A real time recession indicator constructed from a composite of leading economic indicators, high frequency economic data, and SP500 pricing models continues to suggest that the US economy is NOT in recession.
This composite indicator utilizes data from the Economic Cycle Research Institute (WLI, LEI), the Philadelphia Federal Reserve (Aruoba-Diebold-Scotti Business Conditions Index), and the Chicago Federal Reserve (Chicago Fed National Activity Index). Furthermore, two SP500 price models (one proprietary and one not) are monitored. The data from the regional Federal Reserves and the ECRI continue to firm to the positive. In addition, the priced based models are far from confirming a recession. Although not in recession territory, growth isn’t exactly robust either as most measures are hugging the zero lines.
Figure 1 is a weekly chart of the SP500 with the composite Real Time Recession Indicator in the lower panel. With the indicator below the midline, the US economy is NOT in recession. Past and recent signals are shown. The 2011 signal turned out to be false and coincides with the launch of Operation Twist.
Figure 1. SP500/ weekly
Figure 2 is a weekly chart of the SP500 with an analogue graphic in the lower panel of one of the pricing models that goes into the composite real time recession indicator. The red labeled price bars are those times this price based model was consistent with a recession. For the record, the SP500 would have to close below 1224 to put this indicator into recession mode. That is over 200 points away!!
Figure 2. SP500/ weekly
Sites That Link to this Post
- Daily Reading on the Financial Markets: 9/12/12 « Playing the Ponzi | September 12, 2012