Thursday, March 8, 2012

The Weekly Update 3-9-12

There are positives emerging in the Personal Consumption Expenditures (PCE) data flow!  As you would guess some of the positive data is very short-term in its trend, as it is just “days” versus the “consecutive months” we look for, as noted above.  However, a trend change has to start somewhere and that is why we look at both live data flow on PCE and the messaged data flow from the Bureau of Economic Analysis (BEA).

The live data flow can be found on our website ( by clicking on the tab for “WSG Investment Index”.  In just the last three weeks the “live” consumer spending activity, as measured by the Consumer Metrics Institute, has increased 14%.  This is a “peek around the corner” to the future, as this data is about three months upstream from the Bureau’s data flow.  A good sign indeed.

The BEA reports Consumer Spending in both “current dollars” and “chained dollars”.  Long-time readers will recall that we prefer tracking “chained dollars”, as chained dollars are adjusted for inflation.  The last five months of data is as follows:  September 2011 +.5%, October 2011 +.2%, November 2011 .0%, December 2011 .0%, January 2012 .0%.  So, you can see the data is flat, on an inflation adjusted basis.  The press likes to report this data in “current dollars”, which shows very slight growth (+.2), but just look at your own household expenses.  It is clear as day that things are costing more on all fronts and that skews “current dollars” data more positive than it is, unless adjusted for with “chained dollars”.

Another positive sign is that consumer confidence, which is an indicator of people’s desire to spend more in the near future, reached its highest level in a year at 70.8 in February.  Again, comparison creates perspective and in a normal “growing” economy this confidence level would be closer to 90.0.  The annual high in this data point is most likely related to jobs, or lack thereof, as outlined below in Sign #4.

This very key sign of change appears to be on the edge of a positive change, but until the short term data flow turns into two, three or four months, it remains “negative” with a bias toward turning “neutral”, perhaps next month!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

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