Friday, August 20, 2010

CMI Data Indicates It's Still a Real Ugly Economy (And headed toward new lows)

Rick Davis emails the latest data from Consumer Metrics Institute (Along with a bit of an explanation as to how he beats Bureau of Economic Analysis data in detecting trends in the economy by months)

At the Consumer Metrics Institute we have a unique perspective on the economy. We measure consumer demand on a daily basis, providing nearly two orders of magnitude more resolution than the BEA's GDP releases. This is like moving from naked eye observations to using a lab-grade microscope. As a result we can see timing relationships that simply can't be seen in quarterly data.

Last month the BEA revised their GDP readings for the 4th quarter of 2008, now over 18 months old. In so doing, they have reported for the first time (at least in their data) that the Great Recession's annualized "growth" rate bottomed in the 4th quarter of 2008, not the 1st quarter of 2009 as they had been telling us for over a year. Although it is always disconcerting to have history revised, this particular revision was hardly news to us, since our daily data has always recorded the Great Recession's absolute bottom occurring on November 5th, 2008:


Our Daily Growth Index has reached a year-over-year contraction rate of 5%, and it is rapidly closing the gap on the worst contraction rate observed during the 2008 Great Recession:

The current 2010 contraction is now over 215 days old. At the same point during the duration of the 2008 Great Recession, consumer demand was contracting at less than a 1% year-over-year rate. Additionally, during the 2008 Great Recession our Daily Growth Index had returned to net growth after 223 days. From the above chart we can see that the profile of the 2008 contraction and the 2010 contraction are substantially different. The 2008 event was a classic "V" shaped recession. So far this one is not. We have previously suggested that this contraction might be mild but prolonged. We are no longer confident about "mild".

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