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Federal Reserve Economic Data

The FRED® Blog

The increasing appetite for air conditioning

Tracking changes in the output of electric and gas utilities

Posted on September 10, 2020

The FRED Blog often discusses the regular economic ups and downs that occur over the course of a year (eg, fruit and house prices). Today, we look at some big changes in the seasonal pattern of electricity and gas production.

The data are from the Board of Governors of the Federal Reserve System—specifically, the Industrial Production and Capacity Utilization (G.17) survey—which show the quarterly changes in the industrial production of electricity and gas utilities.*

The FRED graph above shows electricity and gas production from 2000 to 2020, which peaks twice per year: in winter (first quarter) and summer (third quarter). For most of these 20 years, the winter and summer peaks have been very similar in value. But that has not always been the case.

Traveling back in time with FRED, we can see the same quarterly percent changes in electricity and gas production for 1939-1960. Notice how little variation there was in production between 1939 and the end of 1946. Heavier reliance on coal for heating and the military production effort during WWII can explain this steady pattern in the data.

In the first decade after WWII, winter was the peak annual season for producing electricity and gas, with no spikes in production during the summer (third quarter). But the increase in the use of air conditioning by businesses and households changed things: Summer soon became the second annual peak for utility production that we see today.

The FRED Blog team hopes you are safely enjoying the end of summer, perhaps from the comfort of your temperature-controlled home or office. We thank you for including our blog in your summer reading and hope you enjoy it year-round.

How this graph was created: Search for and select “Industrial Production: Electric and Gas Utilities, Not Seasonally Adjusted, (IPG2211A2N).” From the “Edit Graph” panel, customize Line 1 by searching for and adding “Industrial Production: Electric and Gas Utilities, Seasonally Adjusted, (IPUTIL).” Next, type the formula ((a-b)/b)*100 and click “Apply.” Use the “Format” tab to select “Mark type: Diamond.” To travel back in time with FRED, adjust the dates of the graph.

*Btw, we use the formula ((Non-seasonally adjusted production – Seasonally adjusted production) / Seasonally adjusted production) x 100 to show by how much the production of electricity and gas utilities changes each quarter relative to its seasonally adjusted value. We multiply that ratio by 100 to show the value of those changes as a percent.

Suggested by Diego Mendez-Carbajo.

View on FRED, series used in this post: IPG2211A2N, IPUTIL

The pandemic’s impact on North American GDP: Checking on the neighbors

Posted on September 3, 2020

An earlier FRED Blog post discussed the global scale of the ongoing pandemic. Today, we focus on some recent GDP values in North America, comparing inflation-adjusted growth for Canada, the United States, and Mexico.

The data shown in this FRED graph are from the Organization for Economic Co-operation and Development (OECD), which uses the label “GDP in constant prices,” which is a synonym for “real GDP.” (Btw, FRED tends to adopt the series names used by the data source.)

But whether you call it a “tomāto” or a “tomăto,” these inflation-adjusted GDP growth figures show large declines in overall economic activity in Canada, the United States, and Mexico during the second quarter of 2020. The large trade flows among these three countries and the recent reduction in U.S. imports and exports can help explain the in-step movement of these GDP figures.

How this graph was created: Search for and select “Gross Domestic Product by Expenditure in Constant Prices: Total Gross Domestic Product for Canada.” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Gross Domestic Product by Expenditure in Constant Prices: Total Gross Domestic Product for the United States” and “Gross Domestic Product by Expenditure in Constant Prices: Total Gross Domestic Product for Mexico.” Use “Edit Line 1” to change “Units” to “Compounded Annual Rate of Change” and click “Copy to All” to apply this change to lines 2 and 3. use the “Format” tab to select “Graph type: Bars.” And select colors to taste.

Suggested by Diego Mendez-Carbajo.

View on FRED, series used in this post: NAEXKP01CAQ189S, NAEXKP01MXQ189S, NAEXKP01USQ652S

What’s happened so far with the return on safe and liquid assets?

Posted on August 31, 2020

Today, we use an assortment of FRED data to consider a straightforward question: What has happened to the returns on safe assets (in this case, Treasury securities) since the pandemic hit? We look especially at the possible contributions of inflation expectations and demand for liquidity.

The FRED graph above shows

  • nominal rates for the 1-year Treasury (dark blue) and the 5-year Treasury (red)
  • the difference between the “instantaneous” 5-year-ahead Treasury rate and the 5-year, 5-year forward expected inflation rate (green)
  • the difference between corporate bond yields and the 5-year Treasury yield (light blue)

The 1- and 5-year Treasuries are among the safest and most liquid assets in the market, and both rates have dropped considerably since the start of the pandemic. From January 2 to July 31, the 1-year rate fell 145 basis points from 1.56% to 0.11% and the 5-year rate fell 144 basis points from 1.67% to 0.23%. Also, the slope of the yield curve (the difference between the 5- and the 1-year rates) in July is quite similar to what it was in January: about 10 basis points.

Because these are shorter-term nominal rates, we also look at forward rates implied by the Treasury yield and long-term inflation expectations. Specifically, we graph the difference between the instantaneous Treasury rate 5 years forward and the 5-year, 5-year forward inflation expectation rate to calculate the change in long-term real rates. The green line in the graph shows a decline of about 108 basis points, smaller than the decline in short-term nominal rates.

Finally, we can look at what happened with safe but illiquid assets. The light blue line tracks the change in the credit spread for AAA corporate bonds (ie, the difference between ICE BofA AAA US Corporate Index Effective Yield and the 5-year Treasury). These securities carry very little default risk, but aren’t as liquid as Treasuries. So, the yield spread on these bonds relative to Treasuries is often viewed as a proxy for the liquidity premium. (See papers by Krishnamurthy and Vissing-Jorgensen and del Negro et al.) In recent months, this spread has risen by 32 basis points, consistent with the increased scarcity of liquid assets.

Hence, the drop in nominal rates for safe and liquid assets was driven by a combination of an overall drop in real and safe rates (at both short and long horizons) and an increase in the liquidity premium. A paper by Kozlowski, Veldkamp, and Venkateswaran provides a model consistent with these observations.

How this graph was created: Search FRED for “1 year Treasury” and select the constant maturity rate. From the “Edit Graph” panel, open the “Add Line” tab: Search for and add the 5-year rate. Then, add another line by searching for and selecting the “instantaneous rate” series (take the 5-years hence series); then add a series by searching for and selecting the forward inflation rate; fianlly, apply formula a-b. For the last line, repeat the previous steps by searching for “AAA yield” and “5 year Treasury.” Finally, start the sample period on 2020-01-01.

Suggested by Julian Kozlowski.

View on FRED, series used in this post: BAMLC0A1CAAAEY, DGS1, DGS5, T5YIFR, THREEFF5


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