U.S. Economy Struggling In August, According To Decision Analyst's Economic Index

Arlington, Texas—The Decision Analyst U.S. Economic Index for August 2022 was 104, the same as for July 2022; both months are down by 9 points from August 2021 (113). The Economic Index has, on average, trended down over the past 12 months. The Decision Analyst U.S. Economic Index tends to be a leading indicator of the overall U.S. economy by six to 12 months. Therefore, the U.S. Economic Index is forecasting a recession for the U.S. economy. The past-20-year history of the Index is shown below.

“The decline in the Economic Index over the past 12 months has been driven primarily by high inflation rates, particularly in energy, food, and housing costs. Inflation reduces consumers’ purchasing power and tends to weaken the economy. COVID and long COVID continue to act as economic depressants. Many sectors of the U.S. economy continue to be battered by supply-chain disruptions. The Russian invasion of Ukraine, of course, has been a major factor in driving inflation higher. Now, an aggressive Federal Reserve is pushing interest rates higher in the U.S., and that will depress economic activity in coming months,” according to Jerry W. Thomas, President/CEO of Decision Analyst.

“The 4-point uptick in the Economic Index from June 2022 to August 2022 might be related to consumers’ improving perceptions of inflation. Over the years, we have observed that the price of gasoline plays an outsized role in consumers’ inflation perceptions. By late August 2022 (the most recent data-collection period), gasoline prices were falling rapidly; this might explain this month’s bounce in the Economic Index. High inflation rates might continue to moderate during the closing months of 2022, especially if the Federal Reserve continues to raise interest rates and to pursue quantitative tightening. If governmental policies were to help reduce inflation, consumers would see that as a positive development and likely expand their consumption spending,” noted Thomas.

“But as of now, consumers’ planned future purchases (see graphs below) indicate that consumer spending plans (roughly 70% of the U.S. economy) are starting to wane in major sectors of the economy. The graphs below show the percentages of U.S. households that say they are likely to make various types of purchases in the next 12 months. A quick look at the trend for the charts reveals that consumers are anticipating some reductions in their spending over the next year,” 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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