NEW YORK, Nov 30 (Reuters) - Judging from what businesses and consumers are throwing away, the U.S. economy is growing steadily.
Garbage bins from offices, trash from malls and dumpsters behind factories reflect consumption by businesses and consumers, and strong volumes can suggest a sustained economic upturn.
"Volume in the garbage industry absolutely is an indicator of the state of the economy," said Michael Hoffman, senior analyst at Friedman Billings Ramsey. "The simple observation is our economy is in fine shape."
For the past 15 months, solid-waste landfill volume has been growing at a high single-digit percentage rate, he added.
Garbage is a lagging indicator, accumulated after orders are filled, goods are shipped and ultimately discarded. But a drop in tonnage -- especially at landfills -- can suggest a recession is coming. And an increase in corrugated box waste or cardboard is a good gauge of the health of durable goods.
So far, landfill volumes have held firm, Hoffman said, with the top three U.S. waste management companies seeing an average of 6 percent growth this year.
J.P. Morgan analyst Amanda Tepper interprets the data to mean the construction business is "very solid" and housing is "holding in really nicely."
But capital spending on bridges, roads and factories has not been as high as expected.
The absence of construction volumes from big-ticket capital spending usually shows up in the margins of waste management companies, Tepper said. While it is a tiny component of total volume and revenue, this activity is highly profitable.
"These extra-special waste volumes (from capital spending) just didn't come in this year," she said. "I've heard that anecdotally from everyone," she added.
That reflects the hesitance seen in corporate surveys throughout the year about using growing piles of cash to boost capital spending.
But while capital spending may be muted, anecdotal evidence suggests consumers are spending on their homes.
"We are taking away tons of furniture and renovation material," said Cameron Herold, vice president of operations for 1-800-Got-Junk, a Vancouver, Canada-based company that hauls old appliances, furniture, construction waste and other items garbage workers do not handle.
The company's sales and volumes are on track to more than double this year from 2003.
"Our guys in San Francisco have picked up leather furniture and big-screen TVs because (people) are upgrading," Herold said.
And industrial waste remains strong. Waste Management Inc. (WMI.N: Quote, Profile, Research) , for example, saw a jump in its "roll-off" volume beginning in April.
While overall GDP growth has slowed, Friedman Billings Ramsey's Hoffman said, "from the industrial level of activity, measured by disposal occurring in the economy, it hasn't even taken a breath."