In our ever-connected global economy, it’s hard to make sense of where we are going with our economy. Is it getting better, worse, stagnant…? Who can say, here are the facts:
Yesterday, President Barack Obama ordered the release of 30 million barrels of oil from the Strategic Petroleum Reserves in coordination with other western countries around the world which immediately sent crude oil prices lower by $4 per barrel. The U.S. had 737 million barrels of oil in its reserve before the release; the last time it released oil was for Hurricane Katrina when it had 707 million barrels. The res, serve is more full than ever before in U.S. History. The oil is held in underground salt caverns along the gulf coast.
Globally, 60 million barrels will be released in a slap in the face to OPEC, the Organization of Petroleum Exporting Countries, which recently decided to keep production levels steady instead of increasing them as the U.S. and Europeans had wanted. The International Energy Agency, IEA, requires member countries to stay 90 days of supply of their daily public use in reserve. Globally there are currently enough reserves for 147 days’ worth of supply. The reserve was created after OPEC’s embargo in October of 1973. The IEA also said it is prepared to release more oil on a monthly basis to fight oil speculations which drive up the price artificially.
Demand for durable goods shot up 1.9% last month, overcoming the global supply shortages caused by the devastating earthquakes in Japan.
In a CNN poll, two-thirds of the Fortune 500 companies polled said they would be hiring at least 100 employees by mid-fall of this year. The Department of Commerce revised its economic output for the first quarter, from 1.8% to 1.9 %. A one-year tax break for capital investments is spurring companies to make improvements they might otherwise put off. The Institute of Supply Management rated the manufacturing sector at 55.5%. A reading that is above 50% indicates that the manufacturing industry is expanding. Airline and transportation stocks shot up at news of the release and its subsequent drop in oil prices.
However, the beleaguered housing market is still weak and losing value; unemployment for new first time claims is up to a seasonally adjusted figure of 469,000 per week, and oil prices will most likely reclaim some of their lost costs once the influx of reserve oil is used up, but not too much as the nation enters the fall slowdown for oil demand.
Given these and other factors, the economy is likely to grow, albeit slowly, through the end of the year with a slight bump upwards during summer. The forecast in 2012 looks much better, but it would still require a 4.5% + growth for several quarters to even come close to bring us back to where we were pre-recession.