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Brexit in dollars per pound

You may have heard of Brexit, a portmanteau of Britain and exit. The exit refers to the European Union: On June 23, 2016, U.K. citizens voted to leave the EU, which could have many possible consequences, such as lowering investment and production and reducing imports and exports between the U.K. and the EU. Not much has changed yet; the full effects will take time to materialize. But some financial variables in the U.K. did move after the Brexit vote, including the exchange rate.

The graph shows the evolution of the dollar/pound exchange rate since the beginning of 2016. The red line marks the day of the vote. Before the vote, the exchange rate fluctuated around 1.45 dollars per pound; after the vote, the pound depreciated sharply (relative to the dollar) and the exchange has fluctuated around 1.32 dollars per pound since then. This depreciation may reflect negative expectations about the U.K.’s international trade and its economy in general after the Brexit vote.

How this graph was created: Search for “US UK foreign exchange rate,” select the daily series with units “U.S. Dollars to One British Pound, Not Seasonally Adjusted,” and limit the date range from 2016-01-01 to the present. Now, to create the red line to show when the Brexit vote occurred: In the “Edit Graph” section (orange button in the upper right hand corner), use the “Add Line” option to create a user-defined line and set the start date and end date for that line to be 2016-06-23.

Suggested by Maximiliano Dvorkin.

View on FRED, series used in this post: DEXUSUK

Negative investment?

Investment. It’s a common-enough term, typically defined as an addition to existing capital. It can take the form of structures such as buildings, machinery, and residential housing. So, investment always contributes to the increase of physical capital and growth of the economy, right? Not quite. Investment has two components that complicate things a bit: change in inventories and depreciation.

Change in inventories can be positive or negative, and technically all investment could take the form of inventories and contribute nothing to our stock of buildings and machinery. More importantly, and what we focus on here, is that capital depreciates. Machinery breaks and buildings fall into disrepair, so capital requires upkeep or it becomes obsolete. Often, investment more than replaces this depreciated capital; occasionally, though, investment isn’t so robust.

The graph shows two series: real gross investment and real net investment. Gross investment is always in positive territory, despite strong fluctuations throughout the business cycle, which is what you’d generally expect from investment. Net investment removes the depreciated capital from the picture and isn’t always positive: In fact, in 2009, when the U.S. economy was in a deep recession, this measure dipped into negative territory.

How this graph was created: Search for “real net investment” and select the first series and add it to the graph. To add the second series, open the “Edit Graph” panel, search for “real investment,” and select the other series shown in the graph.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: A557RX1A020NBEA, GPDIC1

Cargo is cloudy for planes, ships slip and trains don’t gain, but trucks are in luck and pipelines are fine

A few simple observations: The United States is large. Americans buy things often. So, all kinds of goods get hauled over great distances all the time. And, once again, FRED has some relevant data.

The graph tracks various modes of transportation for freight. And even though these indicators have different units (tons, short tons, ton-miles, and barrels), FRED’s graphing flexibility lets us compare them in a logical way. Once we change the units to an index, setting all values at 100 starting in the year 2000, we can compare the evolution of these indicators over time. It looks like freight hauled by rail is slowly but surely losing its market share, while freight hauled by trucks has fared better. Freight on U.S. waterways has partially recovered from earlier losses, and pipeline transport has recently increased. Airborne freight is more difficult to judge: The jump in 2002 reflects a change in the indicator itself, when more carriers were included in the calculation; but it looks stable since then, except for the big dip during the recent recession.

How this graph was created: These series can be found in the U.S. transportation data release. Select the relevant series and click “Add to Graph.” Because so many different units are used for these series, unify them by scaling the units to 100 for the date 2000-01-01: Open the “Edit Graph” tab, look in the “Units” menu, and choose “Index (scale value to 100 for chosen date).”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: AIRRTMFMD11, PETROLEUMD11, RAILFRTCARLOADSD11, TRUCKD11, WATERBORNED11


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