Monthly Archives: April 2010

The Mule trips up

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In my last post, I fell into a common trap when dealing with financial time-series data: I did not adjust for inflation. The post examined recent trends in US personal consumption and concluded with the following chart showing a long history of year-on-year consumption growth.

Chart showing the year-on-year growth of US personal consumption

Year-on-year Growth of US Personal Consumption (1959-2010)

What stands out in the chart is the high rate of growth in the 1970s and 80s, a phenomenon that was picked up in comments on the blog post. Of course, the problem is that inflation was high in the 1970s and 80s and so at least some of that growth can be attributed to rising prices rather than increased consumption of “stuff”.

What I should have done is adjust the personal consumption expenditure (PCE) data for the effect of inflation. This is made easier by the fact that the Bureau of Economic Analysis publishes a companion to the PCE which serves exactly that purpose. The PCE price index (PCEPI) provides a measure of inflation very much like the consumer price index (CPI), but it is based on the particular basket of goods used in the PCE index. Using this index to scale consumption to 2010-equivalent dollars and then looking at the annual growth in this measure of “real” consumption results in a rather different picture.

A chart showing real growth in US personal consumption

Year-on-year Growth of US Personal Consumption (1959-2010)

As is often the case with inflation-adjusted data, this chart is noisier than the previous one, and real consumption exhibits bigger swings than the original “nominal” consumption figures. While there is still a declining trend in consumption over time, it is a more modest decline and the 1970s and 80s no longer appear to be a particularly unusual period. Futhermore, the contraction of consumption seen in the wake of the recent economic crisis no longer stands out so dramatically. The falls in real consumption in 1974, 1980 and 1991 were all of a similar size. In fact, the biggest fall was in the 12 months to November 1974. (Note that the github code repository has been updated to include this new chart).

I can be quick to criticize the charts in other publications, so it is only fair that I correct my own mistakes too.

UPDATE: a regular reader has suggested that for a series like the PCE, looking at the original series in nominal (not inflation-adjusted) terms actually is the most appropriate way to look at the data, so that the original post was actually fine. I’m still thinking this through….stay tuned, but it sounds like I will have to correct the correction!

Has the US consumer shaken off the financial crisis?

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A few years into the global financial crisis, US unemployment remains high and the economy still appears fragile. Nevertheless, American consumers appear to be returning to their old ways. For years they were seen as the engine of global growth. Their consumption drove exports in countries around the world. However, in the aftermath of the financial crisis, the unemployment rate in the United States soared to double figures, the collapse of property prices around the country eroded the wealth of many Americans and banks reined in their lending, while many borrowers cut their spending to pay down their debts. This appeared to set the scene for a change in the long-standing tradition of US consumer-led economic growth.

However, the latest personal consumption expenditure figures released a few weeks ago by the Bureau of Economic Analysis show another month of consumption growth in February. This is the fifth month in a row of strong personal consumption in the United States. Seen over the broad sweep of the last 50 years, the global financial crisis starts to look like a mere blip in an inexorable climb in personal consumption. (Note: the chart below uses a logarithmic scale so that a straight line indicates a steady rate of growth).

US Personal Consumption Expenditure (1959-2010)

Focusing on the last five years reveals that, while consumption collapsed in mid-2008, by the end of that year consumption began to recover. A little shakily at first, consumers appear to have returned to the pattern seen before the crisis and by late 2009, total personal consumption had exceeded pre-crisis levels.

Chart of US Personal Consumption Expediture over the last five yearsUS Personal Consumption Expenditure (2005-2010)

Looking at year-on-year consumption growth gives further insight into the underlying pattern. Growth peaked in the late 1970s, followed by a slowly declining smoothed trend* to growth rates just above 5% per annum. While the growth in consumption over the 12 months to February 2010 has not quite returned to the 5% level, that period includes weaker figures from early 2009. Annualizing quarterly growth over recent months gives figures back around the 5% mark.

Chart showing the year-on-year growth of US personal consumption

Year-on-year Growth of US Personal Consumption (1959-2010)

This may simply be a bounce back to earlier consumption levels and growth may now slow once more. But, economists, policy-makers and America’s trade partners will all be watching closely to see whether indeed the US consumer has shrugged off the financial crisis and is set to recover its place as the driver of the world economy. This scenario seems all the more likely if consumers forget the lessons offered by the crisis about the perils of excessive debt and once again turn to borrowing to finance consumption.

* For the technically-minded, the smoothing is performed with a LOWESS local regression. The code used to produce all of the charts is available on github.

Mule Stable update

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I have been working on some tweaks to the Mule Stable discussion forum for a few weeks and yesterday the new site went live. As well as upgrading to the lastest version of the StatusNet software, I moved the Stable to its very own domain name: mulestable.net. The old name stable.stubbornmule.net was a bit too long, particularly for anyone on other OStatus-enabled sites, but more on that later. Any links to the old site will automatically re-direct to the new site and, of course, all of the old posts have moved across too.

The move all appears to have gone smoothly, but anyone with links to Twitter or Facebook accounts will most likely have to reconnect them (just follow the Connect link). Some of the enhancements with the upgrade are:

  • A secure-version of the site (using TLS connections) so if you are surfing the Stable at a public wifi-hotspot and someone tries to intercept your traffic, they will find it is encrypted.
  • Automatic switch to secure connections for login pages, even if you don’t start on the secure site. This is likely to be all anyone needs. Since posts on the Stable are public, it’s really only your username and password that you want to protect.
  • Auto-completion of usernames*. When directing messages to other users, after you type @ and begin typing a user’s name, a dropdown list will appear with suggested usernames so you don’t have to type the full name.
  • Faster performance. For the technically minded, the site is now caching data in a memcached server to speed up generation of pages.
  • Some improvements to the Facebook interface.
  • Enhancements to the OStatus interface.

This last point probably needs some explaining. In an earlier post, I touched on the subject of OStatus, which is essentially a set of protocols allowing communciation between different sites in an attempt to subvert the “walled garden” approach of the likes of Facbook and Twitter. In practice, what this means for the Mule Stable is that it is easy to send messages to people on other OStatus-enabled sites and vice-versa.

For example, let’s say you felt like sending a message to Evan Prodromou (the man behind StatusNet) from the Stable and you happened to know that his username on identi.ca is evan. Then, simply posting a message in the Stable to @evan@identi.ca would deliver a message to him on identi.ca. It’s a bit of an ugly syntax, but it is easy to remember and it works.

If you have an account on the Stable, you can also subscribe to users of other OStatus-enabled services (including identi.ca, brainbird.net and army.twit.tv). To do that, click on the “Remote” link next to your subscriptions link and enter a name like evan@identi.ca (no @ at the front this time) and you will see all of evan’s posts in your personal timeline on the Stable. Not only that, you can now post to Evan with a simple @evan. Easy!

So, if you have not yet had a look at the Mule Stable, this is a good time to pop in and sign up!

* This feature uses Javascript, so if you have scripting turned off (for example if you use the Firefox NoScript addon), it will not work.