Economic Indicators Dashboard - Housing and consumer confidence

Some may have judged the Fed’s decision not to raise rates in September as a sign of economic weakness in the U.S. In this case, global concerns probably played a greater role in that decision as the U.S. economy appears on the path of continued moderate growth. The factors and statistics presented by the Economics Indicators Dashboard support the view that the economy remains in pretty good shape. To better understand this, let’s review two of the factors displayed in the Dashboard that support this view: Homes Prices and Consumer Sentiment. Economic dashboard October 2015 Accessed on October 16, 2015. How do I read this chart? This dashboard is intended as a tool to set context and perspective when evaluating the current state of the economy. For each indicator, the horizontal bar shows four things.
  • A blue color band represents the typical range for this indicator. +/- 1 standard deviation of historical values for the indicator fall in this range.
  • An orange marker shows the most recent value – the closer the marker is to the blue bar, the closer it is to historically typical conditions.
  • A grey area outside of the blue band which shows the range actual conditions.
  • An arrow shows the most recent three-month trend indicating if it is moving toward or away from the typical range

Home Prices

Those who experienced the last recession don’t need a reminder of the housing market’s importance to the U.S. economy. The slow-down of the housing market and corresponding deterioration of related credit markets, which started in 2006, eventually led to the worst U.S. recession since the 1930s. Housing values greatly influence consumer spending and corresponding economic growth. People tend to spend more when they feel good about their home’s value, so a confident housing market sends positive ripples through the entire economy. Housing sales and prices can be one of the better indicators of relative economic strength. The current year over year housing price increase of almost 5% has held steady for most of 2015, and is placed comfortably within the range of historical norms. This is a good indication that the housing market is on solid ground, and does not appear to be declining or in overbought state. Ongoing moderate increases in housing prices should help support a growing economy.

Consumer Sentiment

Consumer Sentiment saw a slight decrease in September from prior months as concerns about China, falling commodity prices, and global growth weighed on confidence levels. This likely reflects consumers’ increasing awareness that global trends can impact job and wage prospects here in the States, and not necessarily a sign of diminished growth prospects for the U.S. economy. Even with this modest pullback, Sentiment remains at the higher end of the historical range, indicating that U.S. consumers maintain a positive outlook for the economy and their own prospects. A confident consumer is an important component to the ongoing economic growth story. The U.S. economy is consumer driven. You can debate the accuracy of the “70% of U.S. GDP growth is consumer driven” quote, but you can’t debate that the majority of the economy is driven by consumer. So a healthy, confident consumer bodes well going forward.

The bottom line

Housing and Consumer Sentiment are only two factors amongst many when it comes to assessing the strength of the economy. However, a strong consumer is critical to economic success in this country, and these two factors paint a relatively healthy picture. Combine the healthy consumer with other positive measures evident in the economy and the U.S. to still be on the path to growth.
Standard Deviation is a statistical measure that reflects the degree to which an individual value in distribution tends to vary from the mean of the distribution. Standard Deviation is a useful tool in measuring the historical typical range as 1 Standard Deviation includes approximately 68% of the historical values in a normal distribution. Using this measurement allows us to exclude the more extreme values which would not be as probable to see from the indicator.Data stated is historical and not a guarantee of future results. Data displayed in the Economic Indicators Dashboard are reflective of current data as provided by the data sources including any revisions to previous data. These revisions may change historic data points and historic ranges for some or all indicators. These changes are usually due to seasonal adjustments to previously supplied data. The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. It is not intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Anyone using this material should consult with their own attorney, accountant, financial or tax or consultants on whom they rely for investment advice specific to their own circumstances. Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell Investments is a trade name and registered trademark of Frank Russell Company, a Washington USA corporation, which operates through subsidiaries worldwide, including Russell Financial Services, Inc., member FINRA. Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management.  Copyright © Russell Investments 2015. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an “as is” basis without warranty. RFS 16110