Personal Consumption Expenditure in the US is still
by far the largest motor in the World Economy.

US Consumer Non-durables Index is the leading indicator for this motor!

Our next report will be mailed to our subcribers at 1400 hours GMT on March 28 2012

Posted 22^nd February 2012 by Jorn Thulstrup

Consumers are holding back and do not confirm recent optimistic signals about the US economy!

In spite of improved demand for cars and slightly positive figures for clothing and footwear, the general picture in the February survey is not optimistic. US consumers are holding back and three of the sub-indices are at or close to all time low levels. The February survey - conducted from February 15 to 19 - are the latest conducted and published US consumer survey and the third in a row of US CDI-surveys, which indicated stagnation. We expect that the two other monthly consumer surveys - Thomson Reuters University of Michigan's sentiment index (to be published February 24) and The Conference Boards confidence index (to be published February 28) - will trail the US CDI.

Data for the February survey was collected from February 18 -22.

A note on forecasting!

On February 2nd 2012 - Professor Emeritus Charles Goodhart wrote a piece in Financial Times about forecasting based on his many years of experience in Banking and Finance at the London School of Economics and as a member of the Bank of England’s Monetary Policy Committee. He wrote: “But when a break comes, central banks are as clueless to foresee it as anyone else.” and adds: “Neither central bankers, nor anyone else, have a good way of predicting future fluctuations in either output, inflation or interest rates more than a few quarters ahead.”

Having worked with business cycle forecasting for more than 30 years, and having spent fortunes on developing macroeconomic models, my conclusion is the same: “In the long run only short term forecasting is reliable!” However, using consumer surveys with the right questions and focusing on forecasting the largest and strongest engine in the world economy - private consumption in the United States - it is possible to forecast some of the major breaks. We did that in early 2008 when we forecast the dramatic drop in private consumption that materialised in the following quarters. Another experience in the forecasting business is, that if you are alone in forecasting breaks, the throng does not believe you before it is too late for them.

Jorn Thulstrup, Founder and CEO of Institute for Business Cycle Analysis.

Available on Bloomberg

Our reports are now available on the Bloomberg terminal and can be found via the function BMRT<GO>. Search for "US Consumer Index" or click on "Search by Provider" and select "Institute for Business Cycle Analysis".

Be sure not to miss any of our reports by setting a news alert at NLRT<GO> for our wire "CYC".

Subscribe to the US Consumer Demand Indices

"Base your financial and business decisions on advanced information"