Keeping an eye on the Consumer

With the consumer excessive spending season (holidays) upon us I wanted to highlight a book I read some time ago. In Ahead of the Curve, by Joseph Ellis, the author develops a very convincing thesis that consumer spending is the real driver of the economy (aka taking a stance and developing it, that the chicken did indeed come before the egg or the likes). Throughout, the book Ellis includes the real leading, coincident, and lagging indicators from a consumer spending view point. Of course all of the information is a bit lagging in that it takes several data points to determine when an actual inflection point occurs, but the information is useful in determining big picture economic health. The book is built around the following graph which describes the nuts and bolts of the economic cycle.For fairly up to date graphs and charts from the book see the Ahead of the Curve website.

Excerpt from Joseph Ellis' web page

How to Read the Signs of Economic Change—Before They Impact Your Business and Investments

Economic and stock-market cycles affect companies in every industry. Unfortunately, the confusing barrage of anecdotal and conflicting indicators we face every day, week, and month render it impossible for managers and investors to see where the economy is heading in time to take corrective action.

Now, a thirty-five-year Wall Street veteran unveils a new forecasting method and working model that puts these indicators into context and will enable managers and investors to understand and predict the economic cycles and related stock-market movements that control their businesses and financial fates. In Ahead of the Curve, Joseph H. Ellis argues that the problem with current forecasting models lies not in the data, but rather in the lack of a clear framework for putting the data in context and reading it correctly.

The book (1) explains critical economic indicators in nontechnical language, (2) identifies and documents the recurring cause-and-effect relationships that consistently predict turning points in the economy, and (3) provides the tools, including highly readable charts, that managers and investors need to position themselves ahead of cyclical upturns and downturns.

This website contains 20 of the key charts from Ahead of the Curve, continually updated, so that readers will be able to apply the book’s key insights to today’s latest reported data.

Economic events are not as random and unpredictable as they seem. This book will help readers recognize and react to signs of change that their rivals don’t see—and win a sizable competitive advantage.

About the Author:
Joseph H. Ellis was a partner of Goldman Sachs and was ranked for eighteen consecutive years by Institutional Investor magazine as Wall Street’s #1 retail-industry analyst.