Three key indicators
Gina Martin Adams, institutional equity strategist at Wells Fargo Securities, gave a presentation on the state of the US economy at the National Marine Bankers Association’s annual meeting in San Diego in November.
Her main point was simple: ‘The US is in an economic cycle with strong headwinds where growth is expected to be bumpy and slow and growth will come from non-traditional sources.’
Ms Adams said home purchases tend to lead the economy out of recession, usually stimulated by interest rates, but this is not the case in this cycle, due to the large increase in purchases during the 2002-2007 time period.
She went on to note boat sales follow automobile sales (selective spending segments) and consumer confidence levels. Today’s automobile and boat sales numbers do not look good. When indexed to 100 in January 2008, light vehicle sales are down 29% and boat sales are down 45%.
In the October consumer confidence report (the October index is 50.2 [1985=100]) Lynn Franco, director of The Conference Board Consumer Research Center, said: ‘Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels. Consumer assessment of the current state of the economy is relatively unchanged, primarily because labor market conditions have yet to significantly improve.’
And, despite the uptick in expectations, consumers continue to be quite concerned about the short-term outlook, she added. Both present and future indicators point toward more of the same in the coming months.
Ms Adams’ presentation showed in the late 1980s the consumer confidence index was around 110 and new boat sales peaked at just over 500,000 new boats a year while today’s index of 50.2 suggests sales of around 130,000.
Watching three key indicators - home purchases, auto sales and consumer confidence levels - will provide a good sense of where this market is heading.
