My Questions to President of Consumer Metric Institute – Rick Davis

Dear Sir,
 
I follow your web site everyday and get very interested in your methodology to forecast the climate of US economy.  I noted your consumer index contracts significantly during the summer of 2008 predicting the great recession 18 weeks later.  I also noticed that in the summer of 2009, your index increase dramatically.  I understand the increase is in the relative term and is due to the easy comparison with the summer of 2008.  It actually just return to the normal level before great recession in the absolute term.  But the dramatic decline in the summer of current year looks weird because it has already compared with a normal level of consumer behavior unless the decline is real in the absolute term.
 
This make me interested in the methodology when you have your index “constantly being re-normalized”.  Say one year ago you record your index as 105.  Now you find consumer behavior has the same level as one year ago in ABSOLUTE term.  Will you in this case record your index of today as 100 or 105?
 
Thank you for your attention.  I am a physicist and always want to know why before believing and judging anything.
 
Hui Zhong

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