U.S. Economic Recovery Slows Down, According to Decision Analyst’s Economic Index

The Decision Analyst U.S. Economic Index stood at 105 in December 2020, the same as November. Since August 2020 the Index has essentially been flat, fluctuating between 105 and 107. The December 2020 Economic Index remains well below the January 2020 time period (down by 13 points). The Index tends to be a leading indicator of future economic activity. The past-20-year history of the Index is shown below.

The U.S. Economic Index continues to signal economic growth for the start of 2021, albeit at a slow rate. If COVID cases continue to spike in January and February, the U.S. economy could really struggle. More governmental stimulus is approved and coming, however, and that will tend to sustain the economy during the first quarter of 2021. A growing risk factor is business and corporate layoffs. We are likely to see major layoff announcements by corporate America during the first half of 2021, and the bankruptcy rate among small businesses will continue at elevated levels," said Jerry W. Thomas, President/CEO, Decision Analyst. “The economy has a long way to get back to its pre-COVID strength.”

“In Decision Analyst’s Economic Index survey, U.S. adults are asked to self-classify their employment status. They have to say they are ‘unemployed but looking for a job’ to be counted as unemployed,” said Thomas. “The U.S. unemployment rate remains at elevated levels, according to Decision Analyst’s tracking survey. In reviewing the Decision Analyst unemployment estimates, the December rate (9.0%) is slightly improved over the November rate (9.5%). Hidden within the employment data, however, is a downtrend in full-time employment and large numbers of women dropping out of the labor force, probably to take care of children who are schooling at home,“ said Thomas.

“Planned future purchases (see graphs below) continue, on average, to indicate that consumer spending (roughly 70% of the U.S. economy) is likely to remain somewhat stable into the first quarter of 2021. The graphs below show the percentage of U.S. households who say they are likely to make various types of purchases in the next 12 months.”

"These future purchase intentions suggest that the economy will be chugging along at its current level during the first quarter of 2021. Subdued travel and vacation plans indicate more pain and suffering in the hospitality industry (hotels, restaurants, entertainment venues, airlines, etc.). Car and truck sales have stabilized, while remodeling and the outlook for future sales of existing and new homes remains positive. All together, these graphs point to a positive but cautious start for the economy in Q1,” said Thomas.

Methodology

The Decision Analyst Economic Index is based on a monthly online survey of several thousand households balanced by gender, age, and geography. The scientific survey is conducted in the last 10 days of each month. The Economic Index is calculated from 9 different economic measurements using a sophisticated econometric model. The result is a snapshot of coming economic activity in each country surveyed, as seen through the eyes of representative consumers living in the respective countries.

Decision Analyst conducts its concurrent economic surveys each month in Argentina, Brazil, Canada, Chile, Colombia, France, Germany, India, Italy, Mexico, Peru, the Russian Federation, Spain, and the United States. Whenever the Decision Analyst Economic Index is greater than 110, it tends to signal an expanding economy. An Index value of 90 to 110 suggests a no-growth or slow-growth economy, and near or below 90 generally indicates economic contraction. These guidelines vary by country, however.

About Decision Analyst

Decision Analyst (www.decisionanalyst.com) is a global marketing research and analytical consulting firm specializing in strategy research, new product development, advertising testing, and advanced modeling for marketing decision optimization. For over 40 years, the firm has delivered competitive advantage to clients throughout the world in consumer-packaged goods, telecommunications, retail, technology, medical, and automotive industries.

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