Real-Time 'GDP' Analog Contracts at Over 1% Annualized Rate
The Daily Growth Index published by the Consumer Metrics Institute has recently recorded an annualized contraction rate of 1.24%. This index records trailing 'quarter' consumer demand, and is a demand side proxy for a real-time 'GDP.'
Lakewood, CO, February 16, 2010 --(PR.com)-- On February 15th the Consumer Metrics Institute announced that their trailing 91-day 'quarter' recently recorded net contraction in consumer demand at an annualized rate of 1.24%. The daily Growth Index published by the Institute measures net year-over-year changes in consumer demand during a sliding 91-day trailing 'quarter', and serves as a demand-side proxy for a real-time 'GDP'.
To give perspective to this measurement, a calendar quarter of equivalent U.S. GDP growth would place that quarter within the lowest 13th percentile among all GDP quarterly growth figures recorded since the spring of 1947 by the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) -- i.e., less than one in seven quarters since the spring of 1947 would have been worse.
"We have been asked how our measurements could differ so significantly from the BEA's most recent readings of the GDP," said Richard Davis, President of the Consumer Metrics Institute. "The recent BEA readings of a 5.7% annualized growth rate for the 4th Quarter of 2009 correspond with our measurements of consumer demand about 17 weeks earlier, on August 31st. It is only natural that the BEA's production statistics will lag our demand measurements by a substantial margin, especially given the much newer data collection technologies we are able to employ."
Mr. Davis went on to cite at least seven reasons why the BEA's GDP data will lag the Consumer Metrics Institute's Growth Index:
"1) The BEA is using methodologies developed in the middle of the previous century to measure economic activities that were important at that time. We, on the other hand, are using twenty-first century technologies to measure real-time consumer activities typical of today.
"2) The pace of the mid-twentieth century economy was such that a quarterly update was considered adequate for largely academic pursuits. Our indexes, however, have a daily time resolution and are updated daily, within days of data acquisition, for the benefit of the investing public.
"3) The BEA extensively revises their numbers over several months in order to get the numbers finally 'right'. This may have been acceptable 60 years ago, particularly when used for leisurely academic analysis. In contrast, our daily numbers are our final numbers; i.e., we don't provide first, second and third estimates before publishing a final number.
"4) The BEA is measuring U.S. gross domestic 'product', i.e., the output of goods and services. We are measuring pure Consumer demand. If Consumer demand is the fundamental stimulus of most economic activity in the U.S., we are closer to (or further 'upstream' towards) the impetus of any changes in the economy.
"5) Between changes in consumer demand and 'downstream' changes in factory production many stages of economic activities have to occur. Generally inventory levels will need to shift enough to change standing orders for goods, and those orders for goods and support services will need to change enough to cause producers to adjust production schedules -- which usually can not be altered in small increments. As an example, the BEA's data will in some cases show changes only when (presumably prudent) factory owners decide it's time to add or remove a shift. Consumer demand, however, changes daily according how consumers feel about their ability to make durable goods purchases.
"6) In good times the kinds of major financial commitments required to change production levels will often lag initial changes in consumer demand by many months. In uncertain times prudent (or financially challenged) entrepreneurs may (and perhaps should) lag even further.
"7) Changes in production schedules occur in capacity blocks that generally can't match a 1% or 2% change in demand. Large block changes in production cause the BEA's numbers to be necessarily choppy or noisy, as producers overshoot demand to build inventories and then undershoot demand to allow inventories to draw down.
"We feel that investors deserve information that is upstream economically, has daily resolution, isn't noisy or frequently revised, and is measuring what Consumers are actually doing in the current century. The net result of the above 7 differences was that the BEA's measurement of the 4th Quarter 2009 U.S. GDP lagged our trailing 'quarter' Growth Index by about 17 weeks."
Mr. Davis also noted that "if the BEA's numbers continue to lag ours by about 17 weeks, on April 30th 2010 the BEA will announce an advanced estimate of the 1st Quarter 2010 U.S. GDP annualized growth rate of about 2.5%, approximating our November 30th reading of trailing 'quarter' Consumer demand. Similarly, on July 30th 2010 they will announce that the 2nd Quarter 2010 U.S. GDP contracted at an annualized rate of slightly over 1%, a reasonable projection of where our February 28th 2010 Growth Index will be. Presumably by then the equity markets would have long since discounted such news."
About the Consumer Metrics Institute:
The Consumer Metrics Institute publishes a set of indexes reflecting day-to-day changes in consumer interest towards major discretionary purchases. These indexes are updated several times per week and are available free of charge at the Consumer Metrics Institute website. Complete historical tables of the indexes are also available for download by members of the Institute.
This full press release including background information is available in Adobe® Acrobat® PDF format from the Consumer Metrics Institute website.
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To give perspective to this measurement, a calendar quarter of equivalent U.S. GDP growth would place that quarter within the lowest 13th percentile among all GDP quarterly growth figures recorded since the spring of 1947 by the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) -- i.e., less than one in seven quarters since the spring of 1947 would have been worse.
"We have been asked how our measurements could differ so significantly from the BEA's most recent readings of the GDP," said Richard Davis, President of the Consumer Metrics Institute. "The recent BEA readings of a 5.7% annualized growth rate for the 4th Quarter of 2009 correspond with our measurements of consumer demand about 17 weeks earlier, on August 31st. It is only natural that the BEA's production statistics will lag our demand measurements by a substantial margin, especially given the much newer data collection technologies we are able to employ."
Mr. Davis went on to cite at least seven reasons why the BEA's GDP data will lag the Consumer Metrics Institute's Growth Index:
"1) The BEA is using methodologies developed in the middle of the previous century to measure economic activities that were important at that time. We, on the other hand, are using twenty-first century technologies to measure real-time consumer activities typical of today.
"2) The pace of the mid-twentieth century economy was such that a quarterly update was considered adequate for largely academic pursuits. Our indexes, however, have a daily time resolution and are updated daily, within days of data acquisition, for the benefit of the investing public.
"3) The BEA extensively revises their numbers over several months in order to get the numbers finally 'right'. This may have been acceptable 60 years ago, particularly when used for leisurely academic analysis. In contrast, our daily numbers are our final numbers; i.e., we don't provide first, second and third estimates before publishing a final number.
"4) The BEA is measuring U.S. gross domestic 'product', i.e., the output of goods and services. We are measuring pure Consumer demand. If Consumer demand is the fundamental stimulus of most economic activity in the U.S., we are closer to (or further 'upstream' towards) the impetus of any changes in the economy.
"5) Between changes in consumer demand and 'downstream' changes in factory production many stages of economic activities have to occur. Generally inventory levels will need to shift enough to change standing orders for goods, and those orders for goods and support services will need to change enough to cause producers to adjust production schedules -- which usually can not be altered in small increments. As an example, the BEA's data will in some cases show changes only when (presumably prudent) factory owners decide it's time to add or remove a shift. Consumer demand, however, changes daily according how consumers feel about their ability to make durable goods purchases.
"6) In good times the kinds of major financial commitments required to change production levels will often lag initial changes in consumer demand by many months. In uncertain times prudent (or financially challenged) entrepreneurs may (and perhaps should) lag even further.
"7) Changes in production schedules occur in capacity blocks that generally can't match a 1% or 2% change in demand. Large block changes in production cause the BEA's numbers to be necessarily choppy or noisy, as producers overshoot demand to build inventories and then undershoot demand to allow inventories to draw down.
"We feel that investors deserve information that is upstream economically, has daily resolution, isn't noisy or frequently revised, and is measuring what Consumers are actually doing in the current century. The net result of the above 7 differences was that the BEA's measurement of the 4th Quarter 2009 U.S. GDP lagged our trailing 'quarter' Growth Index by about 17 weeks."
Mr. Davis also noted that "if the BEA's numbers continue to lag ours by about 17 weeks, on April 30th 2010 the BEA will announce an advanced estimate of the 1st Quarter 2010 U.S. GDP annualized growth rate of about 2.5%, approximating our November 30th reading of trailing 'quarter' Consumer demand. Similarly, on July 30th 2010 they will announce that the 2nd Quarter 2010 U.S. GDP contracted at an annualized rate of slightly over 1%, a reasonable projection of where our February 28th 2010 Growth Index will be. Presumably by then the equity markets would have long since discounted such news."
About the Consumer Metrics Institute:
The Consumer Metrics Institute publishes a set of indexes reflecting day-to-day changes in consumer interest towards major discretionary purchases. These indexes are updated several times per week and are available free of charge at the Consumer Metrics Institute website. Complete historical tables of the indexes are also available for download by members of the Institute.
This full press release including background information is available in Adobe® Acrobat® PDF format from the Consumer Metrics Institute website.
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Contact
Consumer Metrics Institute, Inc.
Richard Davis
(303)656-9801
www.consumerindexes.com
Richard Davis
(303)656-9801
www.consumerindexes.com
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