Evaluating the US economy is a numbers game – and by numbers, read data. There is a lot of it to factor in, and often the figures point in several different directions.

Take four key indicators – retail sales, unemployment claims, house building figures and the stockmarket.

Sales at retailers climbed 0.4% last month, according to the US Commerce Department figures. However, this was short of the 0.8% gain that was the median estimate of 82 economists surveyed by Bloomberg. Excluding the biggest gain at car and parts dealers in seven months, demand was little changed from May.

Better news comes from unemployment claims which dropped by 24,000 to 334,000 in the week ended 13 July, according to US Labor Department figures.

How about that housing market, the collapse of which following the breakdown in the sub-prime mortgage sector precipitated the global financial crisis?

The sector has been a bright spot in the world’s largest economy for the past few months. However, recent news is less positive. A sharp slowdown in building of US apartments put the pace of new residential construction at its lowest level in ten months in June.

And what has the stockmarket made of this data? The numbers are good. The Dow Jones Industrial Average is up 23%, year to date. The broader S&P 500 is up 25%.

Healthy picture

Multi-managers and analysts have been looking at the data too and a consensus is emerging – they like what they see.

Aberdeen Asset Management’s Robert Bowie believes the US equity market represents a “relatively attractive opportunity” and he remains overweight in the country.

“The recovery in house prices not only stimulates transactions and construction, but also has a significant impact on consumer sentiment as negative equity is reduced and overall net wealth improves.

“Importantly an improving housing sector also has a strong multiplier effect within the economy, with jobs created in other sectors which benefit from the housing recovery,” he says.

The US positions held within the Aberdeen multi-manager funds include the Findlay Park American fund – which has been held for more than a decade – and the Threadneedle US Extended Alpha fund.

Bowie’s bullishness is also linked to the US’s new energy reality, as the country begins to benefit from an abundant supply of natural gas and oil being released with new extraction techniques.

“The combination of lower energy costs and exceptionally high labour cost inflation in certain emerging markets has resulted in greater US competitiveness and therefore the potential for a manufacturing renaissance,” he says.

And what about the news from US Federal Reserve chairman Ben Bernanke that he plans to start tapering the government’s bond-buying programme?

Bowie believes, like most commentators, that Bernanke will want to see evidence of a sustainable recovery first – most importantly in a continued improvement in the employment figures.

Charles Stanley head of investment research Ben Yearsley has also been won over by the data coming out of the US – for the first time in his career he is buying into the country.

“The opportunity seems too good to ignore this time around. The simple reason is that the economy is recovering.”

Yearsley said dollar strength is also making US equities important from a UK perspective, as the dollar strength can “add a booster” to US equity returns.

He also notes that the US is home to many of the world’s leading companies and top brands, a fact that can’t be ignored in a globalised world.

Funds Yearsley likes include the Legg Mason US Smaller Companies and Axa Framlington American Growth. Alternatively investors could always play the States using a tech fund such as GLG technology or a healthcare fund, he said.

What strategy should you play?

Octopus fund manager on the multi-manager team Simon Reynolds – who has been adding to his US exposure – gives his verdict.

“We’ve been trying to time our purchases with dips in the market. The funds we’ve been adding to are stock-pickers that we think have the skill to identify long-term winners, such as Morgan Stanley US Growth, and those that can benefit from domestic growth, like Threadneedle American Extended Alpha.

“Another area we’ve focused on is small and mid-cap exposure – for instance, through an all-cap fund like Vanguard US Opportunities.”

Monthly non-farm payroll numbers, the unemployment rate and the labour participation rate, are the key indicators Reynolds is watching.
So far these data are pointing in one direction – invest in the US.