Analysis and comments by

Globalist and Business Cycle Analyst Jorn Thulstrup, MA (Econ)  

The COP15 Climate Conference held in Copenhagen in December, fuelled by political and economic special interests and enthusiastically embraced by Danish media, preoccupied people in this country far more than the rest of the world. For a lengthy period of time, leading Danish politicians and commentators seemed to be suffering from the illusion that, in terms of climate and energy, Denmark could rule the world. A widespread perception flourished that Denmark, as host of COP15, could create some kind of platform to market Danish technology, especially wind energy and enzymes used in the production of bio-ethanol.

After a remarkable upswing of 40 points in July, the monthly US Consumer Demand Index, US CDI, slipped back 28 points in August. However, this is a retrenchment, not a reversal: consumer spending in the USA is still on track for recovery. Both the monthly index and the three-month moving average are significantly higher than their all-time low levels of February 2009. (See Figure 1) The downturn is broad based, with buying decisions for cars the most significant - not unexpected after the surge of activity following the “cash for clunkers program”. Data for the August survey was collected from the 19th to 23rd of August.
 

For the first time since September 2008, the CDI is back in positive territory and at the highest level since April 2008. The upswing is remarkable, 40 points up from  –27 in June to + 13 in July. The moving average is up from –18 to –6, the highest level since level since October 2008.The surge in the CDI is based on positive developments in nearly all product segments, most significantly the demand for food and grocery store items. Consumers have stepped out of the woods but there is still a long and not well-paved way to walk before private consumption in the US is back to a strong and growing level. Data for the July survey was collected from the 22nd to 25th of July. 

The CDI is now at the highest level since September 2008. The May survey shows a significant upswing from minus 23 points in April to minus 5 in May, driven by improvements in the index for clothing and the index for food and other grocery store items. These two important indices were the last to collapse when high fuel prices sent the US CDI south last year. It’s a fairly strong indication that the decline in US private consumption expenditure is bottoming out.
 
Data for the May survey were collected from 15th to 17th of May.

I am a great fan of the American economist and Nobel Price laureate Paul Krugman, although I don't always agree with him. But on April 16, 2009 in his Op-Ed column in The New York Times, he gave four good reasons to be cautious about the economic outlook and I think he is absolutely right:
 
1. Things are still getting worse.
2. Some of the good news isn't convincing.
3. There may be other shoes to drop.
4. Even when it's over, it won't be over, because as Krugman states:
"nobody is in the mood for a new burst of spending."
 
The US Consumer Demand Index will be the first to tell for sure when US consumers are in the mood for serious spending. Subscribe today and be sure you will not miss the first and best signal of consumers'changing spending plans.
 
http://www.nytimes.com/2009/04/17/opinion/17krugman.html?_r=1