Tuesday, December 31, 2013

Must Be All Those Green Initiatives

I have not talked about the recent (and apparent) surge in economic growth, but my and others (Rickards, Zero Hedge, 24/7 Wall Street, Political Calculations off the top of my head) reading of the data suggest that the 4.1% growth in Q3 GDP was an aberration and unlikely to repeat. More so, I continue to question the veracity of economic growth in general, as dividends continue to be cut and employment growth continue to wane. We can add another objective measure to the list of data suggesting that economic growth is a lot weaker than otherwise assumed.

Te below chart shows the year-on-year change in GDP versus the 6-month rolling average in the year-over-year change in electricity use by commercial, industrial, and residential users in the US.

Although electricity demand has a lower beta, electricity use and economic growth generally move in tandem, as higher (lower) economic growth precludes growth in businesses, production, and an overall increase in energy use. Looking at the above chart, you should see the relationship between electricity usage and economic growth. Since mid-2012, electricity usage has remained largely negative. More so, usage has shown a renewed downturn. On question, how can economic growth be accelerating while energy use has been falling. Must be all those green initiatives right?

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