White Paint Index: What the price of titanium means to the economy

Posted May 18th 2009 4:20PM by Alex Salkever
Filed under: Forecasts, General Electric (GE), Ford Motor (F), Indices, Best Buy (BBY), Toll Brothers (TOL), Economic Data

Econoblog Financial Armageddon has a great post on titanium and what the price of this prized commodity means for the general economy. In a nutshell, titanium is a critical component of paint, particularly the base color white. Titanium is used in all manner of paints for houses and buildings, cars, home appliances, and consumer electronics. So this number impacts a wide swath of the industry from homebuilder like Toll Bros. (NYSE: TOL) to car companies like Ford (NYSE: F) to appliance makers like General Electric (NYSE: GE) to retailers like BestBuy (NYSE: BBY). From an AP article on titanium dioxide trends:

"Economists track titanium dioxide as a barometer of the country's overall financial health. When people are building homes, remodeling, redecorating or even getting a house ready to sell, they buy paint. About 419 million gallons of paint were sold last year, and more than a third of it was white."

The price of titanium dioxide has fallen by 5.7% in the past 12 months. This implies that the economy is still shrinking, as this compound would need to be purchased by paint manufacturers in order to stock up on inventory and react to rising industrial production. The upshot? Yes, this index is volatile and is hardly a perfect leading indicator. Supply of precious metals on the market can cause price fluctuations. But the titanium supply is rather stable and a growing economy should show sustained demand for the titanium dioxide compound. Keep an eye on this indicator to validate the green shoots mantra.

Alex Salkever is Director of Research at Piqqem.com, an stock prediction community powered by the Wisdom of Crowds.

Tags: titanium