Since the OPEC production cuts are the main factor underpinning oil prices, and hence the ongoing increases in US drilling, we'll start by taking a quick look at OPEC May Oil Market Report (covering April OPEC & global data), which was released on Thursday of last week.
The Consumer Price Index for April reversed last month's course and rose by 0.2%. Inflation increases were across the board. Food rose 0.2%, energy 1.1% and all other items together increased 0.1%. Shelter continues on it's tear with a 0.3% monthly increase. Natural gas had a huge monthly increase of 2.2%. Fresh vegetables had the largest monthly jump since February 2011, an increase of 5.1%.
I have come to the conclusion that capitalism is successful primarily because it can impose the majority of the costs associated with its economic activities on outside parties and on the environment. In other words, capitalists make profits because their costs are externalized and born by others. In the US, society and the environment have to pick up the tab produced by capitalist activity.
The April unemployment report on the surface looks really good because the unemployment rate is the lowest it has been since May 2007. Yet the cause of the low rate for the month is a mixed bag. Labor participation rates also remain low. On the other hand, an alternative measure of the unemployment rate, U-6, is the lowest it has been since November 2007.
Two key parts of the Trump administration have now announced something of a get-tough policy on H-1B employers. Today USCIS released a memo announcing the policy, and DOJ released a similar statement. To my knowledge, this is the first time that American STEM workers have been given a voice.
Since oil pricing, and hence the industry's plans for new oil field exploitation in the US, is still largely dependent on what OPEC does, we'll start by looking at the new OPEC Monthly Oil Market Report for March, which covers February OPEC & global data.
According to official US economic data, the US Gross Domestic Product (GDP) has expanded for 22 quarters, raising real GDP 12.1% above its high prior to the 2008-09 economic contraction. Yet, US manufacturing output and US industrial production have not recovered to their pre-contraction high. So what is driving the real GDP growth? In my opinion, the rise in real GDP is an illusion produced by the under-measurement of inflation.
The first quarter GDP initial estimate is a pathetically weak 0.7%. While the usual suspects, changes in private inventories, imports and government spending all contracted, the real drama is in the very weak consumer spending growth. Consumer spending is most of GDP and only gained a paltry 0.3% for Q1.
Figuratively speaking, a ginormous asteroid is hurtling to a cataclysmic rendezvous with earth, but we are not supposed to notice. The asteroid is the rising threat from environmental degradation. Evidence is accumulating that environmental degradation is becoming global.
The March Consumer Price Index dropped by -0.3%. That's unusual and a decline in CPI has not happened since February 2016. The reason was volatile gas prices but America finally is catching a break on cell phone service costs too. The gasoline index by itself dropped -6.2% for the month. The bigger surprise is Inflation without food and energy prices considered dropped by -0.1%.
The March unemployment report on the surface looked bad due too less than one hundred thousand jobs gained. But that is just one number and also not part of the report which calculates the unemployment rate and other statistics. The unemployment rate actually dropped -0.2 percentage points to 4.5%. That in itself is a decade low. The better news is the monthly drop was due to less people being unemployed and almost half a million more were working.
This week's oil data for the week ending February 10th from the US Energy Information Administration showed that our imports of crude oil fell back from last week's 4 year high but still remained elevated, while our refining of that oil fell for the 5th week in a row to the second lowest rate in a year, and as a result there was another large surplus of crude that was added to our oil supplies, which were thus boosted to an all time high.
The Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% rate in the 4th quarter, revised from the 1.9% growth rate indicated by the second estimate, as personal consumption expenditures and inventory investment were greater than was previously estimated, while losses from trade were worse than was previously estimated.
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