4th of July Edition: GDP, Confidence, Jobless Claims and the PCE; California Gas, a Fire Update and the Greatest Start-Up Ever!
The Data Last Week
First quarter Gross Domestic Product – GDP – had a larger decrease than expected. Originally it was minus 0.2%; that was adjusted down to minus 0.5%.
As a reminder, that was driven by a significant increase in imports so as to not be subject to new tariffs.
It is expected that the second-quarter GDP will be impacted by a significant decrease in Q2 imports, causing the GDP to be positive.
Consumer confidence as measured by the Conference Board dropped to 93 from 98.4 in May.
It seems that most folks were not as optimistic about the economy six months from now as they were the month before.
Initial jobless claims dropped below expectations at 236,000 vs. 246,000 expected.
The surprise figure was the 16.4% increase in durable goods orders. When Boeing gets a 231% increase in passenger plane orders, that’ll impact some numbers.
FYI, durable goods are regarded as products that will last for more than 3 years.
When you take the plane orders out, orders were still up 0.5%. That’s better than the 6.6% decrease we had last month.
An inflation index, the PCE – Personal Consumption Index – had no change. It remains at 0.1% for the month and 2.2% year over year.
Core PCE – without considering price changes in fuel or food – increased.
For the month, it was 0.2%, up from 0.1% last month.
For the year, it was 2.7% vs. 2.6% last month.
We need to keep an eye on that.
California Summer Economics
Gas prices in California are going up on July 1. Why? Two reasons.
The first is a standard increase in the existing gas tax, which rises in line with the California Consumer Price Index. That will increase the tax per gallon from 59.6 cents to 61.2 cents.
The second is the LCSF established by CARB. That’s the Low Carbon Fuel Standard and the California Air Resources Board.
If there ever was a combination for a cluster, this is it.
From the CARB website: The LCFS reduces air pollution and greenhouse gas emissions by setting a declining carbon intensity target for transportation fuels used in California; producers that don’t meet established benchmarks buy credits from those that do.
Summed up, that increases costs for carbon-emitting fuel producers by subsidizing those that don’t.
To keep this short and prevent you from going to your next email, the increase in the fuel price is expected to range from 8 cents/gallon to as high as 67 cents/gallon.
CARB admitted that they have no idea what the impact on prices is going to be. They also stated that the economic impact on consumers does not factor into their decisions to impose limits on fuel emissions.
Fill up the tank TODAY and make a note of the fuel price.
Fire Update
From time to time, I provide an update as to what is going on with the recovery in the Alta Dena burn area. You may recall that the fire in January destroyed over 9000 structures, a vast majority of which were residences.
I have stayed in touch with a friend whose house was destroyed. So far:
They are in the design and development stage.
The topographical survey has been done.
They continue to make mortgage payments to their bank, which is not expected to stop.
Interestingly enough, they will have to pay a capital gains tax of some sort. I’m not clear as to why that is, but I will endeavor to find out.
Their design-build contractor is expecting a permit to begin building in September, with completion targeted for May 2026.
Assuming this timeline holds, I think this is pretty fast considering the history of working with Los Angeles bureaucracy.
The Greatest Start-Up Ever
Many of you on this distribution list are business owners, but why are you a business owner? Most of you, at some point, worked for someone. You had a boss, and you worked for a company.
One day, the revelation set in that you could do what they were doing, and you could do it better, faster, cheaper, or with a better attitude. And so you did. You started your own company and declared your independence from the company or boss running your life.
Just like you, the Founding Fathers felt the same way. They could do it better, and they did, just like you.
But not without considerable risk. Just like you.
One day, you got your last, steady company paycheck; the next, you were working to create that unsteady cash flow that you now call your business.
You work 80 hours a week, so you don’t have to work 40 hours for someone else.
Like you, Thomas Jefferson, George Washington, Benjamin Franklin, John Adams, John Jay, Patrick Henry, and many others had families that depended on them, just like your family depends on you. If you were married, that was a long conversation with your spouse—“Do I go out on my own?” Crazy, right?
The day the Founding Fathers declared their independence from England, these new, thirteen United States, with its brand-new territory, became the competition to England, just like you became the competition to your former employer.
And, like you, these 13 states, with their 56 delegates, had a business plan.
It started with “When, in the course of human events…”
The second sentence may be the most well-known:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
They even had to form a partnership with France, a potential competitor, to prevent their former employer, England, from enforcing their non-compete clause.
And 249 years later, here we are. Next year will be a heck of a celebration!
As a business owner, you are constantly pivoting, trying new things, hiring new people, hitting walls and then going over them. No matter the obstacle, you hurdle it because success is the best revenge. Just like the 56 signatories of the Declaration of Independence, you may have also felt the full wrath of your former employer.
And for that, you have my greatest respect. Thank you.
On Friday, the USA celebrates its independence. A three-day weekend is always welcomed, but take a moment to go down the Wikipedia rabbit hole of the Founding Fathers, the Declaration of Independence or the Continental Congress.
And then get that barbecue going and watch some fireworks!
God Bless the USA!
