Co-authored with John Lounsbury
The New York Times this week posted Consumers Unlikely to Rekindle the Recovery. To "prove" their point they presented three nasty but unfortunately correct graphics.
click to enlarge images
This NYT post presented reasons for optimism as well, and we believe fairly presented the current situation. Forward looks at the economy are educated guesses - there are no proven formulas.
If you look closely at the first graphic (for disposable income), you might notice a slight uptick at the end. The downward trend in disposable income has been broken for at least one month - both on a real and per capita basis.
Econintersect has been playing with an economic index based on the world as seen by Joe Sixpack. For lack of a final name, we have used a development tag of "Joe's Index". Joe's Index is indicating Joe Sixpack is coming back to the consumption trough.
We believe the Joe's Index leads GDP in both trend and exaggerated intensity. More time will test this belief. Joe's Index is based on Joe's real income and the change in his home value, which, to various degrees, Joe sees as income (and/or wealth) gain or loss.
At this point the index is only telling us that Joe Sixpack should have expanded consumption in 2Q2012. Joe's Index needs to be refined further to estimate home prices in real time. As things stand now, Joe's Index has a data lag of one quarter. This improvement will allow vision into 3Q2012.
For now, the economic trends and dynamics are not all negative - and the future USA economy is not written in stone irrespective of pundits' opinions.
This has been a relatively nasty week for economic releases. You can read my normal weekly wrap here which has hyperlinks to specific analysis.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.