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
This past week the Chicago Federal Reserve announced its Chicago Federal Reserve National Activity Index. The value came in at -0.87, which is the lowest value since August, 2009 when the economy was coming out of a steep recession. To learn more about the CFNAI go to this LINK. Figure 2 shows a weekly chart of the SP500 with the CFNAI in the lower panel (orange line). The red labeled price bars are those times (by my calculations) that the CFNAI was predicting that the US economy was in a recession. This indicator along with the Philadelphia Federal Reserve’s Aruoba-Diebold-Scotti Business Conditions Index are currently predicting recession. But as can be seen above in figure 1, the consensus is that the US economy is not in recession.
Figure 2. SP500/ weekly