Consumption Contraction Intensifies

Includes: PMR, RTH, XRT
by: Erik McCurdy

The downtrend in the Consumer Metric Institute (CMI) Growth Index, which measures US consumer spending activity on major discretionary purchases in real time, is accelerating, indicating that the contraction in consumption is intensifying. The following graph from the CMI web site displays annualized rate trends for the last three contractions, and you can clearly see that the current downtrend, in blue, is accelerating.

click to enlarge

The sharp downturn in this metric is yet another sign that tepid economic growth is at risk for a return to outright contraction, and soon. The next graph displays the leading relationship between the CMI Growth Index and GDP figures.

Consumption accounts for about 70% of total economic activity in the US, and if the CMI Growth Index continues to serve as a reliable leading indicator for GDP, it is likely that the "official" numbers will return to negative territory by the end of the year.

Disclosure: No positions