Commentary From the Mile High City

"Star of the conservative blogosphere" Denver Post

"The Rocky Mountain Alliance offers the best of what the blogosphere has to offer." -David Harsanyi, Denver Post
Joshua Sharf

 notify list
to receive email when this site is updated, enter your email address:
 recent posts
24 (2 entries)
Anglosphere (1 entries)
Biking (1 entries)
Blogging (35 entries)
Business (173 entries)
CFA (3 entries)
China (5 entries)
Climate Change (3 entries)
Colorado (20 entries)
Denver (12 entries)
Design (4 entries)
Economics (39 entries)
Education (6 entries)
Electoral College (1 entries)
Environmentalism (3 entries)
Europe (0 entries)
Flying (2 entries)
Foreign Affairs (1 entries)
General (89 entries)
Gun Control (2 entries)
Health Care (7 entries)
Higher Ed (7 entries)
History (8 entries)
Home Improvement (1 entries)
Illegal Immigration (35 entries)
Internet (4 entries)
Israel (57 entries)
Jewish (49 entries)
Judicial Nominations (12 entries)
Katrina (0 entries)
Literature (1 entries)
Media (37 entries)
Music (3 entries)
Photoblogging (32 entries)
Politics (152 entries)
Porkbusters (5 entries)
Radio (16 entries)
Religion (1 entries)
Reviews (8 entries)
Robed Masters (4 entries)
Science (1 entries)
Sports (9 entries)
Taxes (2 entries)
Transportation (6 entries)
Unions (1 entries)
War on Terror (180 entries)
my other blogs
Three-Letter Monte

Rocky Mtn. Alliance
Best Destiny
Daily Blogster
Geezerville USA
Mount Virtus
Night Twister
Rocky Mountain Right
Slapstick Politics
The New Conservative
Thinking Right
View from a Height

other blogs
One Big Swede
American Thinker
Meryl Yourish
NRO Corner
Little Green Footballs
No Left Turns
A Constrained Vision

business blogs
Accidental Verbosity
Assymetrical Information
Carnival of the Capitalists
Cold Springs Shops
Commodity Trader
Coyote Blog
Different River
Everyone's Illusion
Fast Company Blog
Financial Rounds
Freakonomics Blog
Management Craft
Trader Mike
Carnival of the Capitalists Submission

business data
Inst. Supply Mgmt.
St. Louis Fed Economic Data
Nat'l Bureau of Economic Research
Economic Calendar
Stock Charts

colorado blogs
Pirate Ballerina
Pagan Capitalist
Boker Tov, Boulder
Colorado Pols
Jeff Sherman

<-?Colorado BlogRing#->

sites, not blogs
Thinking Rock Press
 help israel
Israel Travel Ministry
Friends of the IDF
Volunteers for Israel
Magen David Adom
 1939 World's Fair
1939: The Lost World of the Fair
The New York World's Fair: 1939-1940
The Last Great Fair by Jeffrey Hart
Iconography of Hope (U.Va.)
Images From the '39 Fair
Tour the 1939 New York Fair
Powered by
Movable Type 3.2

« What's a Little Stoning Among Friends? | Main | Oooh, Are You Sure That's Good Idea? »

Not a Leading Indicator

As the major (and not-so-major) media continue to hyperventilate about consumer confidence, nobody seems to be asking if this really is a leading indicator. Turns out, it's not much of one at all. That doesn't mean it's meaningless, it's not just much of a predictor of consumer spending.

The St. Louis Fed makes public economic data that would make your head spin, just before it nodded off to sleep. While they don't have the Conference Board's numbers, they do have the University of Michigan index of consumer sentiment, a reasonable proxy. They also have an inflation-indexed history of personal spending. I compared the two over the history of the Consumer Sentiment index, from January of 1978. That period covers just about every conceivable economic condition except a depression, including a major runup in gas prices during 1978-80.

Since the Index is constrained between 0 and about 100, rather than compare actual spending, which rises almost continuously, I compared the Sentiment Index to the change in personal spending, both monthly and annual. I compared them contemporaneously, and both leading and lagging the Index by 1, 3, 6, and 12 months.

The best correlation was a contemporaneous comparison between the Sentiment Index and the year-over-year change in spending. Here's a chart, with the Sentiment Index on the left, and the spending rescaled to overlay:

This is about a .70 correlation, meaning that just about half of the annual change in spending can be explained by consumer sentiment. And we still haven't established a cause-and-effect here, either. (The correlations to monthly changes were awful, under .20.)

But at the risk of burying the lead, compare the correlations when I lead the Sentiment Index (i.e., when I use it as a leading indicator) with when Iag it:

Consumer sentiment is a terrible leading indicator, but a tolerably good follower. What that says to me is that people's perceptions of the economy, and even of their own finances, are more a reflection of what they've been reading than of what they've been saving.

Applying this to our current situation, we shouldn't be surprised if personal spending doesn't rise much this month compared to last year, but we certainly shouldn't be projecting Christmas sales on the basis of this number.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)


Power, Faith, and Fantasy

Six Days of War

An Army of Davids

Learning to Read Midrash

Size Matters

Deals From Hell

A War Like No Other


A Civil War

Supreme Command

The (Mis)Behavior of Markets

The Wisdom of Crowds

Inventing Money

When Genius Failed

Blink: The Power of Thinking Without Thinking

Back in Action : An American Soldier's Story of Courage, Faith and Fortitude

How Would You Move Mt. Fuji?

Good to Great

Built to Last

Financial Fine Print

The Day the Universe Changed


The Multiple Identities of the Middle-East

The Case for Democracy

A Better War: The Unexamined Victories and Final Tragedy of America's Last Years in Vietnam

The Italians

Zakhor: Jewish History and Jewish Memory

Beyond the Verse: Talmudic Readings and Lectures

Reading Levinas/Reading Talmud