U.S. Recession Part II – Off the Beaten Path

Continuing the theme of recession, two of my favorite off the beaten path economic indicators are below. The first is the Restaurant Performance Index, which essentially measures the health of the average consumer rather than the Wall Street executive spending $1000+ per couple at Masa or Per Se in New York City.

You can see on the left side of the chart that this index steadily weakened well before the crisis hit and was solidly below the 100 level which is viewed at neutral. Over the past few years, the index has risen and is a long way from falling below 100.

The next chart is the Architecture Billings Index which measures non-residential “work-on-the-boards” and usually a leading economic indicator by 11 months. 50 is the neutral level. Not surprising given the banks’ general unwillingness to lend as in the past, this indicator has been oscillating around neutral but generally above for several years. Commercial real estate is still trying to recover from the bust and remains hampered.

Between the consumer discretionary sector, RPI and ABI, I absolutely do not believe the U.S. is on the verge of recession. Our economy strengthens and weakens periodically in the context of an ongoing recovery. This expansion may be aging, but it’s not dead. Keep an eye on the indicators and not the pundits.

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Economy Still Plodding Along

Economically, as you know, my views haven’t changed since 2009. We are living the “typical” post financial crisis recovery with sub par growth and stubbornly high unemployment that sometimes teases on the upside and terrifies on the downside. Until we get to the other side of the next recession, I believe it will continue this way. 

I often share two of my favorite and off the beaten path indicators to look for clues as to the direction of the economy. They are both very volatile but target different groups. The Restaurant Performance Index (below) is very much how middle America behaves. From the depths in 2009, it took an awful lot of time and energy just to get back to the neutral reading of 100. As you can see now, it has been very strong this year and I would not become concerned until it hit 99 again.

ABI

The other indicator I enjoy watching is the Architecture Billings Index which gives us an idea of the commercial market. Currently in rally mode, I expect that to continue at least until the clowns in Washington start posturing about the debt ceiling again. I would not be too concerned until we see a reading under 46.

ABI

What would Thomas Jefferson Say to the Architects?

The latest Street$marts is out, “What would Thomas Jefferson Say to the Architects?” http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120625.pdf

Topics in this issue include a little known, but important economic indicator, the latest pullback in stocks and where gold is headed.