Electrical Marketing's Key Economic Indicators

May 2, 2003
Leading Economic Indicators Decline 0.2 Percent in March -0.2% The Conference Board said the U.S. leading index decreased 0.2 percent in March. The leading

Leading Economic Indicators Decline 0.2 Percent in March


The Conference Board said the U.S. leading index decreased 0.2 percent in March. The leading index declined for a second consecutive month in March, but the information available so far in April suggests that these declines will not continue. The leading index has been fluctuating around a flat trend since December 2001. The flatness in the leading index suggests that U.S. real GDP growth will stay in the 2-3 percent range for now. As long as economic growth is constrained in this range, the labor market cannot improve.

The coincident index, a measure of current economic activity, has been essentially flat in recent months, with gains in income and sales offset by weakness in employment and industrial production. The lagging index decreased 0.1 percent in February. The leading index now stands at 110.6 (1996=100). Based on revised data, this index decreased 0.5 percent in February and increased 0.3 percent in January. During the six-month span through March, the leading index increased 0.2 percent, with three of the 10 components advancing.

Remodeling regains strength in 1st quarter

Following a lull in residential remodeling at the end of 2002, professional remodelers reported a busier beginning to 2003 and significantly improved expectations for the rest of this year, according to results of the National Association of Home Builders' Remodeling Market Index (RMI).

“Driven by low interest rates, home equity conversions and the strong appeal of investing in the homestead, residential property owners stepped up the pace of contracting for improvements, repairs, additions and general maintenance on their homes and apartments in the first quarter of 2003,” said NAHB Remodelers' Council Chairman Mike Weiss. “This bodes extremely well heading into the spring home improvement season.”

The RMI is based on a quarterly survey of more than 600 professional remodelers, whose answers to a series of questions are assigned numerical values in order to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers' reports of major and minor additions and alterations, plus maintenance work and repairs, on both owner- and renter-occupied dwellings. The second index gauges expectations for the near future and is based on remodelers' reports of their calls for bids, amount of work committed for the next three months, job backlogs and appointments for proposals. A variety of “special questions” are also asked at the end of the survey to help pinpoint market perspectives.

Both indexes recorded substantial gains in the first quarter of 2003, offsetting much, though not all, of their declines since the same time last year. The index gauging current market conditions rose to 46.4, up 3.2 points from the final quarter of 2002 but still off from its 52.7 reading for the first quarter of 2002. (Year-ago comparisons are particularly relevant because RMI indexes are not seasonally adjusted.) Showing even greater strength, the index gauging future expectations rose to 50.3, up a remarkable 11.2 points from the final quarter of 2002, but shy of that year's peak 54.6 reading in the first quarter.

Meanwhile, results of the “special questions” section of the RMI revealed that kitchen and bathroom remodeling jobs continued to be the most common work done by professional remodelers as the new year got underway. Room additions and whole-house remodeling were the next most requested jobs.

Remodelers also pegged granite countertops as the most popular single feature requested by clients, by a wide margin. Commercial-grade appliances and upgraded wiring for high-speed Internet access were the second- and third-most requested jobs, respectively.

GDP Increases in 2002 Fourth Quarter


Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.6 percent in the first quarter of 2003, according to advance estimates released by the Bureau of Economic Analysis.

In the fourth quarter, real GDP increased 1.4 percent. The major contributors to the increase in real GDP in the first quarter were personal consumption expenditures (PCE), residential fixed investment, and government spending.

The contributions of these components were partly offset by negative contributions from private inventory investment, from equipment and software, and from exports. Imports, which are a subtraction in the calculation of GDP, decreased. The small acceleration in real GDP growth in the first quarter primarily reflected a downturn in imports that was partly offset by downturns in equipment and software and in private inventory investment and a deceleration in government spending.

Consumer Confidence Index Rebounds Sharply in April


The Conference Board's Consumer Confidence Index, which had been on the decline for the past four months, improved sharply in April. The Index now stands at 81 (1985=100), up from 61.4 in March. The Expectations Index rose to 84.8 from 61.4. The Present Situation Index improved to 75.3 from 61.4.

“The swift outcome in the Middle East has helped quell consumers' short-term concerns,” said Lynn Franco, director of The Conference Board's Consumer Research Center. “While an increase of this magnitude occurred after the Persian Gulf War in 1991, this post-war surge differs in that both components of the Index posted gains. The increase in the Present Situation Index, especially in labor market conditions, may very well signal a turnaround in confidence and a more favorable outlook for consumer spending.”

Consumers' assessment of current conditions was less negative than in March. Those rating present business conditions as “bad” declined to 23.7 percent from 30 percent, while those holding the opposite view rose to 16.2 percent from 13.6 percent. Labor market conditions also improved. Consumers reporting jobs are hard to get declined to 29.5 percent from 32.3 percent, while those claiming jobs are plentiful edged up to 13.0 percent from 11.4 percent.

Consumers' short-term expectations improved considerably. Those anticipating an improvement in business conditions over the next six months rose to 18.7 percent from 13.0 percent. Consumers anticipating conditions to worsen dropped to 12.3 percent from 20 percent.

The employment outlook was also more optimistic. Consumers anticipating more jobs to become available increased to 16.7 percent from 10.8 percent, while those expecting fewer jobs fell to 20.9 percent from 26.5 percent. The proportion of consumers anticipating an increase in their incomes rose to 17.1 percent, from 15.8 percent.