This is a guest post by Richard Davis of Consumer Metrics Institute:
Recent reports of a strengthening recovery are not fully supported by the behavior of consumers on the web. At the Consumer Metrics Institute we measure the depth and quality of web based consumer “demand” on a daily basis, and during this recovery the year-over-year changes in “demand” that we measure actually peaked in August 2009 and have been declining ever since.
In fact, our “trailing quarter” of web based consumer demand slipped into year-over-year contraction on January 15th, and since then we have been plotting the progress of this 2010 contraction event against the profiles of similar events in 2006 and 2008:
As you can see from the above chart the current consumer “demand” contraction event is unique: if there is a “second dip” it may very well be unlike anything we have seen recently. Instead of a “call-911″ type of event in 2008 or the “hiccup” witnessed in 2006, we may be seeing a “walking pneumonia” type of contraction that has legs.
Over the most recent 7 quarters our economically “upstream” Daily Growth Index has led the “downstream” factory GDP numbers by about 17 weeks. If that pattern continues to hold, we are currently about halfway through the consumer transactions that will drive the third quarter’s production and GDP. If the blue line shown in the above chart continues drifting laterally over the next 40 days, the 3rd quarter 2010 GDP will look a lot like what we have previously projected for the 2nd quarter 2010 GDP, contracting at a mild but persistent rate.
In summary, our data is telling us that US consumers are very reluctant to take on the kind of debt that they have traditionally assumed when pulling the economy out of previous recessions. Even a recent upturn in our retail index faded once the seasonal impact of the forward shifted Easter holiday had passed. Furthermore, even during the Easter retail up-tick the
quality of the transactions was not very high. Big ticket items requiring longer term financial commitments were relatively scarce, and for that reason our Weighted Composite and Daily Growth Indexes did not materially respond.
Our mission at the Consumer Metrics Institute is to measure (on a daily basis) exactly how consumers are leading the US economy. We “mine” nation-wide internet consumer tracking databases on a daily basis for early warnings about the demand side of the economy. Our data is significantly upstream economically from the factories and the products measured by the
GDP, putting us far ahead of the traditional economic reports. Perhaps our data is too timely; we are so far ahead of conventional economic measures that our story generally differs (either positively or negatively) from the stories being simultaneously reported by more traditional sources.
I realize that you are probably tired of hearing about the recession, and frankly our data is certainly less uplifting than the picture currently being painted by most economists. But our data has substance and (as you can see) the chart is telling us that something actually is
“different this time.”
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