Tools Help Predict Economy
Are we heading into a recession? Conventional wisdom says that the
subprime mortgage fiasco will trigger a pullback in consumer spending,
which could drag down the overall economy.
But so far, there is no sign of a drop in consumer spending.
Retail chain store sales data tabulated by the International Council of
Shopping Centers and UBS Securities showed that for the week ending
August 18, sales at stores open at least one-year were up almost three
percent from the same week in 2006. This was on top of news that “U.S.
discounters and department stores generally reported solid July sales.”
I found that information on the site of Chain Store Age (www.chainstoreage.com),
a magazine catering to retail executives (select
Monthly Sales in the Industry Data section).
I mentioned the Chain Store Age data to illustrate that you don’t have
to wonder which way the economy is heading. The ‘Net is a great resource
for finding information that will help you figure that out.
Fed Beige Book
A good place to start is the famous “Beige Book,” published by
the Federal Reserve. Yes, it’s that “Fed,” the former home of Alan
Greenspan, currently headed by Ben Bernanke.
The Beige Book is a nickname for a report titled “Summary of Commentary
on Current Economic Conditions by Federal Reserve District.” It’s
published eight times per year, two weeks or so before each scheduled
Federal Open Market Committee (FOMC) meeting. The FOMC meetings are
where the Fed makes its interest rate decisions.
The Beige Book summarizes current economic conditions in each of the 12
Federal Reserve Districts. The Twelfth District, headquartered in San
Francisco (Federal Reserve Bank of San Francisco) includes Alaska,
Arizona, Hawaii, Idaho, Nevada, Oregon, Utah, and the state of
Washington, as well as California.
In the last report, dated July 25, which covered early June through
mid-July, the San Francisco office described the overall pace of
economic growth in the Twelfth District as “moderate,” and said that
retail sales reports were mixed, while the service, manufacturing, and
agricultural sectors experienced growth. Although the housing market was
weak overall and slowed further in many areas, “demand for commercial
real estate continued firm.” The San Francisco office reported tourist
activity at a high level overall, but noted weakness in foreign tourist
The Beige Book is important not only for the information that it
contains, but also because the FOMC decision makers read them to bone up
on economic conditions before their meetings.
Find the latest Beige Book by selecting
Monetary Policy on the Fed’s homepage (www.federalreserve.gov)
and then selecting
Reports. You can also access earlier economic reports dating back to
1970 from that page.
The minutes of the most recent FOMC meeting often moves markets
when they are published three weeks after the conclusion of each
meeting. You can find a link to the minutes on the Fed’s homepage the
day that they are released. Later, you can find the most recent, as well
as all FOMC meeting minutes dating back to 1993 by selecting
Federal Open Market Committee on the Monetary Policy page.
San Francisco Fed
The San Francisco Fed office maintains a separate site (http://www.frbsf.org,
which includes a variety of economic reports pertaining specifically to
the Bay area.
Predict New Home Sales
If you’re looking for clues as to when the residential
homebuilding market is likely to recover, the National Association of
Home Builders (www.nahb.com)
tabulates indicators intended to help you in that regard.
Its Traffic of Prospective Buyers index, which gauges traffic through
homebuilder’s offices and open houses, is the most useful, at least in
The NAHB displays a graph of the traffic index going back to 1995.
What’s interesting is that the index peaked in mid-2005 and by the
beginning of 2006 was in an obvious downtrend. In fact, by mid-2006, it
was at an all-time low, at least as far back as the chart goes. The
index is still dropping. A good time to consider buying homebuilder
stocks would be after the traffic index has started moving back up.
Find the index from the NAHB homepage by selecting Economic & Housing
Data, and then
NAHB Indices from the Resources dropdown menu. Finally select
NAHB/Wells Fargo Housing Market Index and click on the link labeled
Chart and Components.”
Economic Stats Treasure Trove
Another great resource is FedStats (www.fedstats.gov),
which is a directory linking to economic statistics collected by more
than 100 U.S. Government agencies. It’s fun to poke around to see what
you can find. For instance, I learned that the Census Bureau estimates
that the population of San Francisco dropped 4.2 percent from April 1,
2000 to July 1, 2006. But, the number of housing units increased by 2.4
percent from April 1, 2000 to July 1, 2005 (2006 data not available), so
it should be easier to find a place to live in San Francisco than it was
The Bureau of Labor Statistics (http://stats.bls.gov)
is a good place to find detailed employment, consumer spending and
inflation data. You’ll also find lots of interesting tidbits there.
For instance, I was surprised to learn that the average hourly wage of
production worker rose 42 percent over the last 10 years to 17.45 per
hour. In fact, that figure, which was for July, had risen 4 percent over
the past 12-months. Interestingly, according to the BLS, the highest
paid workers ($27.65 per hour) are in the Utilities industry, while the
lowest paid ($10.33) are in Leisure and Hospitality.
On any given day, you’ll find TV pundits predicting everything from a
major economic downturn to continued good times ahead, and everything
in-between. That’s why it pays to learn as much as you can so you can
form your own opinions.