LONDON -- It's a presidential election year in America, which means that the economic news will increasingly be spun by both sides to favor their candidate. But the complex nature of modern economies often means that the official statistics for economic growth and other indicators will be substantially reviewed after publication, so sometimes we need to look for other measures of economic performance.
I believe that corporate results can sometimes be a much better indicator as to the state of a country's economy. The headline earnings figures aren't necessarily the place to look; instead it's the information about sales, bad debts, and consumer confidence that's often of greater interest.
Corporate America is currently in the middle of a quarterly reporting season, during which time a large number of companies have produced figures that indicate that the economy is doing much better than the gloom and doom merchants are saying.
One of the bellwethers of the American economy is its largest railroad, Union Pacific
Union Pacific's first-quarter results showed a 1.3% increase in shipping volumes, with a 12% rise in sales per car. Of particular interest were the strong gains in automobiles (+15%) and industrial products (+10%). Since new car sales fall off a cliff when the economy is struggling, this is a strong indicator of increasing consumer confidence.
The other major publicly quoted railroads such as CSX
Falling coal sales have been used to support the argument that America is slipping back into recession, though I believe that it this is more to do with the increasing use of shale gas and environmental regulations which are reducing the demand for coal. Also, it's in the interest of one political party to claim that the country is entering a recession.
A very strong signal about improving consumer finances was sent out by Bank of America
Another business that, like Union Pacific, touches many parts of the American economy is the financial services company American Express
Clearly, America's shoppers are back in business and they are settling their accounts.
Another interesting statistic comes from the results for the fast-food giant Yum! Brands
This is an important indicator because eating out is one of the first things that people cut back upon in an economic downturn, so any improvement in this area is a good sign that consumer confidence is rising.
While the vast majority of Yum! Brands' future growth is going to come from its ongoing expansion into the emerging market countries, particularly China and India (which is why Yum! is one of my larger holdings), I always keep an eye on its American sales as these reflect on the wider economy.
For the rest of the year I'd prefer to concentrate on corporate results and announcements, as America's public economic statistics will become part of the battlefield between two increasingly polarized political parties, and their supporters in the media, who are trying to get their candidate into the White House.
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