With our summer hiatus coming up in just four days, now is as good a time as any to see where we stand on the economic front, especially as marketers prepare (or should be!) for the ever important fourth quarter.
At the end of March, we posted a five-part series on the economy to aid in business/marketing forecasting. Just about everyone, if they were talking about it at all, felt the U.S. economy was on the mend. We thought otherwise. Let’s review and update our analysis.
Part 1 – Housing
The housing industry has spun its data by begging you to look at monthly trends instead of year-over-year comparisons. They will even applaud a ONE POINT gain in sentiment like this:
“Confidence among U.S. homebuilders rose to the highest level in five years in May…The National Association of Home Builders/Wells Fargo builder sentiment index rose to 29 in May, the highest reading since May 2007."
Mind you, a score of 50 is NEUTRAL. Housing is still in the basement. Lying down.
Part 2 - Retail Sales
In our original post, we told you to watch Darden Restaurants, whose management had this to say in March:
“If you look at today's environment across the [casual dining] industry, it is somewhat weaker than it was during the holiday and immediate post-holiday period.”
Well, the latest quarter’s results are in, and “Revenue at Olive Garden restaurants open at least a year fell 1.8 % in the quarter. At Red Lobster, the figure fell 3.9 %.”
Part 3 - Employment
We told you to focus on weekly unemployment claims, because monthly employment data were too volatile. From last week:
“The four-week moving average [of unemployment claims] rose to 386,250, to the highest level since December 3rd of last year.”
Remember also that we told you back in March the pre-recession level for this number is 315,000. Light years away.
Lest you think the future might be brighter:
“Employers in April posted the fewest job openings in five months…”
Part 4 - Expert Views
Let’s hear once again from Real Money/The Street.com’s Gene Balas, yesterday untangling the hard-to-comprehend Chicago Federal Reserve National Activity Index:
“A leading indicator in this measure is the…proportion of improving vs. deteriorating economic indicators. This measure is now negative for the first time since June 2011…In February, it was at plus 0.41, and it has dropped steadily since that point.”
And, from the other Real Money expert we quoted back then, Roger Arnold, here is a view of what the Fed can/will do now:
“…they may now begin the slow and steady process of reverting to a reactive stance and allow the markets and economies to clear excesses of the past several years.”
Let it ride. This is the “Turning Japanese” scenario we forecast in March as our most likely economic outcome.
Part 5 – So?
So, go back to Part 5 of our original series and take the steps we outlined there.
And ignore everyone’s “wild card,” aka the November election. “If this one wins, the economy will rebound blah blah blah…” It won’t matter. Wall Street is likely to drop 2% the following day regardless.