July 1, 2016

"Off The Grid" Indicators Reveal True State Of U.S. Economy

Summary: Our basket of unorthodox economic indicators shows a U.S. economy that is growing, but at a very slow pace and with a notable sense of social unease.  On the plus side, used car prices are defying all expectations by remaining robust – that helps trade-in values for new car purchases.  Dealer inventories of new cars are also in good shape.  Food stamp program participation is trending lower, although +44 million Americans (14% of the total population) still need government assistance to eat.  On the cautionary side of the coin, large pickup truck sales have turned negative – a proxy for small business confidence in a range of industries.  Consumer spending per day is declining, and our Bacon Cheeseburger Index is still flashing a deflationary warning.  Lastly, the FBI reports that there have been 11.7 million background checks for firearm sales through May.  At this rate, total year sales could reach 28 million, versus 8-9 million before the Financial Crisis.

We’ve been doing these “Off the Grid” indicator reports for years, and the most common question we get about them is “Why”?  As in “Why do we care about data points that policymakers don’t talk about?”   And “Why does any of this matter?”

Now we have an example of why: Brexit.  To look at the standard economic talking points, the British people should have been happy to go with the status quo and “Remain”.  Consider these customary measures of employment, inflation, output, and well-being:

  • Current unemployment at 5%, and much lower joblessness than other developed economies after the Financial Crisis and Great Recession. Peak unemployment post 2000 was 8.5% in 2011 – better than the US and most European countries.  Source: https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemplo...
  • Inflation is running less than 1% - lower than what policymakers like to see, but very friendly to consumers. The worst things got were in 2008, when inflation peaked at 4.8%. Source: https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o
  • GDP Growth shows none of the quarterly volatility of the US economy, and has run between 2.2% and +5% since 2011. Source: https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyo
  • Income inequality, according the GINI Index, is 32.4 – on par with Canada (32.1), Ireland (33.9) and better than Japan (37.9). Source: https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...
  • Large scale political outcomes – the kind that can move markets – are more than a function of simple economics.  That’s why we look at a range of datasets that we call “Off the Grid Indicators”.  There are numerous graphs and tables available in the attachment to this email.  Here’s the highlight reel:

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