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Thursday, March 11, 2010


consumer metrics institute daily growth indicator

via clusterstock, the work of the consumer metrics institute.

Although McGuckin et al indicated that the above problems had been addressed in 2001, it is clear that the statistical methods still used in constructing the LEI differ substantially from the experiences of real people in the real world. The Consumer Metrics Institute exists to provide alternative and more timely approaches to leading indicators, using the demand side of the economy to move our indexes as far 'upstream' as possible.

their march 8 commentary:

The contraction that began on January 15th in the 'demand' side of the economy moderated somewhat over the prior week. As we have mentioned before, the two most recent prior contractions behaved very differently. In 2006 a contraction event was relatively shallow and resulted in the GDP growth rate bottoming at a very meager but positive .1% in the third quarter of 2006. In contrast to that mild event, the 2008 'demand' side contraction reached an annualized 'growth' rate below -6% at the end of August, 2008, with the 'production' side GDP subsequently bottoming at a -6.4% annualized contraction rate during the first quarter of 2009. These two contraction events registered very differently in the equity markets: the 2006 event was largely ignored, the 2008 event was not.

To help investors understand the nature of the current 2010 contraction event, we have constructed a new chart (the "Consumer Metrics Institute's Contraction Watch" chart above here) that shows the first 90 days of the 2006, 2008 and 2010 events superimposed (with the 2010 event still less than 60 days old at this time). Clearly the 2006 and 2008 events look different. We will be able to watch the 2010 event unfold on a day-by-day basis over the next 6 weeks, and the chart should provide us with a much better idea of how it compares with its two predecessors in an almost real-time mode.

By March 6th our 'Weighted Composite Index' completed an extraordinary two week round-trip excursion from essentially neutral readings to nearly 5% year-over-year contraction and back again to neutral. Again the two weakest sectors we monitor were Housing and Retail. The Housing Index (chart on left below) continued to bump along with a very nearly double-digit year-over-year shrinkage in consumer demand, with the Home Loans Sub-Index having shrunk to the lowest level recorded since September 2008. And by March 6th the Retail Index (chart on the right below) had returned to levels indicative of a greater than 6% year-over-year decrease in consumer demand. This number is substantially different from the self reported sales figures from the retail industry, which suffer from 'survivor bias' as a consequence of focusing on 'same store sales in stores open at least a year'. The closing of select stores or entire chains are simply unreported, while the traffic shifted to remaining stores generates a positive spin. Our substantially more negative numbers, however, have been matching sales tax collections, which have no survivor bias. We believe our internet based sample is a fair representation of the entire 'demand' side of the economy, and the sales tax numbers seem to confirm that conclusion.

worth following, i think. of particular pragmatic interest is this.

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It's great to see you posting regularly again Gaius. You were a guiding light during the depths of the global financial crisis from 08 to early 09. I look forward to your commentary to help me guide my way forward from here.

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thanks anon. i'm more active now on twitter, fwiw -- @dafowc -- if you use it. i'll continue to be more sporadic than i'd like, i imagine.

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