World-Watching: German Industry: Structural Change Underway

[from Deutsche Bank Research]

Production in major industrial sectors in Germany has developed very differently in recent years under the impact of the coronavirus pandemic and energy price shock. For example, manufacturing in electrical engineering rose by 18% compared with the start of 2015. In the chemical industry, there has been a 20% decline over the same period. The differences are not only cyclical, but also structural. In the future, it will be more important to distinguish between Germany as an industrial location and the German industry.

Read the Germany blog [archived PDF].

The Levinas Facial Theme in Novels

[a continuation of Education and Spontaneous Learning]

The Face of Another (Japanese: 他人の顔, HepburnTanin no kao) is a 1964 novel written by the Japanese novelist Kōbō Abe. Like other stories written by this author, the novel explores the alienation of modern man from urban society.[1] It is written in the first person narrative mode, and is divided into a prologue, three “notebooks” (black, gray, and white), and a concluding letter from the protagonist’s wife.[2] In 1966, it was adapted into a film directed by Hiroshi Teshigahara.[3]

An industrial accident has severely burned the face of an unnamed plastics scientist. His wife is repulsed by his disfigurement and refuses to have sexual contact with him. To regain the affection of his wife, he attempts to create a prosthetic mask in a rented apartment. With this new “face,” the protagonist sees the world in a new way and begins a clandestine affair with his estranged wife. Although the mask gives the man newfound freedom, at the end of the story, it becomes difficult to determine if the mask has taken ownership of the man or the man has taken ownership of the face.[1][2][4]

There is also a subplot following a hibakusha woman who has suffered burns to the right side of her face. In the novel, the protagonist sees this character in a film; in the film version, this is deliberately obscured.

References
  1. Hoover, William (2019). Historical Dictionary of Postwar Japan, 2nd edition. Lanham, MD: Rowman & Littlefield. p. 11. ISBN 9781538111550.
  2. Abe, Kobo (1980). The face of another. Internet Archive. New York: Perigee Books. ISBN 978-0-399-50484-6.
  3. Teshigahara, Hiroshi (1967-06-09), Tanin no kao (Drama, Horror, Sci-Fi), Teshigahara Productions, Tokyo Eiga Co. Ltd.
  4. Rush, Zachariah (2014). Beyond the Screenplay: A Dialectical Approach to Dramaturgy. Jefferson, NC: McFarland. p. 59. ISBN 9780786466030
See Also

La Belle Image by Marcel Aymé, a novel with a similar premise.

Economics-Watching: Multivariate Core Trend Inflation

[from the Federal Reserve Bank of New York]

Overview

The Multivariate Core Trend (MCT) model measures inflation’s persistence in the seventeen core sectors of the personal consumption expenditures (PCE) price index.

Whether inflation is short-lived or persistent, concentrated in a few sectors or broad-based, is of deep relevance to policymakers. We estimate a dynamic factor model on monthly data for the major sectors of the personal consumption expenditures (PCE) price index to assess the extent of inflation persistence and its broadness. The results give a measure of trend inflation and shed light on whether inflation dynamics are dominated by a trend common across sectors or are sector-specific.

The New York Fed updates the MCT estimates and share sectoral insights at or shortly after 2 p.m. on the first Monday after the release of personal consumption expenditures (PCE) price index data from the Bureau of Economic Analysis. Data are available for download.

September 2023 Update

  • Multivariate Core Trend (MCT) inflation was 2.9 percent in September, a 0.3 percentage point increase from August (which was revised up from 2.5 percent). The 68 percent probability band is (2.4, 3.3).
  • Services ex-housing accounted for 0.54 percentage point (ppt) of the increase in the MCT estimate relative to its pre-pandemic average, while housing accounted for 0.50 ppt. Core goods had the smallest contribution, 0.03 ppt.
  • A large part of the persistence in housing and services ex-housing is explained by the sector-specific component of the trend.

Latest Release: 2:00 p.m. ET October 31, 2023

View the Multivariate Core Trend of PCE Inflation data here.

Frequently Asked Questions

What is the goal of the Multivariate Core Trend (MCT) analysis?

The New York Fed aims to provide a measure of inflation’s trend, or “persistence,” and identify where the persistence is coming from.

What data are reported?

The New York Fed’s interactive charts report monthly MCT estimates from 1960 to the present. The New York Fed also provides estimates of how much three broad sectors (core goods, core services excluding housing, and housing) are contributing to overall trend inflation over the same time span. The New York Fed further distinguishes whether the persistence owes to common or sector-specific components. Data are available for download.

What is the release schedule?

The New York Fed updates the estimate of inflation persistence and share sectoral insights following the release of PCE price data from the U.S. Bureau of Economic Analysis each month.

What is the modeling strategy?

A dynamic factor model with time-varying parameters is estimated on monthly data for the seventeen major sectors of the PCE price index. The model decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares.

The New York Fed uses data from all seventeen of the PCE’s sectors; however, in constructing the trend in PCE inflation, we exclude the volatile non-core sectors (that is, food and energy). The approach builds on Stock and Watson’s 2016 “Core Inflation and Trend Inflation.”

How does the MCT measure differ from the core personal consumption expenditures (PCE) inflation measure?

The core inflation measure simply removes the volatile food and energy components. The MCT model seeks to further remove the transitory variation from the core sectoral inflation rates. This has been key in understanding inflation developments in recent years because, during the pandemic, many core sectors (motor vehicles and furniture, for example) were hit by unusually large transitory shocks. An ideal measure of inflation persistence should filter those out.

PCE data are subject to revision by the Bureau of Economic Analysis (BEA). How does that affect MCT estimates?

BEA monthly revisions as well as other BEA periodic revisions to PCE price data do lead to reassessments of the estimated inflation persistence as measured by the MCT estimates. Larger revisions may lead to a more significant reassessment. A recent example of the latter case is described on Liberty Street Economics in “Inflation Persistence: Dissecting the News in January PCE Data.”

Historical estimates in our MCT data series back to 1960 are based on the latest vintage of data available and incorporate all prior revisions.

How does the MCT Inflation measure relate to other inflation measures?

The MCT model adds to the set of tools that aim at measuring the persistent component of PCE price inflation. Some approaches, such as the Cleveland Fed’s Median PCE and the Dallas Fed’s Trimmed Mean, rely on the cross-sectional distribution of price changes in each period. Other approaches, such as the New York Fed’s Underlying Inflation Gauge (UIG), rely on frequency-domain time series smoothing methods. The MCT approach shares some features with them, namely: exploiting the cross-sectional distribution of price changes and using time series smoothing techniques. But the MCT model also has some unique features that are relevant to inflation data. For example, it allows for outliers and for the noisiness of the data and for the relation with the common component to change over time.

How useful can MCT data be for policymakers?

The MCT model provides a timely measure of inflationary pressure and provides insights on how much price changes comove across sectors.

View the Multivariate Core Trend of PCE Inflation data here.

Economics-Watching: Texas Service Sector Activity Flat, Outlook Continues to Worsen

[from The Federal Reserve Bank of Dallas]

Growth in Texas service sector activity stalled in October, according to business executives responding to the Texas Service Sector Outlook Survey.

Labor market indicators pointed to no growth in employment and a largely stable workweek,” said Jesus Cañas, Dallas Fed senior business economist. “Price pressures remained unchanged while wage growth eased slightly. Perceptions of broader business conditions continued to worsen in October, as pessimism notably increased.”

Key takeaways from the service sector survey:

  • The revenue index fell eight points to 0.7, with the near-zero reading suggesting little change in activity from September.
  • The employment index fell from 2.7 to 0.1, its lowest level in seven months.
  • The input prices index was flat at 37.3 and the selling prices index remained steady at 9.5.
  • The wages and benefits index fell two points to 17.0, approaching its average reading of 15.8.
  • The general business activity index dropped from -8.6 to -18.2, its lowest level since December of last year, while the company outlook index fell to -12.8, its lowest level in 16 months.

Texas Retail Sales Decline

Retail sales declined again in October while retail labor market indicators reflected a contraction in employment and workweeks,” Cañas said. “Retail labor market indicators reflected flat employment and workweeks. Retailers’ perceptions of broader business conditions were mixed.”

Key takeaways from the retail survey:

  • The sales index fell from -4.4 to -18.1, marking its sixth consecutive month in negative territory.
  • The employment index fell 13 points to -12.4 while the hours worked index fell from 0.6 to -12.1.
  • The general business activity index dropped from -10.2 to -23.0.

The Dallas Fed conducts the survey monthly to obtain a timely assessment of activity in the state’s service sector, which represents almost 70 percent of the state’s economy and employs about 9.5 million workers.        

For this month’s survey, Texas business executives were asked supplemental questions on credit conditions. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together.

Read the special questions results.

Education and Spontaneous Learning

We give you examples of being receptive to the world around you and learning to see and hear as a form of education:

There is a show on PBS called Stories from the Stage. People come forward to a microphone on a stage and tell personal stories from their past, stories that they consider important, informative, educational (in the widest sense), and usable by the listener. One of the early “people at the mic” on stage is a teenage girl who says something, in a plaintive sorrowful voice, like: “I have been waiting far too long…to wait for someone…to see me.”

This perplexed girl is unwittingly raising the question of a deep human hunger: the hunger for “personhood.” At a young age, this primordial hunger expresses itself as somebody befriending me (i.e., the speaker needs a real friend) so that the befriended person comes into clearer focus to themselves, achieving personhood.

Very intelligent philosophers like Emmanuel Levinas of France have spent their entire lives trying to understand the connections between countenances (how a person “wears a face”), personhood, interactive life, etc.

In his book, The Face of the Other (the girl wants somebody to notice her and her face and like her and “smile upon her”) Levinas has a deep analysis of all these human yearnings and self-definitional journeys and quests:

“The Face of the Other” is an evocative phrase used by Emmanuel Levinas, an important twentieth-century philosopher.

  • “Other” (sometimes capitalized, sometimes not) usually translates the French word autrui, which means “the other person” or “someone else” (other than oneself). It is thus the personal other, the other person, whoever it is, that each of us encounters directly, or experiences the traces of, every day. Of course, we encounter a multiplicity of others, but Levinas more often uses the singular “other” to emphasize that we encounter others one at a time, face to face.
  • By “face,” Levinas means the human face (or in French, visage), but not thought of or experienced as a physical or aesthetic object. Rather, the first, usual, unreflective encounter with the face is the living presence of another person.

Thus, when we come “face to face” with another person, the experience is a social and ethical one (rather than intellectual, aesthetic, or merely physical). “Living presence,” for Levinas, would imply that the other person (as someone genuinely other than myself) is exposed to me—that is, is vulnerably present—and expresses him or herself simply by being there as an undeniable reality that I cannot reduce to images or ideas in my head.

This impossibility of capturing the other conceptually or otherwise reveals the other’s “infinity” (i.e., irreducibility to a finite [bounded] entity over which I can have power).

The other person is, of course, exposed and expressive in other ways than through the literal face (e.g., through speech, gesture, action, and bodily presence generally), but the face is the most exposed, most vulnerable, and most expressive aspect of the other’s presence.

Thus, a student could be channel surfing on TV, observe this young girl saying these things on Stories from the Stage, and expand one’s understanding of this entire set of hungers and self-identity efforts and go (say) from the moment of TV watching to reading Levinas.

This is a simple example from the current world of TV where a certain particular “cri de coeur” (French: “cry from the heart”) of a girl you don’t know at all could deepen and widen your understanding by following the thread to Levinas and other profound people. The girl’s plaint where she’s “waiting for someone to see me” becomes much deeper and can be understood on a larger canvas which is exactly what we want.

Many experiences from daily life, from walking around, from moments on TV, from tiny incidents, can be pathways to higher understanding and learning if you can see and hear “with the third eye and the third ear.” (Theodore Reik talks about “listening with the third ear.”)

Education is a kind of “applied awareness.”

Economics-Watching: “Doing Nothing” Is Still Doing a Lot

[from the Federal Reserve Bank of Philadelphia, speech by Patrick T. Harker President and Chief Executive Officer at the National Association of Corporate Directors Webinar, Philadelphia, PA (Virtual)]

Good afternoon, everyone.

I appreciate that you’re all giving up part of the end of your workday for us to be together, if only virtually.

My thanks to my good friend, Rick Mroz, for that welcome and introduction.

I do believe we’re going to have a productive session. But just so you all know, as much as I enjoy speaking and providing my outlook, I enjoy a good conversation even more.

So, first, let’s take a few minutes so I can give you my perspective on where we are headed, and then I will be more than happy to take questions and hear what’s on your minds.

But before we get into any of that, I must begin with the standard Fed disclaimer: The views I express today are my own and do not necessarily reflect those of anyone else on the Federal Open Market Committee (FOMC) or in the Federal Reserve System.

Put simply, this is one of those times where the operative words are, “Pat said,” not “the Fed said.”

Now, to begin, I’m going to first address the two topics that I get asked about most often: interest rates and inflation. And I would guess they are the topics front and center in many of your minds as well.

After the FOMC’s last policy rate hike in July, I went on record with my view that, if economic and financial conditions evolved roughly as I expected they would, we could hold rates where they are. And I am pleased that, so far, economic and financial conditions are evolving as I expected, if not perhaps even a tad better.

Let’s look at the current dynamics. There is a steady, if slow, disinflation under way. Labor markets are coming into better balance. And, all the while, economic activity has remained resilient.

Given this, I remain today where I found myself after July’s meeting: Absent a stark turnabout in the data and in what I hear from contacts, I believe that we are at the point where we can hold rates where they are.

In barely more than a year, we increased the policy rate by more than 5 percentage points and to its highest level in more than two decades — 11 rate hikes in a span of 12 meetings prior to September. We not only did a lot, but we did it very fast.

We also turned around our balance sheet policy — and we will continue to tighten financial conditions by shrinking the balance sheet.

The workings of the economy cannot be rushed, and it will take some time for the full impact of the higher rates to be felt. In fact, I have heard a plea from countless contacts, asking to give them some time to absorb the work we have already done.

I agree with them. I am sure policy rates are restrictive, and, as long they remain so, we will steadily press down on inflation and bring markets into a better balance.

Holding rates steady will let monetary policy do its work. By doing nothing, we are still doing something. And I would argue we are doing quite a lot.

Headline PCE inflation remained elevated in August at 3.5 percent year over year, but it is down 3 percentage points from this time last year. About half of that drop is due to the volatile components of energy and food that, while basic necessities, they are typically excluded by economists in the so-called core inflation rate to give a more accurate assessment of the pace of disinflation and its likely path forward.

Well, core PCE inflation has also shown clear signs of progress, and the August monthly reading was its smallest month-over-month increase since 2020.

So, yes, a steady disinflation is under way, and I expect it to continue. My projection is that inflation will drop below 3 percent in 2024 and level out at our 2 percent target thereafter.

However, there can be challenges in assessing the trends in disinflation. For example, September’s CPI report came out modestly on the upside, driven by energy and housing.

Let me be clear about two things. First, we will not tolerate a reacceleration in prices. But second, I do not want to overreact to the normal month-to-month variability of prices. And for all the fancy techniques, the best way to separate a signal from noise remains to average data over several months. Of course, to do so, you need several months of data to start with, which, in turn, demands that, yes, we remain data-dependent but patient and cautious with the data.

Turning to the jobs picture, I do anticipate national unemployment to end the year at about 4 percent — just slightly above where we are now — and to increase slowly over the next year to peak at around 4.5 percent before heading back toward 4 percent in 2025. That is a rate in line with what economists call the natural rate of unemployment, or the theoretical level in which labor market conditions support stable inflation at 2 percent.

Now, that said, as you know, there are many factors that play into the calculation of the unemployment rate. For instance, we’ve seen recent months where, even as the economy added more jobs, the unemployment rate increased because more workers moved off the sidelines and back into the labor force. There are many other dynamics at play, too, such as technological changes or public policy issues, like child care or immigration, which directly impact employment.

And beyond the hard data, I also have to balance the soft data. For example, in my discussions with employers throughout the Third District, I hear that given how hard they’ve worked to find the workers they currently have, they are doing all they can to hold onto them.

So, to sum up the labor picture, let me say, simply, I do not expect mass layoffs.

do expect GDP gains to continue through the end of 2023, before pulling back slightly in 2024. But even as I foresee the rate of GDP growth moderating, I do not see it contracting. And, again, to put it simply, I do not anticipate a recession.

Look, this economy has been nothing if not unpredictable. It has proven itself unwilling to stick to traditional modeling and seems determined to not only bend some rules in one place, but to make up its own in another. However, as frustratingly unpredictable as it has been, it continues to move along.

And this has led me to the following thought: What has fundamentally changed in the economy from, say, 2018 or 2019? In 2018, inflation averaged 2 percent almost to the decimal point and was actually below target in 2019. Unemployment averaged below 4 percent for both years and was as low as 3.5 percent — both nationwide and in our respective states — while policy rates peaked below 2.5 percent.

Now, I’m not saying we’re going to be able to exactly replicate the prepandemic economy, but it is hard to find fundamental differences. Surely, I cannot and will not minimize the immense impacts of the pandemic on our lives and our families, nor the fact that for so many, the new normal still does not feel normal. From the cold lens of economics, I do not see underlying fundamental changes. I could also be wrong, and, trust me, that would not be the first time this economy has made me rethink some of the classic models. We just won’t know for sure until we have more data to look at over time.

And then, of course, there are the economic uncertainties — both national and global — against which we also must contend. The ongoing auto worker strike, among other labor actions. The restart of student loan payments. The potential of a government shutdown. Fast-changing events in response to the tragic attacks against Israel. Russia’s ongoing war against Ukraine. Each and every one deserves a close watch.

These are the broad economic signals we are picking up at the Philadelphia Fed, but I would note that the regional ones we follow are also pointing us forward.

First, while in the Philadelphia Fed’s most recent business outlook surveys, which survey manufacturing and nonmanufacturing firms in the Third District, month-over-month activity declined, the six-month outlooks for each remain optimistic for growth.

And we also publish a monthly summary metric of economic activity, the State Coincident Indexes. In New Jersey, the index is up slightly year over year through August, which shows generally positive conditions. However, the three-month number from June through August was down, and while both payroll employment and average hours worked in manufacturing increased during that time, so did the unemployment rate — though a good part of that increase can be explained as more residents moved back into the labor force.

And for those of you joining us from the western side of the Delaware River, Pennsylvania’s coincident index is up more than 4 percent year over year through August and 1.7 percent since June. Payroll employment was up, and the unemployment rate was down; however, the number of average hours worked in manufacturing decreased.

There are also promising signs in both states in terms of business formation. The number of applications, specifically, for high-propensity businesses — those expected to turn into firms with payroll — are remaining elevated compared with pre-pandemic levels. Again, a promising sign.

So, it is against this full backdrop that I have concluded that now is the time at which the policy rate can remain steady. But I can hear you ask: “How long will rates need to stay high.” Well, I simply cannot say at this moment. My forecasts are based on what we know as of late 2023. As time goes by, as adjustments are completed, and as we have more data and insights on the underlying trends, I may need to adjust my forecasts, and with them my time frames.

I can tell you three things about my views on future policy. First, I expect rates will need to stay high for a while.

Second, the data and what I hear from contacts and outreach will signal to me when the time comes to adjust policy either way. I really do not expect it, but if inflation were to rebound, I know I would not hesitate to support further rate increases as our objective to return inflation to target is, simply, not negotiable.

Third, I believe that a resolute, but patient, monetary policy stance will allow us to achieve the soft landing that we all wish for our economy.

Before I conclude and turn things over to Rick to kick off our Q&A, I do want to spend a moment on a topic that he and I recently discussed, and it’s something about which I know there is generally great interest: fintech. In fact, I understand there is discussion about NACD hosting a conference on fintech.

Well, last month, we at the Philadelphia Fed hosted our Seventh Annual Fintech Conference, which brought business and thought leaders together at the Bank for two days of real in-depth discussions. And I am extraordinarily proud of the fact that the Philadelphia Fed’s conference has emerged as one of the premier conferences on fintech, anywhere. Not that it’s a competition.

I had the pleasure of opening this year’s conference, which always puts a focus on shifts in the fintech landscape. Much of this year’s conference centered around developments in digital currencies and crypto — and, believe me, some of the discussions were a little, shall we say, “spirited.” However, my overarching point to attendees was the following: Regardless of one’s views, whether in favor of or against such currencies, our reality requires us to move from thinking in terms of “what if” to thinking about “what next.”

In many ways, we’re beyond the stage of thinking about crypto and digital currency and into the stage of having them as reality — just as AI has moved from being the stuff of science fiction to the stuff of everyday life. What is needed now is critical thinking about what is next. And we at the Federal Reserve, both here in Philadelphia and System-wide, are focused on being part of this discussion.

We are also focused on providing not just thought leadership but actionable leadership. For example, the Fed rolled out our new FedNow instant payment service platform in July. With FedNow, we will have a more nimble and responsive banking system.

To be sure, FedNow is not the first instant payment system — other systems, whether operated by individual banks or through third parties, have been operational for some time. But by allowing banks to interact with each other quickly and efficiently to ensure one customer’s payment becomes another’s deposit, we are fulfilling our role in providing a fair and equitable payment system.

Another area where the Fed is assuming a mantle of leadership is in quantum computing, or QC, which has the potential to revolutionize security and problem-solving methodologies throughout the banking and financial services industry. But that upside also comes with a real downside risk, should other not-so-friendly actors co-opt QC for their own purposes.

Right now, individual institutions and other central banks globally are expanding their own research in QC. But just as these institutions look to the Fed for economic leadership, so, too, are they looking to us for technological leadership. So, I am especially proud that this System-wide effort is being led from right here at the Philadelphia Fed.

I could go on and talk about fintech for much longer. After all, I’m actually an engineer more than I am an economist. But I know that Rick is interested in starting our conversation, and I am sure that many of you are ready to participate.

But one last thought on fintech — my answers today aren’t going to be generated by ChatGPT.

On that note, Rick, thanks for allowing me the time to set up our discussion, and let’s start with the Q&A.

[archived PDF of the above speech]

Economics-Watching: Putting Out the NBFIRE: Lessons from the UK’s Liability-Driven Investment (LDI) Crisis

[from the International Monetary Fund Working Paper 2023/210]

by Ruo Chen & Esti Kemp

Liability-Driven Investment (LDI) funds were at the center of the severe stress that emerged in the UK gilt market in the aftermath of the September 2022 UK “mini-budget.” The episode, which came on the heels of the “Dash for Cash” and “Archegos” stress episodes in the previous two years, highlights underlying vulnerabilities in the large and diverse non-bank financial institution (NBFI) sector. This paper seeks a deeper understanding of the factors that amplified the gilt market turmoil which ultimately led the Bank of England (BoE) to undertake temporary gilt purchases on financial stability grounds in late September/early October 2022 to restore orderly market conditions and enable LDI funds to build their capital positions. With the gilt market stress and the BoE’s purchases now fully unwound, this paper identifies the key reasons for the success of the BoE’s intervention. Then, drawing also on findings of the 2022 UK Financial Sector Assessment Program (FSAP), the paper discusses key gaps and policy issues related to the monitoring of financial stability risks in the broader NBFI sector for both individual jurisdictions and international standard-setting bodies.

[read the working paper (archived PDF)]

Zorba the Greek: The Tragic Layer Underneath Zorba’s Feigned Happy-Go-Lucky Style and Dancing

There is a deeper and more tragic layer to the famous movie Zorba the Greek (1964) with Anthony Quinn as Zorba. It’s not about unalloyed good-natured buffoonery or high spirits alone, as everyone seemed to think.

Zorba makes a tragic and transformative spontaneous confession about his past in a dialog with Basil (Alan Bates the introverted British character with whom he takes up).

Like every soulful human who wishes to stay happy and relaxed in life, Zorba also has his tragic fate on his back. Zorba is no different, he also has a dark past. His crimes and atrocities were endless when he fought for his country against the Turks and Bulgarians.

As he tells Basil that he killed people, burnt villages and raped women. But he puts all this in his tragic past and tries to restore peace in his life. He is married but has left his family behind.

He is trying to some extent to kill his inner pain, just revealed to Basil, through the famous dancing:

Sirtaki or syrtaki (Greek: συρτάκι) is a dance of Greek origin, choreographed for the 1964 film Zorba the Greek. It is a recent Greek folk dance, a mixture of syrtos and the slow and fast rhythms of the hasapiko dance.

The dance and the accompanying music by Mikis Theodorakis are also called Zorba’s dance, the Zorba or “the dance of Zorba.” The dance has become popular in Greece and one that is identified with the Greeks.

The name sirtaki comes from the Greek word syrtos—from σύρω (τον χορό), which means “drag (or lead the dance)”—a common name for a group of traditional Greek dances of so-called “dragging” style, as opposed to pidikhtós (πηδηχτός), a hopping or leaping style. Despite that, sirtaki incorporates both syrtos (in its slower part) and pidikhtós (in its faster part) elements.

Thus Zorba the Greek is a tragic story of a broken man—Zorba—trying to dance himself into an anesthetized state. It’s not about Falstaffian “clowning around.” To a large extent, Zorba is trying to run away from himself or “jump over his own shadow,” so to speak, but this must fail because hyperactivity of his type won’t help him from re-colliding with his life and his past.

Economics-Watching: Global Data Tracks Decade-Long Decline in Check Payments

[by Claire Greene, payments risk expert in the Retail Payments Risk Forum at the Federal Reserve Bank of Atlanta]

From around the world, we have more evidence that people are shifting from checks to other means of non-cash payments. Using data from the Bank for International Settlements (BIS), my Atlanta Fed colleagues Antar Diallo and Oz Shy found that from 2012 to 2021, in all 20 countries they examined, the number of checks declined as the number of cashless payments increased. Since checks are cashless payment instruments, it’s notable that the total of cashless payments increased even as a component of this calculation declined.

Among the 20 countries that reported the number and value of these payments to the BIS, the United States had by far the highest per capita use of checks per year in 2021: 30 checks. Only six countries reported more than two per capita (chart below), another 12 between zero and two. Belgium and South Africa reported zero.

Yikes, you say, 30 checks per person per year in 2021! How is that possible? Most checks in the United States—about two-thirds—are estimated to be written by businesses, according to the Atlanta Fed’s Check Sample Survey. That would put the average number of checks that U.S. consumers write at about 10 per year on average, which is in line with the findings of the 2021 Survey and Diary of Consumer Payment Choice.

Given the high per capita use in the United States, it makes sense that our year-over-year decline from 2012 has been slower than that for other countries. The per-year decline in the number of U.S. checks from 2012 to 2021 was slower than the decline for all the other high-use countries listed in the chart. The United States was down 6.7 percent per year from 2012 to 2021, compared to down 8.8 percent per year for Canada at the slow end and down 17.4 percent per year for Austria at the quick end.

No way around it: we love our checks, and our response to innovation has been tepid compared to that of other countries.

Economics-Watching: Third-Quarter GDP Growth Estimate Increased

[from the Federal Reserve Bank of Atlanta’s GDPNow]

The growth rate of real gross domestic product (GDP) is a key indicator of economic activity, but the official estimate is released with a delay. The Federal Reserve Bank of Atlanta’s GDPNow forecasting model provides a “nowcast” of the official estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis.

GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the modelIn particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 4.1 percent on August 8, up from 3.9 percent on August 1. After recent releases from the U.S. Census Bureau, the Institute for Supply Management, the U.S. Bureau of Economic Analysis, and the U.S. Bureau of Labor Statistics, an increase in the nowcast of third-quarter real gross private domestic investment growth from 5.2 percent to 8.1 percent was slightly offset by decreases in the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real government spending growth from 3.5 percent and 2.9 percent, respectively, to 3.2 percent and 2.7 percent, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth increased from 0.08 percentage points to 0.11 percentage points.

The next GDPNow update is Tuesday, August 15.