Signs Of Recovery: Leading Indicators, Philadelphia Fed Survey, And The Applebee's Index

The number of positive data points seems to be increasing these days. It started with the strong earnings reports of many companies due to sales overseas, and is carrying through to the domestic economy. Consider three reports from the past few days.

The Philadelphia branch of the Federal Reserve regularly reports on manufacturing activity in its region, which includes the eastern two-thirds of Pennsylvania and southern New Jersey. I spent my first 27 years there, and in those days there were big steel mills and other plants that today are closed down.

Anyway, the manufacturing that remains has been picking up. The Fed reports a small increase in its general index of current activity, with big gains in indicators of current orders and shipments and firm's expectations for the future. This graph from Northern Trust shows the recent pickup, which gets back to levels of 2009, and even happier times before the housing bust and financial crisis.

The Conference Board's Index of Leading Indicators also emitted a positive signal this week, rising 0.5 percent for November, against a similar gain for October, and a 0.1 percent rise in September. Here is an interpretation from their economist Ken Goldstein:

The economy is slow, but latest data on the U.S. LEI suggest that change may be around the corner. Expect modest holiday sales, driven by steep discounting. But following a post-holiday lull, the indicators are suggesting a mild pickup this spring.

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There also is some good news from the consumer sector, which we all need to pay attention to, as it makes up two-thirds of the U.S. economy. The Financial Times brings to our attention a pickup in "casual restaurant" dining, those establishments positioned somewhere between fast food and the white tablecloth variety.

While spending on food has remained steady at about a 10th of disposable income, the proportion going to food for consumption at home has been rising for the past three years, according to Department of Agriculture data.

However, the latest Knapp Track report, a widely watched industry survey, indicates that same-store sales for casual dining chains were up on last year for four straight months between July and October. The last time the $35bn industry recorded such a sustained period of growth was in early 2006, before the housing market turned down.

Here's a graph from DineEquity's call with analysts, showing how long Applebee's sales have been under pressure, and the welcome relief of the recent sales gain:

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Sales are still a long way off their peak in 2005, as shown below, but these small gains are what it takes to get us back there.

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