Painting the Economic Picture

We've studied all the traditional economic indicators: Gross Domestic Product, the Consumer Price Index, consumer confidence. We've even studied some unique, superstitious indicators, like the Superbowl outcome and lipstick prices.  But I recently heard about another economic indicator, and I think it has the potential to paint an accurate forecast of the strength of the economy:

Paint prices.

Specifically white paint.

Apparently, titanium dioxide, a commodity pigment that is used for making white paint (and keeping your nose from getting sunburned), is a leading indicator for how the economy will boom or bust. It makes sense. White paint is used to paint cars, buildings, and commercial homes. So the price of the paint would reflect how much paint producers think should be made. So if the price of white paint goes down, it might forecast a drop in demand, and therefore a shift in supply-- think back to Econ 101, basic Supply and Demand curves.

So economists track the price of titanium dioxide as another way to tell what's happening in the economy.

Along those lines, the paint industry seems to be recovering with gusto after the housing bust in 2009.

Sherwin Williams closed at $165.62 yesterday. A year ago, the stock closed at $110.77, and the stock bottomed out at $42.19 in February 2009.  It has recovered nicely and its growth is outpacing that of the Dow Jones Industrial Average.

Another paint brand, Valspar, is seeing similar strength. The brand closed yesterday at $61.43. A year ago, it closed at $50.00, and it hit a low of $15.13 in March 2009. The brand is also outperforming the Dow Jones Industrial Average. 

I take it as a good sign. 

-Katy Stewart