Treasury Runs Budget Deficit of $94.6 Billion In July

The federal government ran a budget deficit of $94.6 billion during the month of July. This compares with a $97.6 billion deficit in July of 2013.

Monthly Activity

Receipts for the month totaled $210.6 billion, up from $200.0 billion a year earlier. Total outlays were $305.2 billion from $297.6 billion a year earlier.

The rolling 12-month U.S. government budget deficit through July was $534.3 billion, an improvement from $537.3 billion in June. The rolling 12-month budget balance as a percentage of gross domestic product is -3.09%.

Treasury Statement

GDP Grows At 4.0% In Q2

The U.S. Bureau of Economic Analysis reported this morning that real gross domestic product increased at a seasonally adjusted annual rate of 4.0% in the second quarter. This was the initial estimate for Q2, and included revisions to prior periods, which changed the estimate for the first quarter to -2.1%.

While dragged down by net exports, GDP growth in Q2 was propelled by gains in government consumption expenditures, private investment, and personal consumption expenditures.

GDP

The Impact The U.S. Economy Has On Emerging Markets

With a nominal gross domestic product of nearly $17 trillion, the U.S. is easily the world’s largest economy. Naturally, a small change in U.S. GDP can have a lasting impact on the economies of less developed countries.

An analysis conducted by Credit Suisse shows the degree to which an increase in U.S. GDP causes GDP shifts in select emerging nations. For instance, a 1% increase in U.S. GDP leads to around a 1% increase in Russia’s GDP after one quarter and around a 3% increase after four quarters.

This suggests that Brazil, Mexico, Czech Republic, Hungary, and Turkey are all heavily reliant on a stable U.S. economy. Nations like China, India, Poland, and Indonesia, while still quite benefited by a healthy U.S., are less dependent.

US Impact

A World Of Debt

Some interesting visualizations have been published by Standard Chartered in the new report Local Markets Compendium.

This large tree map shows the size of total government debt outstanding across 161 countries worldwide. Each rectangle shows the size of each bond market, and the color of each square shows the debt-to-GDP ratio for that country.

In 2002, the world government bond market was $22.98 trillion in size. As of the end of 2012, it had reached $57.90 trillion.

Total-Government-Debt-Outstanding

This map shows what portion of each government’s debt is held by foreign investors.

Foreign-Held-Debt

And this map shows government debt as a percentage of GDP.

DBT-Percent-of-GDP

Japan’s Only Way Out: Print, Print, Print

Public sector debt in Japan has reached unmanageable levels, as shown in the below chart from SocGen. Japan’s maturing debt and budget deficit combine for 58.4% of GDP in 2013, a figure that is a multiple of other developed nations.

Japan has received a great deal of both criticism and praise for its monetary policy choices, but given the situation it has gotten itself into, what choice does it have but to amp up the printing press?

Public Sector Debt Issuance

Global Penetration Rates In The Home Appliance Market

Citi has released a massive report on the home appliance market and its potential global growth in the coming years. They note that the household appliance market is over $300 billion, about a third the size of the consumer electronic market.

A few bubble charts show the penetration rate of certain home appliances globally, and how it compares to nations’ GDP per capita.

Air conditioner penetration rates, for example, correlate with regional temperatures nearly as much as they do with wealth levels.

Air-Conditioner-Penetration

The penetration rates for refrigerators and washing machines increase in proportion to per capita GDP until the $10,000 level is reached.

Refridgerator-and-Washing-Machine-Penetration

For microwaves and vacuum cleaners, the distributions are similar, but instead the per capita GDP threshold is $20,000.

Microwave-and-Vacuum-Cleaner-Penetration

State And Local Government Contraction Suppress U.S. Economic Recovery

A new report released by the Tax Policy Center examines the role that state and local governments have played in the U.S. economic recovery.

Examining state and local finances in recent economic recoveries, we find that state and local government activity exhibited an unprecedented decline during the most recent recovery. Never before had state and local contribution to GDP been negative three years after a recession passed its low point. This decreased activity caused a contraction in state and local government payrolls. While many factors affect these trends, it is likely that the unusually low growth in property tax revenue heavily impacted this decline.

State-Local-and-Federal-Contributions-to-US-GDP

Indeed, property taxes plummeted due to the steep decline in the housing market. The 2007-2009 recession is the only of the 5 most recent recessions when property tax revenues have not recovered 3 years after their trough. Property tax revenues are down 1.1%, while average growth 12 quarters after trough following other recessions has been 10.2%.

Real-State-and-Local-Tax-Revenue-Percent-Change-3-Years-After-Recession-Trough

Cumulative-Real-State-and-Local-Property-Tax-Receipt-Growth-from-Recession-Trough