I am slowly building my dashboard of economic indicators that I most regularly follow.  For each, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  Generally, a “positive” rating is consistent with economic growth that is close to or better than average, enough to sustain good job growth.  Neutral would imply slow or no economic growth but not a recession or worse.  Negative would be indicative of a slowdown or recession.

Daily Consumer Leading Indicators (link here)

From the actual description:

The Consumer Leading Indicators track consumer interest in major discretionary purchases. These typically include such items as automobiles, housing, vacations, durable household goods and investments. Not included would be expenditures that are more or less automatic, relatively minor and/or non-discretionary, such as groceries, fuel or utilities.

Consumer spending accounts for about two-thirds of the overall U.S. economy.  So, what the consumer is doing is often a strong indicator of how things are going.  This indicator measures the consumer’s interest in items that are discretionary, meaning that they are not necessary for survival like food, gas or water.  The data is tracked every day and posted only a day or two later, so this is one of those rare almost real-time indicators.

NOTE:  The way the daily index is reported may be a little confusing.  The overall index is expressed as a percent relative to the same day last year.  So, if the index is at 95% today, it means that consumer interest overall in discretionary items is 95% of what it was last year on this day.  But then, they go on to show the “Growth Index Values” for 3, 6 and 12 months (91, 183 and 365 days).  This just means that they take the average of the daily index for the past 3, 6 or 12 months.  This way, they iron out some of the ups and downs that you would see from day to day.  There are some other ways they express their data, but right now I don’t want to confuse you too much.  Focus on the overall daily index (not the individual categories, like “housing” or “automotive”) and the 91-day growth index value.

Latest Reading: During the last week of 2010 and on the first day of 2011, the index was between 94 and 96.   Thus, consumer interest in discretionary purchases was a step below where it was last year.  If you look at the average value over the last 91 days, it translates to a growth rate of -4.56% (or an index value of 95.44).  If graded on a curve, this would be in the bottom 3 percentile of all 91-day average values available since spring of 1947.  That means, 97% of such intervals since then would result in a better growth rate.  This index has been in a contraction mode for many months now and goes against what many “conventional” economic indicators are saying.  A major reason for this discrepancy is that this index is a pure measure of consumer purchases and does not do some of the adjustments that other indicators do (like subtracting money spent on imports from other countries).

NOTE: I was away for several months after starting this blog with a few posts.  I’m updating the USA Today indicator without a full post about it this time.  In the future, I plan to have a detailed post each time I update an indicator on my dashboard.

Economic Indicator Roundup (January 5, 2011) continue reading…