Shifting Into High Gear

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Full steam ahead! The outlook for economic and consumer confidence is brightening, according to indications from the stock market. Last year, the U.S. bucked the trend of slumping global economic growth, buoyed by strong domestic demand and consumer confidence. Now, signs of a sooner-than-anticipated recovery by Asian economies are lifting equity markets there and boosting prospects for the beleaguered American export sector.

Rebounding share prices for industrial companies indicate an improving profit trend and a likely expansion of income gains, which should push consumer confidence even higher. This upshift has been signaled by the American Demographics Consumer SentiMeter index, which tracks the performance of stocks sensitive to changing consumer perceptions, relative to a broad market benchmark. In April, the SentiMeter index bounced to 127, up smartly from lows near 100 in September 1998. But the index still has some ground to cover before surpassing its peak level of 139, hit in September 1997 and February 1998.

It's hard to understand why aggregate consumer demand remained strong despite last year's economic turmoil. As documented here, confidence wavered, but didn't crumble. Underlying demographic trends may have helped: today's economy displays many signs of robust "boomer consumerism."

The low unemployment rate is responsible for strong personal income and the spending that goes along with it, but may translate into less time to spend on regular leisure activities. So today's boomers are squeezing more fun into less time, by purchasing fewer boats and more motorcycles.

Demand for sea-cruisers has languished; annual retail sales have only grown 25 percent since the recession year of 1991. Boating's biggest problem is that it takes up too much time. Pre-sailing preparations, maintenance, and winter storage all conspire to lessen the allure of boat ownership. A new survey by the National Sailing Industry Association found that three-fourths of sailboat owners don't use their sailboats as often as they'd like; work and family obligations were cited most often.

Meanwhile, cruisers of the two-wheeled variety have rocketed in popularity; last year, new registrations of large motorcycles were up more than 150 percent over 1991. Since 1988, the median age of a purchaser of a new Harley Davidson has risen by ten years, to 44. As a result, Harley-Davidson is one of the SentiMeter's best performing stocks: it has soared 1,100 percent since 1991.

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