Tuesday, August 7, 2012

Down in the Dump

Maurice Sendak's We are all in the Dumps (from here, hat tip NC)
I don't generally get into the blow by blow details of economic forecasting.  These ramblings are not intended to replace the Wall Street Journal.

But I saw an unfamiliar economic metric and an appropriate illustration from the great children's book author and illustrator Maurice Sendak (above) and decided to run with it..

The amount of garbage that we produce is a good indicator of our economic activity, and the numbers are available.  As with a lot of industry derived metrics, where respondents don't like to report final quantities, it is a "relative" indicator- each report is in relationship to the previous reporting period.  But as a year-over-year indicator, rather than a month-to-month, or quarter-to-quarter metric, it at least gets rid of some of the noise, and comparison problems those metrics have.  In any case, it definitely is showing a double dip, and some of the recent gains are probably not all that great because they would be percentage gains off of a relatively low basis - remember it is illustrating a trend line, not absolute numbers.

(From here; hat tip NC)

I have been seeing some positive reports, mostly home buying numbers, in the news.  I would not discount them, but I wouldn't be fooled by our presses love of slanting toward positive economic news either.

I may have mentioned this previously, but working in commercial construction, I was very aware of how it was a much more cyclical industry than some others.  In the late 1990s I was following the economic news, mostly with the much more focused Wall Street Journal of the day, and noticed how even when there were very iffy looking economic activities, the reported news was still very positive.  This of course makes it very difficult for normal folks to judge their future prospects.  I would see people take 5 year, nothing-down automobile loans, based on a pay rate that included their then current 20 hours of overtime a week.

Since that time, I have pretty much fallen in line with the often stated truism that it is very easy to convince someone of a "truism" if their financial well being depends on it.  Since the press generally sells advertising on good news, they are always going to see, and truly believe, the good news.  Bad news, if noticed, will typically be treated as an outlier.  If Lehman Brothers Collapses, it is because of corruption, or mistakes, it won't be because all of our financial institutions are a mistake waiting to happen, and they happen to be the first - or second.

On the flip side, the gold sellers, will always highlight the negative news.  It is in their nature.

So finding a neutral metric, the AIA (Architect) billing index is another, is always helpful.  It is a leading indicator (about 11 months leading), and it started trending down (see regional chart) last march.

1 comment:

Anonymous said...

I never would of thought about our garbage output being tied directly to our economy. Good catch.

Last night I saw the tail end of a TV ad for a company that sells precious medals. 1% over spot.