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Dallas Fed's business-cycle index, Texas' economic status, inflation measures and Mexico's recent credit growth focus of Dallas Fed's Southwest Economy

For immediate release: June 16, 2005

DALLAS—The latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy examines the Bank’s new business-cycle index, Texas’ economic status, inflation measures and Mexico’s recent credit growth.

In “Dallas Fed Introduces Business-Cycle Indexes for Texas Metros,”
senior economist Keith Phillips explains a clearer method of measuring performance of local economies.

Working with several economic indicators can give mixed signals, according to Phillips. The Metro Business-Cycle Indexes—released monthly by the Dallas Fed—combine key indicators into a single index to provide a complete picture of the direction of nine Texas metropolitan areas.

“The frequency and severity of cyclical swings in a local economy are important to businesses and consumers because such cycles impact production and inventory decisions, employment and unemployment,” Phillips writes.

In “A Fitter, Trimmer Core Inflation Measure,” senior economist and policy advisor Jim Dolmas applies recent research designed to produce a more accurate core inflation rate to the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge. The result is “a new measure of core PCE inflation—the trimmed mean PCE—and a somewhat different characterization of the economy’s recent inflation.”

Comparing the trimmed mean PCE to a rate excluding food and energy, Dolmas finds the inflation peaks in mid-2004 “are both higher and more sustained in the trimmed mean measure,” however, inflation slowed in late 2004 with trimmed mean rates bottoming out at about 1.5 percent compared with 1 percent for the food-and-energy-excluded rates.

In “Texas Finding Growth in Seeming Disadvantage,” economic research assistant Raghav Virmani and director of energy economics and microeconomic policy analysis Stephen P.A. Brown find that Texas is not rebounding as quickly from the 2001 recession as it has from past recessions because of poor performance in the state’s economic base.

However, Virmani and Brown find Texas is keeping pace with national economic growth because of the success of industries outside the core economic base.

In “Mexico Emerges from 10-Year Credit Slump,” international financial analysts Robert V. Bubel and Edward C. Skelton find that business lending in Mexico is growing after significant improvements in the banking and legal systems.

“By rebuilding capital and improving risk management systems, Mexico’s banks have positioned themselves to take advantage of the positive trends shaping business loan demand,” the authors write.

Find the May/June issue of Southwest Economy online at


Media contact:
James Hoard
Phone: (214) 922-5307