3 Best Sectors for Gauging the Growth of the Economy

Depending on who you listen to, the U.S. economy is either holding up well or sliding into a double-digit recession. Every television commentator, radio personality, and Wall Street "expert" has a different opinion, so who should you believe? In order to avoid investing in an uncertain market, it's important to learn how to analyze the growth of the economy yourself. Not sure where to start? Pay attention to these three sectors.

If investors are looking for a way to gauge the health of the individual consumer, they should pay attention to the earnings of the big banks like Bank of America

, Wells Fargo

, and JPMorgan Chase

. These big players on Wall Street led us into the economic boom of the past decade with easy credit and relaxed lending standards. Those same practices brought us to the brink of an economic collapse when people

and couldn't repay the loans they were given. When

rates drop dramatically and banks experience top line growth again, it will be a clear sign that the economy is ready for a serious rebound.

Housing prices are down 33% since 2006 - as low as they have been since March 2002. But the worst may not yet be over, according to Robert Shiller of the Case Shiller Index. He believes that a further drop of 25% could occur. Only time will tell whether Schiller is correct, but if you want a clue, watch the performance of the home builders. The rise of home builder stocks like Lennar

and Toll Brothers

will indicate better economic health in middle income and luxury home buyers.

The demand for steel and other base metals is a direct result of the expansion and building of enterprises around the globe, which is a solid indication of a recovering economy. Metal suppliers have pricing power when demand increases and companies have to replenish inventories. Lower demand leads to substantial drops in metal tonnage prices and steep losses for these companies. So look to metal suppliers like U.S. Steel

and Mittal Steel to see if they are investing in their own growth and how their top-line performance is trending.

All three of the aforementioned sectors are especially sensitive to the economic cycle. These companies thrive when demand is high and the economy is revving along. The same companies see their earnings plummet when the economy slows down and consumers stop spending. Their earnings reports and growth forecasts can help to predict whether the economy is simply slowing down or sliding into a double dip recession - and let you know when it's safe to invest in the market.