Changing Times and New Data Views

By ITR Economics on February 7, 2023

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ITR Economics

ITR Economics is the oldest, privately-held, continuously operating, economic research and consulting firm in the US.

We wrote in a previous blog post that “the data is out there.” Indeed it is, but at ITR Economics we can also say that the data is “in here.” We have a relentless Data Team that tracks and compiles more than 10,000 economic datasets, from hundreds of sources, and also calculates the various moving totals and averages as well as the rates-of-change.

Our economists have virtually instantaneous access to this data, which they use to conduct research, generate forecasts, support forecasts, respond to clients’ concerns, and perform any other task tied to our mission of providing “the best economic intelligence to reduce risk and support practical and profitable business decisions.”

However, there is a little more to it than that. Identifying the right datasets can be difficult, especially when the particular circumstances you are researching for implications and trends are without precedent or have no recent precedent. During the post-COVID-shutdown years, including 2022, we at ITR Economics have analyzed existing data in new ways, looked for new data, and even generated new datasets to better understand the changing economic landscape and what comes next. Here are just a few of those data innovations.

US Personal Savings Balance Index

Consumer health is an important component of economic health. The consumer played a key role in the robust recovery that followed the 2020 shutdowns, and the consumer factors into our expectation that the next macroeconomic recession, forecasted for late 2023 and through 2024, will be relatively mild.

Savings are one measure of consumer health, but we found the standard measure of savings – US Personal Savings, compiled by the Bureau of Economic Analysis – to be less than optimal for all uses. It is a monthly total of saved dollars in the US, but it does not give insight into how much consumers are saving versus spending in dollar terms or how much savings consumers have accumulated.

Our first concern can be overcome using another Bureau of Economic Analysis data series, US Personal Savings as a Percentage of Disposable Income,

For the second concern, we got creative. We essentially summed the Personal Savings data through the years, by month, to derive the US Personal Savings Balance Index, which provides an estimate of US consumers’ overall savings cushion. We also created the option to deflate the Index for a “real” measure of consumers’ buffer that can serve as a macroeconomic barometer of consumer health.

Deflated Data

We deflated many datasets this past year. ITR Economics has long had deflated versions of our go-to series at the ready, but we spent extra time with those versions in 2022, running analysis to ascertain how much of US Total Retail Sales growth represented an increase in unit volume and how much was attributable to inflation. We do the same with the dollar-denominated nonresidential construction data series that we cover in the Trends Report™.

Deflation is not a perfect science; the result is intended to serve not as a hard dataset in its own right but as a point of comparison that enables us to better identify the unit volume trend behind the spending.

In a similar vein, we frequently advise our clients to track both dollars-based and units or activity-based metrics of their own performance for a more comprehensive view.

New Tools

Our friends at Bellwether Wealth manage the ITR Optimizer™, a device that – to put it very simply – selects offense-oriented investments in certain sectors when those sectors are poised for economic rise, and defense-oriented investments when economic risks are mounting. Like so much else that involves ITR Economics analysis, the Optimizer is about maximizing profitability through various stages of the business cycle. While it was built to respond to and act upon economic signals, it also emits its own signal, which gives us and our clients a better handle on what the stock market is signaling for the economy.

The latest signal, as readers of the Trends Report know, is that the market is still defense-oriented. But we are watching to see if a change occurs this year, up or down, as the market may anticipate the upcoming 2024 macroeconomic recession and eventually shift focus toward the subsequent recovery.

Continuing Process

Time will tell what new datasets we leverage next, or how we will modify existing data for a new perspective. Our economic forecasts are our highest priority; we use the tools that enable us to achieve the highest forecast accuracy.

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