There is a new source of daily economic data shows that shows that the ‘demand’ side of the economy has been shrinking at an annualized rate of over 1.5% during the trailing quarter. The new data, derived from millions of daily U.S. consumer internet transactions, recorded the trailing 91-days transitioning into net contraction on January 15th, 2010 after peaking at the end of August 2009. The contraction will flow down to the ‘supply’ side of the economy over the next few months, with the lagging GDP shrinking in the second quarter (see http://www.consumerindexes.com/GDPvsDGI.gif).

There are two separate stories in the above paragraph:

1) There is a revolutionary new daily source of spin-free hard data about the demand side of the economy. It does not involve any governmental sources. It does not utilize ‘seasonal adjustments’ (all numbers are year-over-year). It is simply based on real-time U.S. consumer transactions (see http://www.consumerindexes.com/Overview.pdf).

2) Current real-time consumer tracking data is showing contraction even as the latest GDP release indicates nearly 6% growth. The GDP lags by some 17 weeks both because it measures production activities ‘downstream’ from consumers and because the traditional data requires months to collect and adjust.

Some of this had been in the news recently (see http://www.consumerindexes.com/Shedlock.pdf).

However, the latest story is how the current contraction is unfolding. The two most recent prior contractions in 2006 and 2008 behaved very differently. The 2006 contraction was mild and was ignored by the equity markets. The 2008 contraction was neither. The 2010 contraction is tracking its own unique line on a day-by-day basis (see http://www.consumerindexes.com/ContractionWatch.gif).

We are not professional doom-sayers. We simply report what consumers have been doing on a day by day basis by mining on-line U.S. consumer tracking data for purchases of discretionary durable goods. We were incredibly upbeat one year ago — when most economic indicators were preaching doom and gloom. Since August, however, consumers have been pulling in their spending, and our numbers have slowly turned upside down.

From our perspective on the demand side of the economy, a contraction is already here, having started officially in the middle of January. The only question now is whether the 2010 contraction will revisit 2006 or 2008? Our daily updates will ultimately tell the story.

If you would like to contact me for an interview, simply reply to this e-mail. If you are on a tight deadline, call me directly at the Consumer Metrics Institute: (303)656-9801.

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Thank you,

Richard Davis
Consumer Metrics Institute, Inc.