One government report this past week showed a minor upward burp in the Minnesota economy while most indices and statistical studies reveal state and national economies growing ever weaker.
More such reports are scheduled for this week, beginning this morning when the government releases the always-confusing data on the U.S. trade balance. Retail sales data for May will be released on Thursday, and the May compilation of the national Consumer Price Index will be issued on Friday.
At times, such as this past week when reports on gross domestic product (GDP) and unemployment seemed to contradict each other, it isn’t easy to interpret just what the economic reports are telling us. That is the point we will try to make today: Read the reports over time, knowing that individual statistics will bounce from month to month.
“It’s probably best to monitor the reports over a two- or three-month period. Maybe six months is even better,” said Jean Kinsey, an applied economist and co-director of the Food Industry Center at the University of Minnesota.
Even then, the monthly stats will show trends and not necessarily reveal how the current economy will impact groups of Minnesotans or your own household.
For instance, Kinsey knows from past research that rising food costs impact families in extremely different ways. The lower income people pay up to 33 percent of their income for food; higher income people spend about 7.2 percent of income on food, and the average household spends about 10 percent on food.
Food costs are again rising. Lower income people will spend more than the historical amount or begin rationing what they buy and eat in ways that will cause ripples throughout the food chain. And the actual amount of household income spent on food will statistically jump out of sight in those households where some recently lost a job.
On top of the food costs, average Americans usually spend about 2 to 3 percent of household income on fuel costs that include trips to grocery stores. Lower income people in some rural areas spend up to 16 percent of household incomes on these fuel costs.
That was before the U.S. Labor Department reported 49,000 more Americans lost jobs in May, and before the average price for regular, unleaded gasoline climbed above $4 a gallon over the weekend. Oil industry analysts on Monday were warning that basic gas prices could climb to $5.50 a gallon by the end of the summer vacation season.
“We’re probably going to need to start studying food and gasoline prices together to understand what the impact is going to be,” Kinsey said.
This coming Friday’s CPI report won’t help. Food and gasoline prices are not part of the “core inflation” categories monitored by the government’s economic harvesters. As a result, the CPI will almost certainly look better on Friday than it actually feels in at least half the households of Minnesota.
In what passed for almost good news this past week, the U.S. Department of Commerce found that Minnesota’s GDP grew by 2.2 percent last year, or slightly more than the national average of 2 percent. The warning that came with that preliminary report, however, noted that the figures will likely be adjusted downward later, as they were for 2006 when the GDP growth rate for Minnesota was reduced from 2.9 percent to a minor 1.5 percent rate.
Looking ahead, Thursday’s retail sales report for May might be equally difficult to interpret, Major retailers have already indicated that May sales were strong at low-cost Wal-Mart stores, but other retailers such as Minnesota -based Target Corp. and Wisconsin’s Kohl’s had sales drop.
The latter isn’t good. May was supposed to be an upswing month with hesitant consumers becoming shoppers again by using their federal tax stimulus checks.
In general terms, home foreclosures and home mortgage delinquencies are up, unemployment is up, health care costs continue to soar, food costs are up, and gasoline and energy costs are really up; on the other hand, personal savings, average household incomes, the stock market and consumer confidence continue to fall.
No matter how economic data reports may bounce later this week, the trend lines are obvious. Minnesota’s and the national economies are growing weaker. Once this election year is over, lawmakers and leaders at both the state and national levels will need to explore stimulus packages aimed at strengthening the U.S. economy and restoring national and international confidence in our ability to mind the store.