Posts filed under “Consumer Spending”
I spoke with Hugh Moore of Guerite Advisors over the weekend. Hugh has sent this chart over, and I found it worth sharing (I’ll have some more info later this week on Housing).
Note that the NAHB Housing Index is a measure of Builder sentiment — it measures a combination of sales, traffic and new permits (NAHB site is down, I’ll post the exact components later).
What happens when we overlay the Housing Index against Real Personal Consumption? It turns out that, going back to 1985 anyway, it operates as a leading indicator:
Graphic courtesy of Guerite Advisors
I would like to see this going back further than 1985, but it certainly raises some interesting issues . . .
UPDATE II: January 22, 2007 12:43pm
The range for the NAHB/HMI ran from a maximum of 78 in December 1998 down to a minimum of 20 in January 1991.
UPDATE: January 22, 2007 11:47am
Here’s some more details from the NAHB survey, now that their site is back up:
"Derived from a monthly survey that NAHB has been conducting for 20
years, the NAHB/Wells Fargo Housing Market Index (HMI) gauges builder
perceptions of current single-family home sales and sales expectations
for the next six months as either “good,” “fair” or “poor.” The survey
also asks builders to rate traffic of prospective buyers as either
“high to very high,” “average” or “low to very low.” Scores for each
component are then used to calculate a seasonally adjusted index where
any number over 50 indicates that more builders view sales conditions
as good than poor.Two out of three component
indexes registered improvement in January. The index gauging current
single-family home sales and the index gauging traffic of prospective
buyers each gained three points, to 36 and 26 respectively, while the
index gauging sales expectations for the next six months remained
unchanged at 49.
Note that "50" is the line in the sand for good versus poor conditions; Current sales and prospective traffic improved slieghtly, but its still way below 50, meaning its still rather poor . . .
Given our focus today on Retail sales this week, it is appropriate to reference another source of data on the consumer.
This commentary comes to us via Northern Trust’s Paul Kasriel. Paul is the Senior Vice President and Director of Economic
Research at NT, and I had the pleasure of meeting him (and Caroline Baum) at Bloomberg last month. He is the recipient of the 2006 Lawrence R. Klein Award for Blue
Chip Forecasting Accuracy.
His recent commentary focused on the Fed’s Flow-of-Funds data. It is rather insightful work into consumer debt and savings. Some of it might be a bit beyond the interest of many readers, so to make it more accessible, I did a little slicing and dicing. Here is my highly edited version, emphasizing The State of Consumer, by the Numbers:
Kasriel: I love the Fed’s quarterly flow-of-funds report. It usually is the mother lode
of enlightening economic nuggets of information. And the Fed’s latest release on
December 7 of third-quarter data was rich with these nuggets.
The slowdown in
borrowing was due principally to the household sector: Chart 2 shows that after
hitting a post-WWII high of 14.6% in Q3:2005, household borrowing relative to
disposable personal income (DPI) dropped to 8.8% in Q3:2006 – the lowest since
7.6% in Q3:2001, when the economy was in a recession.
Notice in Chart 2 that
precipitous declines in this percentage tend to be followed by the onset of
economic recessions (indicated by the shaded areas in the chart).