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Consumer Metrics Institute, Inc.

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The Leading Economic Indexes From Consumer Metrics Institute Tell Remarkably Different Story

The disconnection between forecasts made by some closely watched leading indexes and the eventual results in the real economy has become evident during the recent recession and current recovery. Those disparities become glaring last week.

Lakewood, CO, January 25, 2010 --( Last week there were announcements that some closely watched leading economic indexes increased in December. More importantly, the announcements observed that those same indexes had risen steadily for nine consecutive months. In sharp contrast to that set of forecasts, the daily Consumer Leading Indicators published by the Consumer Metrics Institute peaked on August 13th and has declined by over 11% since.

"The disconnection between the recent consumer demand 'correction' that we have been monitoring and the rosy picture painted by some indexes has been startling," said Richard Davis, President of the Consumer Metrics Institute. "If a set of leading indicators has forecast uninterrupted growth for nine consecutive months and therefore completely missed the recovery's current slowdown, how can you trust their predictive power moving forward?"

Mr. Davis went on to say that "unfortunately such a disconnection can be the inevitable result of mid-twentieth century methodologies attempting to measure the pace of a twenty first century economy containing electronic demands for electronically transferable assets. Sixty year old methodologies may very well measure the buggy whips that manufacturers had on their shelves 45 days ago, but they can't begin to respond to what consumers were actually buying days ago for download from inventory-less servers. Times have changed, and leading economic indicator technologies that haven't kept pace are misleading relics of another age."

During the prior week the Consumer Metrics Institute reported that the cumulative net performance of its Weighted Composite Index over a 91-day trailing 'quarter' turned negative on January 13th, 2010, dropping that quarter into the 18th percentile among all calendar GDP quarterly growth rates since 1947. The last time that the 91-day cumulative 'growth' slipped from net growth into net contraction was June 4th, 2008.

Mr. Davis further observed that on January 19th "our daily Weighted Composite Index reflected a year-over-year contraction of over 2%, down 11.7% from its August 13th peak and low enough that historically similar levels have resulted in future positive S&P 500 30-day price movement less than one out of five times."

"Again the weak links in the consumer economy were the housing and retail sectors," he added, "which were seriously lagging several other sectors, particularly the automotive and technology sectors. Our housing index continued to be pulled down by precipitous declines in both the home loans and refinancing sub-indexes. Meanwhile the retail sector simply stalled after showing some life during the prior couple of weeks, with nearly every retail sub-index showing the same weakness. The importance of the housing and retail sectors to the economic recovery warrants continued close monitoring."

About the Consumer Metrics Institute:

The Consumer Metrics Institute publishes a set of indexes reflecting day-to-day changes in consumer interest towards major discretionary purchases. These indexes are updated several times per week and are available free of charge at the Consumer Metrics Institute website. Complete historical tables of the indexes are also available for download by members of the Institute.

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Consumer Metrics Institute, Inc.
Richard Davis

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