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US Economy Drops

September 8, 2010

US Economy Drops 15.5 TPSI Points to 401.7

As Aerosmith once said: “We’re Back In The Saddle Again!” It’s been almost a year to the day since we e-blasted our previous analytics blog on Tuesday September 1, 2009 – which was then called “60 Second Insight.” Remember? So what happened that kept us so busy? Two births were occurring. The birth of DECIPHER, launched July 1, 2010 and the the birth of my son August Alexander, born August 4, 2010!

Are we heading towards a double-dip recession? Myriad forecast scenarios of the US economy based on hundreds of market indicators via DECIPHER unfortunately call for further TPSI declines to the tune of 24 to 42 points. However, our über-cautious “glass one-quarter full” outlook does NOT translate (yet) into the TPSI decreasing once again below the “Absolute Recession Level” of 354.4 (denoted by red line in chart below). How long will this secondary downturn last? Keep reading.

Below are two charts of our National TPSI (Thousand Point Strength Index) for the US Economy. The TPSI (1000 Point Strength Index) is the most comprehensive and precise market measurement tool of its kind. The US TPSI is based on hundreds of indicators and calculations via Competitive Analytics’ proprietary econometric model. The TPSI ranges from zero to 1000 where 500 is benchmarked as the mathematical stabilized equilibrium – historical figures and forecasts above or below 500 reflect relative strength or weakness, respectively. The TPSI has the ability to track and forecast a near-infinite number of market indicators and capable of in-depth analysis, forecasting, valuation, and dynamic what-if analysis of macro economies, industries, organizations, product types, services, and competitive geographic market areas.

The following time series output from our TPSI Model reflects the recent 24 month trend. Note that May 2010 was the first month the US TPSI realized two successive months of declines since the “Trough of March 2009″:

Jul 2008 = 326.0Aug 2008 = 321.1
Sep 2008 = 313.2
Oct 2008 = 292.0
Nov 2008 = 281.4
Dec 2008 = 272.5

Jan 2009 = 256.2
Feb 2009 = 250.2
Mar 2009 = 248.8  (only 48.4 TPSI points above the all time low of 200.4 realized January 1932)
Apr 2009 = 255.5  (new expansion cycle begins)
May 2009 = 268.1
Jun 2009 = 264.1
Jul 2009 = 280.0
Aug 2009 = 295.7
Sep 2009 = 312.9
Oct 2009 = 327.1
Nov 2009 = 343.8
Dec 2009 = 361.4

Jan 2010 = 375.9
Feb 2010 = 404.4
Mar 2010 = 433.3  (TPSI increases 184.5 points over prior 12 months)
Apr 2010 = 432.9
May 2010 = 418.1  (First time TPSI realized two successive months of declines since Trough of March 2009)
Jun 2010 = 417.2
Jul 2010 = 401.7  (TPSI down 31.6 points since sub-cycle high of 433.3 during March 2010)

Short-Term US TPSI Trend
November 2007 to July 2010


Intermediate Range US TPSI

January 2002 to July 2010

 

Is the US Heading Towards a Double Dip?

We have run 500 forecast scenarios of the US economy via DECIPHER and it appears that further TPSI declines are in order . . . to the tune of approximately 25 to 65 points. The cautiously optimistic news is that a further 25 to 65 point decline does not translate into a “full blown double dip recession” . . . yet can be better described as a “moderated sub-cycle downshift” that will prolong our economic recovery for one to three quarters. We are perpetually running our models and updating our forecasts on a national, regional, geo-submarket, and industry basis, so stay tuned.

Five Key Observations

01  The recent one month drop of 14.8 during May 2010 and 15.5 point drop during July 2010 is concerning when you compare these one month double-digit decreases to the “median month-over-month drop” of only 8.4 TPSI points based on every month from January 1920 to current;

02  We are observing increasing variances (sometimes quite dramatic changes) within our daily, weekly, and monthly time series data. Preliminary forecasts reflect that the TPSI is poised to drop another 5 to 10 points  during both August and September.

03  Annual Year-Over-Year Employment Growth is now at negative 16,000 (-.01%) or what can also be considered “near zero employment growth,” which under normal circumstances would be considered abysmal . . . yet based on the prior economic cycle where employment growth troughed at negative 6.78 million (-4.96%) during July 2009, near-zero job growth is a welcome condition;

04  Back in 2008, we had forecast a return to economic equilibrium for 4Q2011. And during that time, we were told by many that we were far too pessimistic. Forecasts from other economists, consultants, and professors forecasted “quick recoveries” during 2009, 2010, and 2011. Why did we not follow the mainstream prognosticators and forecast a quick recovery? Simple. Because the mathematics and fundamental indicators did not justify a recovery. And they still do not. Not yet. And as we re-run our models over and over again, our scenarios are trending towards a mid to late 2012 “return to equilibrium” when out TSPI model for the US economy hits 500.

05  As you might anticipate, the performance of myriad indicators (market, economic, industry, and geographic) are expected to realize material changes (increasing betas) in one or more of the following eight trend characteristics: direction, speed, momentum, duration, intensity, cyclicality, correlativity, and causality). We recommend that forward thinking decision makers start examining “time series data” on a weekly or monthly basis.

Long Range US TPSI – January 1921 to July 2010