boasting foreign currency reserves of $18b., the Syrian regime announced it would be using these reserves to pay for the increased governmental outlays. But as Reuters reported, the government has been forced to spend $70m.- $80m. a week to buck up the local currency. So between protecting the Syrian pound and paying for political loyalty, the Assad regime is quickly drying up Syria’s treasury.

Friday, July 15, 2011

Leading & Lagging U.S. Inflation Indicators Rising

While money supply in much of Europe is stagnating, it is rising fast in the United States. Up 1.9% in a month (25% at an annualized rate), up 3.6% in the latest 3 months (15% at an annualized rate), up 5.2% in the latest 6 months (10.5% at an annualized rate) and up 8.6% in the latest year.

Increased demand for dollars because of the European debt crisis will limit the price inflationary impact, but it will likely not eliminate it entirely.

Meanwhile, though the drop a month earlier in oil prices caused a drop in the monthly CPI, the lagging indicator of inflation known as "core" CPI rose 0.3% for the secon month in a row. With oil prices now recovering and money supply increasing, all-items price inflation will likely soon return at an elevated level.

Thursday, July 14, 2011

Dean Baker Doesn't Understand National Income Accounting

Commenting on the increase in the U.S. trade deficit that I mentioned yesterday, Dean Baker asserts:

This is also bad news for fans of income accounting. If we have a trade deficit, then national savings must be negative. That means either or both negative private savings or negative public savings (e.g. budget deficits). That's the rules -- there is no way around this one.

Yes, there is, as someone who claims to be a fan of income accounting should now. National savings is not a function of the trade balance alone, it is a function of the trade balance (or actually the current account balance) and investments. It is thus often the case that a rising national savings rate is associated with a higher trade deficit, as in the late 1990s, or that a falling national savings rate is associated with a lower trade deficit, as in the 2007-09 recession.

Wednesday, July 13, 2011

Statistical Notes Wednesday July 13

-The British consumer price inflation rate fell from 4.5% to 4.2%, while nominal earnings growth rose to 2.3%. That however still means a decline of nearly 2% in real earnings while employment in the 3 months to May was flat compared to the previous 3 month period. Meanwhile, unemployment claims rose again in June, suggesting that employment may have fallen that month.

The U.K. trade deficit rose again in May, from £3.1 billion to £4.1 billion.

-The U.S. trade deficit also increased in May, to $50.2 billion from $43.6 billion, raising the April-May average to the same monthly average as in the first quarter. Net exports might still make an apparent contribution to growth despite a flat or slightly higher deficit, because the increase in imports largely reflected an increase in import prices that was higher than the increase in export prices.

-The consumer price inflation rate excluding interest payments in Sweden fell from 1.7% to 1.5% in June. This further weakens the case for further interest rate increases by the Riksbank, that was already non-existent to begin with given that money supply growth has fallen below zero.

-Estonia saw an increase in exports by 53%, Latvia saw an increase in exports by 39% and Lithuania saw an increase in exports by 42% in May. In Estonia and Latvia the increase in imports was smaller than the increase in exports, while it was larger in Lithuania.

-GDP grew 9.5% in China in the second quarter, below the first quarter increase but still relatively high and above most forecasts.

-Employment in South Korea rose 1.9% in June this year compared to the same month the previous year, and as a result the employment rate rose to a new high of 60.3% and the unemployment rate fell to 3.3%. It should be noted that since people older than 65 is included in the working age population, a 60.3% employment rate is a lot more impressive than it would have been in America or Europe where people older than 65 are generally excluded.

Tuesday, July 12, 2011

Who Has A Crush On Obama Today?

In 2007 and 2008, a lot of left of center people liked Obama strongly, with some even saying that they have "A crush on Obama".

Yet who likes Obama now. Conservatives or libertarians certainly don't, except perhaps in the sense that one may like an inept enemy for discrediting a cause you don't like. Interestingly, not even liberals like him these days either. as the unanimous verdict on left-wing blogs that I visit (like those of Paul Krugman, Robert Reich, Matthew Yglesias, Mark Thoma and Kevin Drum) is that Obama is either a sell-out, a fool or both. Krugman was skeptical to him already in 2007-08 so he can(and often does) say "I told you so", but others like Reich who supported him in the Democratic primaries likely feel very disappointed.

And as Pat Buchanan points out, blacks, among whom Obama got 96% of the votes and an usually high turn out in 2008, have fared much worse than other racial groups during Obama. The employment to population ratio has fallen from 55.2% in January 2009 to 51.1% in June 2011 among blacks, compared to a decline from 61.2% to 58.6% among hispanics/latinos and a decline from 61.4% to 59.3% among whites.

The drop in employment has thus been 1.5 times bigger among blacks compared to latinos and about twice as high as for whites. And with blacks over-represented among the jobs likely to be cut in future budget deals that Obama agrees to, their position is not likely to improve.

While Obama is still likely to get more than 90% of the blacks that do turn out to vote, it is hard to see that there will be a high turnout to vote for someone who has presided over a deterioration in black living standards contrary to the promises and slogans he presented in 2008. The "change you can believe in" has turned out to be change for the worse, and instead of "yes, we can" it has been "no, he can't".

While some leftists, black and non-black, will still vote for him as they will see him as the lesser evil compared to the Republican candidate, it is very difficult to find anyone these days that actually likes him, much less has a crush on him. And it will be very difficult for him to mobilize blacks and other core Democratic supporters.

Monday, July 11, 2011

ECB Tightening Attempt Backfiring?

Last week's interest rate increase by the ECB was foolish for pretty much the same reasons as the previous one, reasons that I discussed here, mainly that money supply growth had in fact already dropped to zero in recent months (something that has continued since then), that increased risk aversion by increasing money demand also had deflationary effects and that the euro was trading at an elevated level. And by tightening monetary condititons at a time of debt panic is likely to aggravate that general panic.

The first interest rate increase was closely followed by increased panic around Portugal, now the second starts to create increased panic around Italy-though that isn't as serious as that regarding Portugal-yet.

But by aggrevating the debt panic, the ECB's move is in fact now sending the exchange rate of the euro lower as demand for euros relative other currencies fall-something that in turn could in fact raise price inflation, contrary to the ECB's stated objective.

Redefining "Most"

Wall Street Journal reports that:

Among two-parent families, median earnings did rise by an inflation-adjusted 23% from 1975 to 2009. But the parents’ combined hours worked increased by 26% during the same period–accounting for most of the income gains.

The last time I checked, 26% was more than 23%, so it would seem that "more than the entire increase" is a better word. However, if you include non-wage benefits ,real income rose more than 26% (as total copmpensation of labor rose 6% more than wage and salary imbursements, that would put it at 30%) and in that case "most" is the better word. But then you should write that real income rose 30%.

Friday, July 08, 2011

Statistical Notes Friday July 8

-Both industrial production and construction output recovered somewhat in Britain in May from its depressed (largely due to royal wedding) level in April, but both were down compared to May 2010.

-The ISM non-manufacturing survey fell back from 54.6 to 53.3, contradicting the manufacturing survey, while confirming the picture given by the employment report discussed separately in the previous post.

-Contradicting some other recent reports, the latest numbers from Germany indicates a continued strong recovery, with factory orders, industrial production and exports all booming in May.

-Similarly to neighboring Estonia, Latvia's industrial production fell in May this year compared to April (-1.3%) , but rose compared to May 2010 (+10.2%).

-Canada's employment report was stronger than that of the United States, but weaker than Australia's and Israel's (see below), with employment increasing 0.16% on the month and 1.4% over the latest year.

-After a drop the previous month, employment rose 0.2% in Australia. As part-time employment fell while full time employment rose 0.7% this masked an even greater rebound in hours worked. During the latest year, employment is up 2%.

Meanwhile, Australia's trade surplus rose from A$1.7 billion to A$2.3 billion.

-Retail sales in Hong Kong continued to boom in May, up by 27.8% in nominal terms and 21.6% in real terms.

-Employment in Israel was up by 2.5% in the latest year, while real wages rose 1.3% during the same period.

U.S. Employment Report Even Weaker Than It Seems

Markets reacted strongly to the news that U.S. non-farm payrolls rose a mere 18,000, far below expectations. As disappointing as that may look, the details are even worse.

First of all, previous increases in payroll survey employment were revised down.

Secondly, average weekly earnings fell 0.3% as hourly earnings were flat and the average work week fell 0.1 hours. However, at the same time earnings for May was upwardly revised by 0.1%.

And thirdly, the other survey, the household survey, showed a decrease in employment by 445,000. As a result, the entire increase in the employment to population ratio since the cyclical low of 58.2% has been wiped out. The 0.9 percentage point drop in the unemployment rate since then is thus entirely the result of peopke dropping out of the work force, discouraged by the shortage of jobs.

This report thus confirms the picture of an economy that could be described as stagnant at best.

Thursday, July 07, 2011

Really Interesting Interactive House Price Index

Over at The Economist there is a really interesting interactive house price index chart for 20 selected large countries . You can choose which country or countries that will be shown, as well as whether to look at levels for nominal prices, prices adjusted for consumer prices, rents or income or annual price changes (For some countries, not all of these variables are available).

One interesting fact is that if you look at China, while nominal prices there is up by 90% during the latest decade, they are down by 40% relative to average income, an even weaker development than in Japan and Germany (the two countries where nominal house prices have been weakest). China thus clearly doesn't have a housing bubble.

Tuesday, July 05, 2011

Rare Earth Mineral Shortage Followed By New Discovery

For decades, no, make that centuries, Malthusians have warned about how we will run out of natural resources because of population growth and economic growth. And all the times these predictions have failed to materialize as real signs of potential shortages have been averted through more efficient use and/ or the dsicovery of substitutes and/ or the discovery of new supplies. This is what we now see happening with regard to so called rare earth minerals.

Monday, July 04, 2011

Does Money Supply Growth Necessarily Cause Economic Growth?

Though there has been some anomalies suggesting otherwise, such as the latest ISM manufacturing survey, most U.S. economic indicators suggest serious economic slowdown from what was already a weak recovery.

Yet money supply growth during the latest year has been relatively high during the latest year, largely because of QE2. Given the role that Austrian and Monetarist theories place on money supply in determining cyclical fluctuations, how is it possible for economic growth to slow down even as money supply growth increases?

Well, first of all, money supply is not the only factor influencing the economy. A lot of other factors, including money demand, demography, tax- and [government] spending policies, foreign business cycles etc. also influence economic growth. Saying that money supply changes could affect short-term changes in the short term is certainly not the same thing as saying that money supply changes is the only thing affecting economic growth and that there should therefore be a perfect empirical correlation. It's sort of how the things you eat influence your weight, but that doesn't mean that there will be a perfect correlation between eating habits and weight, because other factors, primarily genetics and the amount of exercise also influence weight.

And secondly, it is not certain that an increase in money supply will, even in the short term, boost economic growth. It will, if the conditions described in Austrian business cycle theory is applicable. But it might also be the case that it simply bids up prices in general, or the prices of largely imported commodities. If that is the case, then higher money supply growth could lower, and not increase, even short-term economic growth, as for example Zimbabwe experienced during its recent hyperinflation.

The Link Between Death Star Design & The L.A. Real Estate Market

What does the design of the fictional super weapon "The Death Star" from the Star Wars universe have to do with the Los Angeles real estate market? That is explained in the Family Guy version of the classical scene from the first Star Wars movie, A New Hope, from 1977 where Darth Vader uses the force to choke an Imperial officer who mocks Vader's faith in the force.

Saturday, July 02, 2011

Why The 1870s Wasn't As Bad As Some Say

In an attempt to attack laissez faire policies, historian Francois Furstenberg describes United States in the 1870s as a period of widespread misery, poverty and social unrest that finally convinced the "robber barons" that according to him controlled politicians to embrace the welfare state.

I have no idea whether his numbers about strikes and other forms of social unrest during that period are accurate, so I won't discuss them. What seems clear however is that his description of economic growth in the 1870s is misleading to say the least.

One problem that immediately should be apparent is that if the 1870s was so bad that it made the "robber barons" embrace the welfare state, and if they controlled politics, why wasn't the welfare state introduced until 60 years later?

And if the slump was as bad or worse than the Great Depression, then how come historical sources indicate that the 1870s as a whole was a period of unprecedented growth?

According to this estimate, the U.S. share of global industrial production rose from 23% in 1870 to 29% in 1883, implying a relative gain of nearly 2% per year. And given the fact that global production rose too, this implies very big absolute gains.

As Murray Rothbard puts it:

"Orthodox economic historians have long complained about the “great depression” that is supposed to have struck the United States in the panic of 1873 and lasted for an unprecedented six years, until 1879. Much of this stagnation is supposed to have been caused by a monetary contraction leading to the resumption of specie payments in 1879. Yet what sort of “depression” is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, or real per capita income? As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3-percent-perannum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita"

While the fact that data over the economy weren't gathered as systematically as today means that you should treat these numbers with extra grains of salts, the fact is that the indicators of economic activity that does exist indicates that the 1870s was a period of economic strength, not weakness, for the United States in particular, despite the cyclical setbacks caused by some bank failures.

Statistical Notes Saturday July 2

-The British manufacturing survey weakened to 51.3 to the weakest level in 21 months. Meanwhile, yearly GDP growth was revised down from 1.8% to 1.6%.

-U.S. economic news was more mixed. The ISM manufacturing index recovered somewhat in June after May's big dip, but initial jobless claims remained at a high level and construction spending continued to drop.

-Sweden's money supply continued to contract, at -0.7% in May.Meanwhile, its manufacturing survey weakened from 56.1 to 52.9.

-Yearly euro area money supply growth fell to 1.2% in May, the lowest since 2008, with the 3- and 6 month increases being even lower, while consumer price inflation held steady at 2.7%. With money supply growth already near zero, ECB interest rate increases seems unnecessary at best.

-Euro area manufacturing survey weakened to 52, the lowest in 18 month

-After increasing the previous month, Spain's current account deficit fell in April. For the first four months as a whole, it fell but only slightly, from €21.0 billion to €20.5 billion.

-Industrial production fell back in May in Estonia from the previous month, but was still up as much as 26.1% compared to a year.