The Pasta Indicator: when is the market going to turn?

Hi There,

Just this week I’ve had some very positive feedback from clients in both the home and auto industries about their recent campaigns. While business is still not great by most accounts, there seems to be a growing number of positive stories this month over last.

If you’re interested to chat about I can help your business grow, please don’t hesitate to call me at 403-686-9715 or email marc.binkley@calgaryradio.rogers.com

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recessions don’t last forever, and we’ll be coming out of this one long before official statistics say so. That’s just the way it works. Most economic data — like the quarterly GDP reading — are lagging indicators. What you need are leading indicators that will signal when we’ve made a turn.
Here are 10 indicators to help you know when times are getting better

1. Home Sales
says Jeoffrey Hall, chief U.S. economist for Thomson Financial. He’s watching the National Association of Home Builders House Market Index, which measures recent sales, expected sales, and prospective buyer traffic. “The faster it rises,” says Hall, “the faster I’d say we’re emerging from recession.”

2. Jobs
companies typically cut hours before cutting heads the slide means more layoffs are coming. the key is to just change the direction. You can find private sector average weekly hours worked on the Bureau of Labor Statistics web site.

3. Jobs (again)
monthly temporary employment. In 2002, temporary hiring went from net job losses to net job gains almost to the month that the recession ended. At this moment, the monthly change in temporary employment has been negative for 25 months running. When it swings positive you can be sure that better times will follow. This can be tracked on the BLS web site as well.

4. Car Sales
Cars are one of the first big-ticket items that consumers buy when they start to feel good again. “It’s only fear that’s holding consumers back,” says James Smith, chief economist at Parsec Financial Management. “They have money — $56.5 trillion of net worth — and the products available are attractive and well priced.” They just need to start feeling a little better about the economy and their financial future.

5. Retail Sales
For the seventh consecutive month, retail sales fell in January. When that string reverses it will be a positive sign. But more important will be any shift away from discounters like Wal-Mart and Dollar General towards specialty or higher end stores like Nordstrom or Saks. You can track retail sales at http://www.census.gov/.

6. Interest Rate Spreads
Modest signs have begun to emerge suggesting that the credit freeze is thawing. When credit spreads across the spectrum narrow it will signal that money is flowing again, a critical development. Also, and perhaps easiest to follow, look for jumbo mortgages which are now about 1.5 percentage points above conforming mortgages to close to within half a point.

7. The Pasta Indicator
When pasta sales begin to slow you’ll know times are getting better. One way to track the trend is by watching financial results at American Italian Pasta Co. (ticker: AIPC), which is North America’s largest pasta producer. The stock has soared from $5 to $26 in the past 12 months while just about everything else got hammered.

8. The Cardboard Indicator
Alan Greenspan was fond of tracking liner board prices. The idea is simple: liner board is a main component of cardboard, which is used as packaging to ship just about everything. When liner board prices surge it means that packaging is in demand, which can only be the case if people are buying things, which in turn signals a healthy economy. Liner board isn’t easy to track. As a proxy, keep your eye on the stock price of leading cardboard producers Smurfit-Stone Container Corp. (ticker: SSCC) and International Paper (IP). Their shares began falling before the recession started and could turn higher before the recovery begins.

9. Sweet-Talking Bill Collectors
The big card companies are waiving fees, restructuring debt and even accepting payoffs of as little as pennies on the dollar. They’re not doing this to be good guys; they are bracing for a continued wave of defaults and want to collect as much as they can right now — before some other bill collector gets to you first and leaves you with empty pockets. You’ll know the economy is righting itself when credit card companies stop negotiating with debtors. To monitor this industry, check out creditcard.com. 10. Movie Madness

But where Hollywood storylines tend to lag the economy, movie goers as a group tend to lead the economy. So it was that the number of tickets sold dropped 4% last year, when film buffs collectively concluded that with money so tight they might as well make better use of their high-def home theater system. Watch for that trend to reverse. You can check for year-to-date movie ticket sales comparisons at http://ercboxoffice.com/

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