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"Off The Grid" Indicators Suggest US Economy Not Ready For 'Liftoff'

Tyler Durden's picture




 

Via ConvergEx's Nicholas Colas,

You’re probably sick of hearing about Greece, so today we’ll offer up something completely different.  Every quarter we review a raft of unusual and less examined datasets with an eye to refining and adding perspective to our more traditional macroeconomic analyses.

 

This quarter’s assessment of everything from large pickup truck and firearms sales to Google search autofills for “I want to buy/sell” shows a U.S. economy that is reasonably strong but growing only very slowly.

 

The chief areas of concern: Food Stamp participation is still very high at 45.6 million Americans (14% of the total population) and indicators like used car prices and large pickup sales are flat. 

 

One good piece of news going into the July 4th long weekend: our Bacon Cheeseburger Index – a proxy for popular food prices – is down 3.7% from last year, led lower by declining bacon prices (down 18%). 

If you are in the investment game for a few years or more, you pick up enough in the way of economics knowledge to be dangerous.  You can quote the difference between U-6 and U-3 unemployment with ease, outlining a whole range of theories about which one the Fed really watches more carefully.  You can quote the yield on the 10 U.S. Treasury versus its German and Japanese counterparts and what those spreads have done in the last few weeks.  And no one parses a Fed statement like you can…  Seriously.  No one.

But how about some real world questions to test your knowledge of, well, the real world that Americans actually inhabit?  You know – like actual people.  Not the world of statistics and trend graphs. For example, do you know:

The price of a pound of ground beef?  Your first answer should not be a price.  It should be a question: chuck or beef?  Yes, there can be a difference, usually based on the amount of lean meat in the grind.  The U.S. Bureau of Labor Statistics survey of food prices for May shows a price of $4.31/lb for “Chuck” and $4.14/lb for beef, up 15-19% over last year.

 

The price of a new Chevy Silverado full-sized pickup truck?  As with beef, this is a trick question.  You should ask: what towing capacity, and are we talking 2 door, double cab, or crew cab?  Short box or standard?  A real work truck, with crew cab, standard bed and V-8 is $40,211 according to the company’s website.  Add the bucket front seats and a nice stereo and you are at $42,000, before applicable sales taxes.  For reference, a reasonably equipped Mercedes C-Class sedan is about the same price.

 

How much is dinner at Cracker Barrel?  No tricks this time – and there are over 600 locations to choose from, so don’t tell me you’ve never heard of the place.  The “Country Dinner Plate” is $7.69, which includes a main dish (choices include fried chicken livers and 2 interpretations of a catfish fillet), two sides and corn muffins or buttermilk biscuits.  You can check out their website for other menu items – they all look like good home cooking to me.

Now, none of these will ever be market-moving information, but chances are good that you now have a few more heuristic wrenches for your economic tool box.  A shiny new pickup truck with a contractor’s company name on the door shows that business is good.  Like the better part of $50,000 new truck good.  And two pounds of ground beef in the supermarket is close to $10 – real money to most Americans.

In this spirit of staying connected to things actual consumers do, every quarter we review a range of “Off the grid” economic indicators.  We don’t expect anyone will be reworking their econometric models to incorporate them.  That’s not the point.  Rather, they are meant to provide a series of windows into the actual state of the U.S. economy.  We’ve included several charts and graphs immediately after this note, but here is a summary of the data.

U.S. Supplemental Nutrition Assistance Program.  Despite the notional recovery of the American economy since 2010, there are just as many Americans enrolled in SNAP (once known as food stamps) as July 2011: 45.6 million men, women, and children as of March 2015 (most recent data available).  The good news, such as it is, is that this number is down from the peak of 47.7 million in June 2013.  Of the current enrollees in the SNAP program, 16 million (35% of the total) are children.  That number was just under 10 million in 2007.

 

Our takeaway: one of the most vivid examples of how stretched many American households remain and a worrisome fact if the U.S. economy experiences an economic shock in the next few years.

 

Used Car Prices.  The price of 2-3 year old used cars has stayed remarkable firm since 2011, according to Manheim Auto Auctions proprietary sales data.  This goes counter to many “Smart money” calls for the value of used cars to decline over the last 12 months.  This is important because buoyant used car prices help support new car sales through strong trade-in values.

 

 

Our takeaway: one of the most important positives for U.S. auto industry, not only with respect to new car sales, but also low payment terms on leases and even used car financings.

 

Background Checks for Firearm Sales.  The current year may well set a new record for the number of instant background checks for firearm sales, as tracked by the Federal Bureau of Investigations.  As of May 2015 (latest data available), the run rate stands at 21.5 million.  That is higher than the 21.1 million of 2013, which is the current record. Not every background check results in a sale, but in our experience most of them do.  Prior to the Financial Crisis, annual background check counts never exceeded 10 million. Since 2007, there have been over 100 million such checks with the majority certainly representing a firearm sale.  There are approximately 250 million adults in the U.S.

 

Our takeaway: obviously a deeply contentious issue throughout the country, it pays to remember that firearms are not cheap and buying one is a reasonably large financial outlay.  The typical rifle or shotgun is several hundred dollars, and the most popular full-power rifle in America – the AR-15 – costs over $1,000 new.  So we are talking about a lot of money spent on firearms in 2015 and the continuation of a trend that is now almost a decade long.

 

Precious Metal Coin Sales.  The U.S. Mint publishes their sales for gold and silver coins on a monthly basis, and both are pretty slack at the moment.  The dollar value of 1 ounce gold coins (Eagles) is just $52 million on a rolling 6 month basis, right where it was in early 2009.  At its peak, the Mint was moving close to $200 million/month on average in mid-2013.  Silver coin sales show a similar trend, with an average of $57 million/month sold over the last 6 months versus over $100 million/month average in mid-2011.

 

Our takeaway: precious metal coin sales spike when Americans grow concerned over the health of the global financial system.  Those concerns seem to be at a low tide just now.  We’ll see what the Greek debt negotiations might do to that confidence, as well as when and if the Federal Reserve chooses to increase interest rates.

 

U.S. Mutual Fund Flows.  Despite a pretty consistent bull market for U.S. stocks since March 2009, mutual fund investors have been just as consistent at reducing their holdings of this asset class.  The second quarter of 2015 continues the trend, with $34 billion in outflows for April and May.  Much of that money went to overseas equities (at least on a net basis), where funds dedicated to those investments saw $30 billion of inflows.

 

Our takeaway: prior to 2007, mutual fund inflows and absolute performance were tied at the hip.  This is no longer the case, with stronger flows into international equities and fixed income funds.  This quarter simply continued that trend, which we view as largely demographic.

 

Job Quits and Consumer Confidence.  As we point out in our monthly JOLTS review, the percent of workers who quit versus being fired is a strong indicator of near term consumer confidence as measured by the University of Michigan survey.  As the accompanying chart shows, confidence has run out ahead of quits.

 

Our takeaway: consumer confidence is set for a near term decline to match the long term relationship with quits.

 

Pickup Truck Sales.  We use full sized pickup truck sales as a proxy for the health of small business in America.  Since the Financial Crisis, monthly sales of such vehicles have risen from 70,000/month to over 170,000/month now.  The most recent readings, however, show zero percentage growth from last year.

 

Our takeaway: Ford is in the middle of a major changeover of its full sized pickup product, and supply issues have slowed production and limited availability. For example, Ford dealers have 83 days supply versus 88-92 for GM and 89 for Dodge.  We’ll have to wait another few months to see if the slowdown in full sized pickup truck sales is permanent or simply supply-related.

 

Google Autofills.  One of our favorite “Off the grid” indicators, this simply lists the top items Google suggests for simple phrases like “I want to buy” or “I want to sell” when entered into the company’s search engine.  On the “Buy” side, “House” and “stock” routinely trade places for #1 – this time around “House” wins.  And, thanks to Mad Men (I am told by reliable sources), “The world a coke” is in second place this quarter.  The most commonly entered things people want to sell: “Car”, “House” and “Kidney”.  Yes, the last one makes a regular appearance in these lists, along with “Hair” and “eggs”.

 

Our takeaway:  not much change here since mid-2013, showing a healthy level of demand for traditional items.  And it is illegal to sell your kidney.  Hair and eggs are legal, however.

 

Bacon Cheeseburger Inflation Index.  Saving the best for last, we average the price changes from the Consumer Price Index for beef, cheese and bacon.  This time around, bacon is down 18% year on year, but beef (at least according to the CPI) is up 10%. Cheese is basically unchanged (down 1.1%).  That means that the cost of a bacon cheeseburger is 3.7% lower than a year ago, a welcome change from the +10% increase last year at this time.

 

Our takeaway: With so many pockets of food inflation rearing their heads this July 4th weekend, enjoy something that is cheaper than Independence Day 2014. I will take mine medium well, please.

So enjoy the barbeque and try not to think about the Greek drama for a few days. It will be here when you get back. Promise.

 

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Tue, 06/30/2015 - 17:16 | 6255646 aliki
aliki's picture

off the grid common sense says she's in a fucking box & is completely clueless

I love when these clowns on CNBC say "if the fed makes a policy mistake..."

the fed policy IS the mistake

Tue, 06/30/2015 - 17:16 | 6255650 TeamDepends
TeamDepends's picture

Reasonably strong = Can't lift the EBT card

Tue, 06/30/2015 - 17:24 | 6255675 mastersnark
mastersnark's picture

Americans are quitting their jobs, divesting from mutual funds, and then using the cash to buy guns, gold, and pickups? Actually, it sounds like revolution is imminent...

Tue, 06/30/2015 - 17:27 | 6255686 Consuelo
Consuelo's picture

"We use full sized pickup truck sales as a proxy for the health of small business in America."

 

I use full sized pickup truck sales as a proxy for the downstream effects of what cheap $money does to an economy, and walk-away's for what happens when that circus leaves town...   Fortuantely (?) for many, the cheap money $circus seems to have found permanent residence in the U.S. economy.

Wed, 07/01/2015 - 06:58 | 6257402 NoPension
NoPension's picture

Friend of mine was advised to set his small business as a corporation. he works his tail off, chasing payment, to meet payroll, etc. At the end of the year, he has a fair paper profit, no cash in the account, and his accountant telling him he needs a write off. He is in his second F150 Platinum (close to $60,000) in 3 years.
When he walks into the dealership at tax time, he said it's like they are expecting him. It's a well honed racket.

Tue, 06/30/2015 - 17:27 | 6255689 Bill of Rights
Bill of Rights's picture

So what they're saying is we are waiting for the lower 14% to rise before we have a raging economy?

Seriously? They spend what they need for necessities and the rest goes to cheap booze and weed so don't hold your breath waiting for the boom time 20"s

Tue, 06/30/2015 - 17:44 | 6255705 sudzee
sudzee's picture

Gotta luv those secret documents coming to light after the fact. Troika scumbags trying to humiliate Greece. Nothin but fucking lies. Tspiras needs to demand more money and refuse to deal with a rep that has some common sence.

http://www.theguardian.com/business/2015/jun/30/greek-debt-troika-analys...

Tue, 06/30/2015 - 17:52 | 6255764 Yen Cross
Yen Cross's picture

  What about the labor participation rate, captain obvious?

Wed, 07/01/2015 - 05:32 | 6257279 JMT
JMT's picture

well they can't qualify to buy a $42,000 Vehicle or even rent a $2000 shitbox studio -- people choose 'stable' employment for these reasons. Not everyone has mommy & daddy to leach off of... After age 25 (even in a hugely stuffy limosine liberal city like Boston, Brookline or Newton)  it becomes pathetic.  You shouldn't even be needing a $40,000 Beemer to drive down 'comm ave' with you have the MBTA... Many of these kids shop and 'dine' on Newbury street in between classes

Tue, 06/30/2015 - 18:07 | 6255796 KansasCrude
KansasCrude's picture

My takeaway your head is up you ASS!  This is a stupid agglomeration of trivial observations. 

Tue, 06/30/2015 - 18:16 | 6255824 JohnG
JohnG's picture

 

 

Tue, 06/30/2015 - 18:17 | 6255831 kill switch
kill switch's picture

America is the fucking Hindenburg on steroids,,,the fucking humanity ohhhhh the humanity..... liftoff,,,, sure.... with the power of one matchbox..

 

Is there a punctuation issue here?

 

The switch

 

Tue, 06/30/2015 - 21:57 | 6256648 Falling Down
Falling Down's picture

Tells me there should be a lot of gently-used pick-ups for sale, come Spring or by next Summer.

 

Tue, 06/30/2015 - 22:08 | 6256670 rejected
rejected's picture

And a fire is the hottest just before it goes out.

Yep,,, everything is just fine.

 

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