Real Time Recession Indicator (Update)
Not to be a Grinch, but our real time recession indicator continues to signal an oncoming contraction in the US economy.
The real time recession indicator is constructed from the Economic Cycle Research Institute’s Leading Economic Indicator and the Chicago Fed National Activity Index (CFNAI). Yesterday, the CFNAI data was released, and the number remains negative and was lower than the previous month. While not perfect (but what is), there is a high degree of correlation between the recession calls made by the National Bureau of Economic Research and the real time recession indicator. The red labeled price bars in figure 1, which is a weekly chart of the SP500, are those times the indicator has been on recession watch. Of note, last Fall (August to November, 2010) turned out to be a false signal as the Fed announced and implemented QE2. One has to wonder what interventions the central banks (ECB or Federal Reserve) have left to implement.
Figure 1. SP500/ weekly
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