In the consumer durables market all those newspaper articles about real GDP, employment, unemployment and housing drive appliance sales because industry shipments are directly tied to aggregate economic results, which determine consumer demand, said Neil Cline, manager of economic forecasting for Whirlpool Corp. The most effective leading indicator for appliances is the relationship of interest rates to the housing cycle. In addition, new construction, existing home sales and the unemployment rate drive much of the year-to-year volatility in sales. For those that have been around the block, both housing and appliance have been traditionally cyclical, he said. In fact, the cyclical nature of the industry is quite apparent in the chart below. But, in recent years, the market has enjoyed a little more stability. Cline noted that instead of the peak-and-valley cycle, the industry has shown continued growth. Today's monetary policy can operate within the boundaries of minor inflation, and the traditional up-and-down cycle has been broken, thanks to the efforts of Paul Volcker back in the 1980s. As a result, economic growth and housing starts are less cyclical than they used to be, and the percent of the industry driven by housing has gone down.
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